Performance Audit on MGNREGS in Karnataka

Findings

1. Only 2 to 4 per cent of MGNREGS-demanding households in Karnataka received the full statutory entitlement of 100 days of employment during 2019-20 to 2023-24. The majority received 1 to 30 days. The unemployment allowance that the law requires to be paid when employment is not provided within 15 days was assessed at ₹1.28 crore in payable arrears but remained unpaid. Demand registers at test-checked Gram Panchayats were not maintained, meaning the actual quantum of unfulfilled employment demand — and consequent liability — is substantially understated.

   “2 per cent to 4 per cent households were provided employment for 100 days and”Ch.IV §4.3 · p. 39

2. The State's delay in releasing funds to the State Employment Guarantee Fund incurred ₹36.26 crore in penal interest — and simultaneously ₹32.78 crore was recorded as inadmissible expenditure under the administrative head. Contractors were found hired for manual (labour-oriented) components of works, depriving registered workers of their employment entitlement. Pending Aadhaar mapping of 3.11 lakh workers out of 84.98 lakh active workers meant no assurance could be drawn on wage payment integrity for these accounts.

   “State Employment Guarantee Fund entailed a penal interest of ₹36.26 crore.”Executive Summary · p. 13

3. Recruitment of contractual staff under the Scheme was carried out without following the State's reservation policy, resulting in inadequate representation of women, SCs, STs and differently-abled persons. 34,499 job card applications were pending as of March 2024. Special job cards for differently-abled persons were not issued. NREGASoft had no provision to record vulnerable group data. The assessment of demand was not based on a baseline survey, meaning Labour Budgets were prepared without knowing actual employment needs at the Gram Panchayat level.

   “Issue of job cards was pending for 34,499 beneficiaries who had applied for jobs, as of March 2024.”Ch.IV §4.1 · p. 28

4. Programme Officers rejected ₹3.29 crore of legally-due delayed-wage compensation on incorrect grounds. NREGASoft calculated compensation for delayed wages capturing only partial delays, systematically underpaying workers. Pending wage payments of ₹35.10 crore in Aadhaar-based transactions (rejected and regenerated) remained unresolved. A pendency of ₹30.52 crore was observed in respect of outstanding unskilled wages in test-checked districts.

   “rejection of delayed compensation amounting to ₹3.29 crore by Programme Officers on incorrect grounds”Executive Summary · p. 13

5. Fraudulent transactions were found in housing works (payment for already-completed houses, payment to ineligible beneficiaries, payments without construction, payments in excess of limits) and in Solid Waste Management works (fabricated records). Works contracts were extended unauthorisedly without fresh tenders. Capacity building training programmes showed significant shortfall in conduct. Convergence of MGNREGS works with other departments was ineffective due to absence of prescribed institutional support.

   “Fraudulent transactions under housing works such as payment for houses already completed, payment to ineligible beneficiaries”Ch.V §5.5 · p. 44

6. 2–4%Households provided 100 days of employment (of total demanding households)

   Only 2 to 4 per cent of households that demanded employment under MGNREGS received the full entitlement of 100 days. The majority of households received only 1 to 30 days, defeating the livelihood security objective of the scheme.

   “2 per cent to 4 per cent households were provided employment for 100 days and”Ch.IV §4.3 · p. 39

7. ₹36.26 CrPenal interest incurred on delayed State releases

   The State Government's delay in releasing central and state share to the State Employment Guarantee Fund entailed penal interest of ₹36.26 crore — public money wasted because of administrative delays in fund transfer.

   “State Employment Guarantee Fund entailed a penal interest of ₹36.26 crore.”Executive Summary · p. 13

8. ₹32.78 CrInadmissible expenditure under administrative head of scheme

   Audit observed inadmissible expenditure of ₹32.78 crore under the administrative head of the Scheme — expenditure that should not have been incurred but was, reducing funds available for actual employment and asset creation.

