## Audit of Substantially Financed Bodies — Grants and Loans

### What is a 'Substantially Financed' Body?

A body or authority is substantially financed when it receives a grant or loan from the Consolidated Fund of India or a State that satisfies both of the following conditions:

Condition	Threshold
Absolute amount of grant/loan	≥ ₹25 lakh
Grant/loan as % of total expenditure of that body	≥ 75%

> Both conditions must be satisfied simultaneously.

### CAG's Duty

Where a body or authority is substantially financed, the CAG shall:

1. Audit the receipts and expenditure of that body/authority

2. Make a report thereon

### Also within scope

Audit of receipts of Union or State Government (covered separately)
Audit of Government companies or Corporations
Audit of accounts of stores and inventory
Audit of grants and loans disbursed

Worked example

### Example 1

A State Sports Authority receives ₹30 lakh as grant from the State Consolidated Fund. Its total expenditure for the year is ₹35 lakh. Since ₹30L ≥ ₹25L AND ₹30L/₹35L = 85.7% ≥ 75%, it qualifies as substantially financed. The CAG must audit its receipts and expenditure.

### Example 2

An NGO receives ₹28 lakh grant but its total expenditure is ₹100 lakh (28% only). Despite meeting the ₹25 lakh threshold, it does NOT meet the 75% condition. The CAG's substantial financing audit duty is NOT triggered.

⚠️ Common exam mistakes

Applying only one condition (either ₹25 lakh OR 75%) — both must be met simultaneously.
Confusing 'substantially financed' audit with routine government audit. The CAG's power here is triggered by the financing relationship, not by the nature of the body.
Forgetting the source must be the Consolidated Fund of India or a State — grants from other sources do not trigger this provision.

Reference: Section 14(1) (Audit of receipts and expenditure of substantially financed bodies) — CAG (DPC) Act, 1971

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Audit of Substantially Financed Bodies (Grants and Loans)

Worked example

⚠️ Common exam mistakes