The Haryana Government is introducing the ‘Haryana Local Audit Bill, 2026’ to establish a statutory framework for auditing local bodies and government-funded institutions, while empowering the Director, Local Audit Department, to “surcharge” officials for illegal payments and losses resulting from negligence or misconduct.The decision has been taken following the bank scams in Haryana. Substantial amounts were siphoned off from the Panchkula Municipal Corporation, the Kalka Municipal Council, and other departments in the IDFC First Bank-AU Small Finance Bank scam. The Kotak Mahindra Bank scam continued from 2020 to 2026, during which crores were siphoned off from the Panchkula Municipal Corporation. Later, it came out that the bank records were never submitted to auditors.The state government has felt that strong legal powers to compel government officials to produce records are required, said a senior official in the Finance Department. He added that the Bill, to be introduced during the current Monsoon session, mandates statutory timelines for submitting annual audit reports to the State Legislature and also includes provisions to ensure that local authorities respond to the audit paras within a fixed time frame.In the Haryana Local Audit Bill, the Urban Local Bodies and Panchayati Raj Institutions, all state varsities, Board of School Education, Bhiwani, Maharaja Aggarsain Medical College, Government or Government-aided High Schools, Senior Secondary Schools, Colleges, charitable endowment funds and all relief funds are covered for audit.Power to require production of accountsThe Bill requires that the executive authority of an entity shall prepare the accounts for audit within three months of the end of the financial year. In the event of failure to do so, the Director, Local Audit, may request that the government withhold the release of funds to the concerned local authority.Section 6 of the Bill says that an auditor can require, in writing, the production of records, such as vouchers, statements, returns, correspondence, notes, or any other documents, including those in electronic form. Also, the attendance of concerned officials can be enforced, and an explanation can also be sought.An official may be fined Rs 1,000 to Rs 5,000 for willfully neglecting or refusing to comply with the auditor’s requisition.A time limit has been set for the completion of the audit, which cannot exceed six months.The audit report issued by the Director shall include any illegal payments; any losses caused by the negligence or misconduct of any person; any cases of misappropriation or improper use of funds; and remedial actions to improve the accounting system.Upon receipt of the audit report, the executive authority must remedy the irregularities within two months and place the audit report, along with the action taken, before its governing body. The executive authority shall also, within a month of the governing body meeting, send an amended report to the Director.Director to surcharge illegal paymentsFurther, the Director has the right to decide whether the amount to which the irregularity relates can be charged and against whom. He can also inform the government if he has a presumption of criminal misappropriation or fraud.The Bill empowers the Director to recover illegal payments and losses from the responsible person. Amounts certified as recoverable must be paid within one month; otherwise, they may be recovered as arrears of land revenue. An aggrieved person can approach the administrative secretary within one month against the surcharge.Section 17 of the Bill states that whenever any loss of money or stores is caused by misappropriation, theft, or natural calamities in a local authority, it shall be promptly reported to the Director, Local Audit. On receipt of the report, the Director shall immediately conduct a special audit of the accounts and transactions of that authority.The Director shall submit a consolidated report of the accounts and transactions of executive authorities to the state government and the government shall cause the consolidated report to be laid, as soon as may be before the state legislature.