   “Audit also observed inadmissible expenditure of ₹32.78 crore under the administrative head of the Scheme.”Executive Summary · p. 13

9. 3.11 lakhActive workers with pending Aadhaar account mapping (as of March 2024)

   Out of 84.98 lakh active workers, Aadhaar mapping of 3.11 lakh workers was pending at the State level as of March 2024. Without Aadhaar mapping, no assurance can be drawn about the preparation of wage lists and payments made to these workers — creating leakage risk.

   “Aadhaar mapping with the accounts of 3.11 lakh out of 84.98 lakh active workers was pending (March 2024)”Executive Summary · p. 13

10. ₹1.28 CrUnemployment allowances due but unpaid

    Under MGNREGA, if employment is not provided within 15 days of demand, the household is entitled to unemployment allowance. Unemployment allowances assessed as payable for 2019-20 to 2023-24 amounting to ₹1.28 crore were pending payment. Demand registers were not properly maintained, meaning actual liability is likely higher.

    “unemployment allowance assessed payable for the period 2019-20 to 2023-24, amounting to ₹1.28 crore, was also pending”Executive Summary · p. 13

11. 34,499 applicantsJob card applications pending (as of March 2024)

    Issue of job cards was pending for 34,499 beneficiaries who had applied, as of March 2024. Special job cards were not issued to differently-abled persons. The NREGASoft system had no provision to record data of vulnerable groups (nomadic tribals, HIV-positive persons etc.) for targeted support.

    “Issue of job cards was pending for 34,499 beneficiaries who had applied for jobs, as of March 2024.”Ch.IV §4.1 · p. 28

12. Below 48%Demand for employment as fraction of issued job cards

    The demand for employment from registered households did not exceed 48 per cent of issued job cards during the audit period — indicating that either awareness of entitlements was lacking, or workers were not being encouraged to formally demand employment (which triggers the 15-day clock).

    “demand for employment from the registered households did not exceed 48 per cent of the issued job cards during the audit period”Ch.IV §4.2 · p. 28

13. ₹3.29 Cr rejectedRejection of legally due delayed-wage compensation

    When wages are paid late, MGNREGA entitles workers to compensation. Programme Officers rejected delayed compensation amounting to ₹3.29 crore on incorrect grounds. NREGASoft calculated delays partially — capturing only part of the delay period to the disadvantage of beneficiaries.

    “rejection of delayed compensation amounting to ₹3.29 crore by Programme Officers on incorrect grounds”Executive Summary · p. 13

14. Material funds strandedMaterial component funds not utilised (released at year-end)

    The Department failed to utilise the entire amount released under the material component of MGNREGS because funds were released at the fag end of the financial year. This pattern of year-end dumps made effective planning of works impossible.

    “failed to utilise the entire amount released under material component as the fund were released at the fag end of the year”Executive Summary · p. 13

15. Fraud observedFraudulent transactions in housing and Solid Waste Management works

    Audit noticed fraudulent transactions including: payment for houses already completed, payment to ineligible beneficiaries, payments without undertaking construction, and payments in excess of prescribed limits. Fabrication of records and fraudulent payments were also found in Solid Waste Management works.

    “Fraudulent transactions under housing works such as payment for houses already completed, payment to ineligible beneficiaries”Ch.V §5.5 · p. 44

Recommendations

1. Conduct baseline survey of job card holders to assess actual employment demand before preparing Labour Budgets; stop using previous-year consumption as a proxy for demand.
2. Ensure timely release of funds throughout the year to avoid year-end dumps; stop incurring penal interest on delayed releases to the State Employment Guarantee Fund.
3. Pay all pending unemployment allowances immediately; maintain demand registers at every Gram Panchayat and integrate demand verification into NREGASoft.
4. Complete Aadhaar mapping for all 3.11 lakh pending active workers; adopt Aadhaar-based payment for all wage transactions without exception.
5. Investigate and recover the fraudulent payments found in housing works; blacklist contractors found to have submitted fabricated records.

Fact-checks citing this report

• ◑Lacks contextBJP will: increase public investment in agriculture and rural development… take steps to enhance the profitability in agriculture, by ensuring a minimum of 50% profits over the cost of production, cheaper agriculture inputs and credit; introducing latest technologies for farming and high yielding seeds and linking MGNREGA to agriculture.