Nearly three decades have elapsed since the Panchayati Raj Institution evolved into a three-tier system of decentralised governance. Yet, the lack of transparency and accountability in financial transactions by most panchayat bodies continues to pose a stumbling block in strengthening decentralised governance. Official data shows that for the financial year 2021–22, only 36.75% of rural local bodies generated audit reports in AuditOnline, a system rolled out by the Ministry of Panchayati Raj to facilitate both internal and external audits of government institutions, including urban and rural local bodies. Disruption of fund flows to rural local bodies that are not generating audit reports will have a cascading impact on the implementation of funds devolved by the 15th Finance Commission for strengthening grassroots governance. The 15th Finance Commission made it mandatory for all panchayats to get their accounts audited for the preceding two years—provisional accounts of the previous year and audited accounts for the year before—and also make the audit report public in order to be eligible to avail FC grants from 2023–24 onwards. In its report, the FC insisted that for any part of the government using taxpayer money, the availability of accounts (including audited accounts) in the public domain on a timely basis is a primary requirement for good governance. In the absence of such information, previous Finance Commissions have also highlighted the difficulties in realistically assessing the requirement of resources by rural and urban local bodies for carrying out their core functions and for development expenditure, it adds. The FC recommended a total grant of Rs. 2,36,805 crore for duly constituted rural local bodies for the period 2021–26 and inter se distribution amongst the States with a weight of 90 percent on population and 10 percent on the area of the States. It, however, explained the norm that if for a particular state only 35 percent of rural local bodies have both provisional accounts for the years 2022–23 and audited accounts for the years 2021–22 and these are available online in 2023–24, then the state will receive only the total amount due to these 35 percent of rural local bodies for the years 2023–24. This mandate of audited accounts of local bodies as entry-level eligibility was set by the FC in its report 2021, and it is baffling why the states and rural local bodies have failed in their compliance. A few other recommendations of the FC stipulate that 40 percent of the total grants to be disbursed to rural local bodies shall be untied and can be used by them for felt needs under the twenty-nine subjects enshrined in the Eleventh Schedule, except for salaries and other establishment costs. The expenditure required for auditing of accounts by external agencies approved by the State Government, however, may be borne by this grant. Besides, 30 percent of the total grants to be disbursed to rural local bodies shall be earmarked for drinking water, rainwater harvesting, and water recycling; 30 percent shall be earmarked for sanitation and maintenance of open defecation-free status; and this should include the management and treatment of household waste, human excreta, and faecal sludge management in particular. The list indicates how critical development work in villages under rural local bodies is going to be affected if funds are withheld on account of the non-generation of audit reports and not placing those in the public domain. The Parliamentary Standing Committee on Rural Development and Panchyati Raj highlighted in one of its recent reports that of the total 2.71 lakh rural local bodies, only 80,742 rural local bodies have active internet connections as of January 21, 2023, even though 1.92 lakh Gram Panchayats have been made service ready under the Bhartnet programme and the launching of the digitization of all Gram Panchayats by the Ministry. Making every single gram panchayat equipped with computers and internet connectivity is critical to the maintenance of online accounts and easily sharing those for internal and external audits. The central government’s position in response to the parliamentary panel’s recommendation for making audit reports public as required by the FC is that constitutionally, the subject of auditing the accounts of panchayats comes within the purview of state governments. Article 243J of the Constitution of India provides that the Legislature of a State may, by law, make provisions with respect to the maintenance of accounts by the Panchayats and the auditing of such accounts. However, the Ministry, apart from rolling out the online application to facilitate the online generation of audit reports of panchyats, has also been pushing for strengthening audit mechanisms at the grassroots level in follow-up initiatives. The states have the larger responsibility to ensure that decentralised governance does not suffer due to the non-availability of audited accounts. Empowering the elected representatives to press for audit reports can help rural local bodies overcome this pressing problem.