This Report contains six chapters. The first and the secondchapterscontainan overview of financesand observations on financial reporting in Panchayat Raj Institutions.The third chapter contains observations arising out of performance audit on Implementation of National Rural Drinking Water Programme (NRDWP) and compliance audits of the Panchayat Raj Institutions. The fourth and the fifth chapters contain an overview of finances and observations on financial reporting in Urban Local Bodies.The sixth chapter contains observations arising out of compliance audit of the Urban Local Bodies