CERTIFICATE OF COMPTROLLER AND AUDITOR GENERAL OF INDIA ON
                      FINANCE ACCOUNTS


       This compilation containing the Finance Accounts of the Government of Andhra
Pradesh for the year ending 31 March 2021 presents the financial position along with
accounts of the receipts and disbursements of the Government for the year. These accounts
are presented in two volumes. Volume-I contains the consolidated position of the state of
Finances and Volume-II depicts the Accounts in detail. The Appropriation Accounts of the
Government for the year for Grants and Charged appropriations are presented in a separate
compilation.
       The Finance Accounts have been prepared under my supervision in accordance with
the requirements of the Comptroller & Auditor General’s (Duties, Powers and Conditions of
Service) Act, 1971 from the compiled accounts and initial and subsidiary accounts rendered
by the treasuries, offices and departments responsible for the keeping of such accounts
functioning under the control of the Government of Andhra Pradesh and the statements
received from the Reserve Bank of India. Statement Nos. (8, 9, 19 and 20), Explanatory notes
(Statement Nos. 5, 14 and 15) and Appendices (VIII and IX) in this compilation have been
prepared directly from the information received from the Government of Andhra Pradesh/
Corporations/ Companies/ Societies who are responsible to ensure the correctness of such
information.
        The treasuries, offices, and/or departments functioning under the control of the
Government of Andhra Pradesh are primarily responsible for preparation and correctness of
the initial and subsidiary accounts as well as ensuring the regularity of the transactions in
accordance with the applicable laws, standards, rules and regulations relating to such
accounts and transactions. I am responsible for preparation and submission of Annual
Accounts to the State Legislature. My responsibility for the preparation of Accounts is
discharged through the office of the Principal Accountant General (Accounts &
Entitlements), Andhra Pradesh. The audit of these accounts is independently conducted
through the office of the Principal Accountant General (Audit), Andhra Pradesh in
accordance with the requirements of Articles 149 and 151 of the Constitution of India and the
Comptroller & Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971, for
expressing an opinion on these accounts based on the results of such audit. These offices are
independent organisations with distinct cadres, separate reporting lines and management
structure.
        The audit was conducted in accordance with the Auditing Standards generally
accepted in India. These Standards require that we plan and perform the audit to obtain
reasonable assurance that the accounts are free from material misstatement. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements.
        On the basis of the information and explanations that my officers required and have
obtained, and according to the best of my information as a result of test audit of the accounts
and on consideration of explanations given, I certify that, except for the effects of the matter
                                             (iv)
described in the Basis for Qualified Opinion, the Finance Accounts read with the Explanatory
Notes to Accounts to the best of my knowledge and belief, give a true and fair view of the
financial position, and the receipts and disbursements of the Government of Andhra Pradesh
for the year 2020-21.
Basis for Qualified Opinion
Financial attest audit requires that an Auditor may give an unqualified opinion if he is of the
view that Finance Accounts give a true and fair view of the financial position and the receipts
& disbursements. However, the Auditor may give a modified opinion in the following
circumstances when he is either:

      i.   Uncertain as to whether the material error does or does not exist in the accounts
           or;
     ii.   Disagrees with the way something has been dealt with in the accounts
All financial transactions of the State are initiated, approved, paid and recorded through the
Comprehensive Financial Management System (CFMS) which is designed as a single source
of truth. Andhra Pradesh Centre for Financial Systems and Services (APCFSS), a Company
under the Companies Act, 2013 operates the CFMS. Generally, the payment transactions are
initiated through bills by the Drawing & Disbursing Officers in various Departments of the
State Government based on approvals contained in the sanction orders; the payments are
processed by the District Treasury Officers on the basis of availability of budget as contained
in the Budget Release Orders (BROs) issued by the State Finance Department through the
year. District Treasury Offices are required to ensure that every payment/accounting entry is
duly authorised and budgeted and are compliant to rules and regulations.
Included in the initial accounts rendered from the CFMS for the year 2020-21 were 54,092
adjustment transactions which were not processed through the Treasuries/treasury system,
and instead were processed in the CFMS centrally at the APCFSS through the back-end.
They were processed through “Special Bills” in the CFMS, which is not an authorised type of
a bill as per the Treasury Code.
The gross amount transacted through the Special Bills was ₹48,284.31 crore including
adjustments between the Consolidated Fund of the State (CFS) and the Public Account. The
payments which led to outgo from the CFS (₹13,071.08 crore) accounted for 7.5 per cent of
the total payments (₹1,73,367 crore) made from the CFS; adjustments in the Public Account
(₹35,213.23 crore) accounted for 13.12 per cent of the payments from the Public Account
(₹2,68,327 crore).
The Finance Department was also provided an opportunity to provide further information in
support of the transactions under question.
Upon being questioned by PAG (A&E), the Principal Secretary (Finance) ratified the back-
end transactions made at the APCFSS which was not within his powers as the procedure for
carrying out these adjustment transactions are laid down in the treasury code. Further, the
Finance Department in compliance to Audit observations and as a corrective measure, issued
a Government Order No.80 dated 12 October 2021 entrusting the activities which were being

