(MENAFN- Live Mint) New Delhi: The Comptroller and Auditor General (CAG) of India has directed all states to adopt a uniform structure for classifying government expenditure by FY 2027–28. The move aims to overhaul the country's public finance architecture, ending decades of inconsistency in the way spending is recorded across the federal system, according to Jayant Sinha, deputy CAG (Government Accounts).

The decision, notified to the Union and state governments on 11 November, brings uniformity to the Object Heads of expenditure-the most detailed level of the accounting hierarchy that classifies how each rupee of government expenditure is categorised. For years, states recorded this expenditure head in different ways, making comparisons difficult, delaying data analysis, and reducing the accuracy of budgetary assessments.

Sinha said that the new standardised framework will allow uniform, transparent and comparable financial reporting for the first time.

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“The harmonisation“addresses a decades-long issue” and strengthens the foundations of public financial management. The list was finalised by a joint working group comprising officers from the Comptroller and Auditor General (CAG), state governments, the Controller General of Accounts and the Controller General of Defence Accounts. While states may retain unique expenditure practices under sub-heads, the core structure will now be common nationwide.

CAG has implemented another major reform by advancing the timelines for preparing Monthly Civil Accounts. These accounts, which were earlier finalised around the 25th of each month, will now have to be prepared by the 10th.

Faster account compilation will provide state administrations, RBI, and other stakeholders with earlier visibility into fiscal trends, aiding budget planning and improving fiscal discipline.

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The CAG has also rationalised the classification of mineral receipts in partnership with the mines ministry and the department of expenditure. The revised structure provides distinct heads for royalties on coal and lignite, iron ore and non-ferrous minerals, along with clearer accounting of transfers to the National Mineral Exploration Trust and the State Mineral Exploration Trust, he said. The changes are expected to improve transparency in state finances, strengthen oversight of mineral revenues and enhance accountability in resource governance.

Collaborations ongoing

The CAG official further stated that similar collaborations with other Union ministries are ongoing to streamline financial classification systems and enhance the overall fiscal reporting framework. These initiatives form part of a wider strategy to improve public financial management across India, particularly at the state level, which accounts for a significant portion of public expenditure.

“The CAG's move to introduce a uniform expenditure-classification framework will bring long-overdue clarity and comparability to how states record government spending, replacing decades of inconsistent accounting practices. This reform was required because widely varying Object Heads across states made it difficult to compare budgets, assess fiscal performance and analyse expenditure trends, resulting in gaps in policy planning and financial oversight,” said Rakesh Arrawatia, professor of finance and accounting at the Institute of Rural Management, Anand.

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“With the new system, state governments, the Union government, RBI, Finance Commissions, and fiscal researchers will be the biggest beneficiaries, as they will now have transparent, comparable and timely expenditure data for decision-making,” said Sinha.

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