The Right of Children to Free and Compulsory Education Act, 2009 (RTE Act) became operational with effect from 01 April 2010 to make elementary education (Class I to VIII) a fundamental right of all children. The Act provides that all children in the age group of six to fourteen years have a right to free and compulsory education in a neighbourhood school within three years of the enactment of the Act. The Performance Audit of implementation of the RTE Act was conducted (April - July 2017) covering the period from 2012-13 to 2016-17. There was significant shortfall (50 per cent) in release of funds by GoI and the State Government as compared to the budget approved by Project Approval Board (PAB) during 2014-17. There were considerable delays in release of funds by GoI as well as the State Government to the Telangana Sarva Shiksha Abhiyan Society (TSSA). In Government Primary Schools, the enrolment declined by 1.12 lakh during 2014-17. On the other hand, in case of Private Primary Schools, enrolment increased by 0.61 lakh during the same period. The enrolment in Government Upper Primary Schools decreased by 0.20 lakh, whereas enrolment increased by 0.03 lakh in Private Upper Primary Schools. There was high dropout rate of students during transition from class I to VIII in respect of SC/ST boys and girls. Fourteen to 26 per cent children at Primary level and 21 to 47 per cent in Upper Primary level scored less than 40 per cent during the years 2014-17. Child tracking system was not in existence in the State and thereby continuity of education of children in one school or other could not be ensured. Under Inclusive Education to Children with Special Needs (CWSN) ₹ 15.42 crore (35 per cent) of funds approved by PAB were only spent during 2014-17. The State had not implemented provisions of RTE Act and the State Rules with regard to 25 per cent reservation for disadvantaged group children in private unaided schools. The benefit of transport allowance for attending neighbourhood schools was denied to 44,412 eligible/identified children in the State during 2014-15 and 2016-17. The schools were largely deficient in basic infrastructural facilities/amenities.