                                                 (v)
managed by APCFSS to Director of Treasury and Accounts, Pay and Accounts officer and
Director of Works and Accounts, which confirms the contention of Audit that the operation of
Special Bills was unauthorised.
The Finance Department segregated the transactions into 14 categories, which I examined.
The summary position is as follows:
   x   In respect of five categories totaling to ₹26,839.60 crore, the Finance Department
       informed us that the entries were a consequence of Government orders on schemes and
       on local bodies. While the relevant Government orders were provided to us, no valid
       reason was forthcoming as to why these entries could not be carried out in consonance
       with the Treasury code, through the CFMS and the Treasury system.
   x   In respect of 16,688 accounting entries totaling to ₹9,124.57 crore, the Finance
       Department had no explanation as to why they were even necessitated in the first
       place, much less being carried out through the back end. Out of 16,688 entries,
       regarding 16 accounting entries totaling to ₹5,454.54 crore, the Finance Department
       stated that these special bills were necessitated because of failed electronic transfer of
       Direct Benefits under a State scheme. The entire funds that could not pass through the
       portal were transferred to a suspense head through eight special bills (₹2,727.27 crore)
       and the suspense head was cleared through another set of eight special bills (₹2,727.27
       crore). It was noticed that the suspense was cleared on 30 May 2020 whereas the
       suspense was credited on 31 May 2020. The details of these adjustment transactions
       and beneficiary transfer could not be explained by the Department. Further, operation
       of suspense head in anticipation was incorrect.
   x   There were 1,006 accounting entries with a debit of ₹8,891.33 crore to the
       Consolidated Fund of the State which were made without requisite sanction orders or
       Budget Release Orders, while 25,734 entries totaling to ₹3,428.81 crore, were only
       supported by internal documents of the APCFSS as the basis, which were not valid as
       per the Treasury code.
Attention is drawn to the generally accepted auditing standards, according to which, I am
required to examine the adequacy of internal controls, in order to provide assurance that the
Accounts of the year provide a true and fair view of the financial position of the State.
In my view, these material accounting entries were effected through the back-end of the
CFMS without any valid rationale and necessary documentation, bypassing the treasury
system and were in violation of the Treasury Code and the IT controls. These irregular
accounting entries are fraught with the risk of inflating the Government expenditure besides
possible misappropriation as these were done in back end of the CFMS. Therefore, my
opinion of the true and fair nature of accounts is subject to the above violations.
Other Points of interest arising from study of these accounts as well as test audit conducted
during the year or earlier years are contained in my Financial, Compliance and Performance
Audit Reports on the Government of Andhra Pradesh being presented separately for the year
ended 31 March 2021.


                                                 (vi)
Emphasis of Matter
       I want to draw attention to the following significant issue/concern which is important
from the point of view of accuracy, transparency and completeness of these accounts and
maintaining legislative control over public finances.
        The Fifteenth Finance Commission recommended that, in the interest of transparency,
States need to make full disclosure of Off-budget borrowings. Government of Andhra
Pradesh mobilized ₹38,312.70 crore through seven State Public Sector Undertakings during
2020-21. The Off-Budget borrowings from various Banks on behalf of the Government as at
the end of March 2021 stood at ₹86,259.82 crore for which principal and / or interest would
be serviced out of the State Budget. This was not disclosed in the State Budget.
       The audit observation on the above issue has been detailed in the State Finances Audit
Report for the year ended March 2021.




Date : 21-03-2022                               (GIRISH CHANDRA MURMU)
Place: New Delhi                             Comptroller and Auditor General of India




                                               (vii)