Learning lessons from the two bank scams, Haryana has notified the Haryana Local Audit Act, 2026, under which officials of local bodies and universities will face personal financial liability for illegal payments and losses caused by negligence or misconduct.The Act received the Governor’s assent on September 17 and came into effect on September 30.The law covers Municipal Corporations, Municipal Councils, Municipal Committees, Zila Parishads, Panchayat Samitis and Gram Panchayats. state universities, Chaudhary Charan Singh Haryana Agricultural University, the Board of School Education Haryana and Maharaja Agrasen Medical College.It is pertinent to mention here that in the Rs 657 crore IDFC First Bank-AU Small Finance Bank scam, the Municipal Corporation, Panchkula, and the Municipal Council, Kalka, suffered a loss of over Rs 118 crore, while in the Kotak Mahindra Bank scam, there was a loss of about Rs 150 crore to the exchequer.As per Section 12 of the Act, the Director, Local Audit Department, can surcharge any official or officials for illegal payments and recover loss caused by negligence or misconduct. Every sum certified to be due from any person shall be paid by such person to the executive authority within one month.Section 17 of the Act states that whenever any loss of money or stores in a local authority is caused by misappropriation, theft, or natural calamities, 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.Power to require production of accountsThe Act 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 Act 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 wilfully 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.The law provides for annual or biannual audits, as well as pre-audit, concurrent audit, post-audit, test audit, and special audit.