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Local Bodies, Government of Madhya Pradesh

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Local Bodies, Government of Madhya Pradesh Report of the Comptroller and Auditor General of India ON LOCAL BODIES for the year ended 31 March 2016 Government of Madhya Pradesh Report No. 4 of the year 2017 Table of Contents Paragraph Page no. no. Preface - v Overview - vii PART – A: PANCHAYATI RAJ INSTITUTIONS Chapter I: An Overview of the Functioning, Accountability Mechanism and Financial Reporting issues of the Panchayati Raj Institutions Introduction 1.1 1 Organisational set up of PRIs 1.2 1 Functioning of PRIs 1.3 2 Audit arrangement 1.4 4 Response to audit observations 1.5 5 Social Audit 1.6 5 Sources of funds 1.7 6 Budgetary allocation and expenditure of PRIs 1.8 7 Accounting arrangement 1.9 7 Bank reconciliation statement not prepared 1.10 8 Temporary advances not adjusted 1.11 8 Fourteenth Finance Commission Grants 1.12 9 Chapter II: Compliance Audit Asset Management in PRIs 2.1 11 Avoidable liability of interest and penalty 2.2.1 23 Deposit of interest to Government Account 2.2.2 24 Suspected embezzlement 2.2.3 25 PART – B: URBAN LOCAL BODIES Chapter III: An Overview of the Functioning, Accountability Mechanism and Financial Reporting issues of the Urban Local Bodies Introduction 3.1 27 Organisational set up of ULBs 3.2 27 Functioning of ULBs 3.3 28 Audit arrangement 3.4 29 Response to audit observations 3.5 30 Sources of funds 3.6 31 Budgetary allocation and expenditure of ULBs 3.7 31 Accounting arrangement 3.8 32 Audit Report on Local Bodies for the year ended 31 March 2016 Paragraph Page no. no. Bank reconciliation statement not prepared 3.9 33 Tax revenue/non-tax revenue not realised 3.10 33 Temporary advances not adjusted 3.11 34 Fourteenth Finance Commission Grants 3.12 34 Chapter IV: Performance Audit Management of own fund by Municipal Corporations 4.1 37 and Municipal Councils including collection of revenue Chapter V: Compliance Audit Setting up and management of Fire Services by Urban 5.1 57 Local Bodies Short-realisation of supervision fee 5.2.1 70 Avoidable payment of penalty and interest 5.2.2 71 Short-realisation of shelter fee 5.2.3 72 ii Table of contents LIST OF APPENDIX Appendix Subject Page no. 1.1 List of test-checked PRIs during 2015-16 75 1.2 Difference in Cash Book balance and Pass Book 76 Balances on 31.03.2015 1.3 Outstanding temporary advances as on 31.03.2015 80 2.1 List of test checked Gram Panchayats 82 2.2 Statement of Assets not being utilised for intended 83 purposes 2.3 List of Theft Items in Gram Panchayats 85 2.4 Statement showing deposit of interest to 86 Government account 3.1 Statement showing devolution of functions to Urban 88 Local Bodies 3.2 List of test-checked ULBs during 2015-16 89 3.3 Bank reconciliation statement not prepared 90 3.4 Statement showing unrealised tax revenue (Property 91 tax, composite tax, education cess, urban development cess, market fees, show tax) 3.5 Statement showing details of unrelised rent and 93 premium 3.6 Statement showing of details non-tax revenue 95 (water charges, license fee, land and building rent etc) not realised 3.7 Details of unadjusted temporary advance 97 4.1 Statement showing demand and collection of 98 property tax by test checked MCs 4.2 Statement showing demand and collection of 101 composite tax by test checked MCs 4.3 Statement showing demand and collection of user 104 charges (water tax) 4.4(A) Statement showing preparation of unrealistic budget 107 estimates 4.4(B) Statement showing preparation of unrealistic budget 109 estimates 4.5 Statement showing difference in closing balances as 111 per cash book and bank pass book as on 31.03.2016 4.6 Statement showing short deposit of money in 112 reserve fund 4.7 Statement showing delays in remitting taxes 114 deducted at source to respective authority 4.8 Statement showing short remittance of State’s share 115 of urban development cess in Government account 4.9 Statement showing sanctioned, working and vacant 117 posts in revenue department iii Audit Report on Local Bodies for the year ended 31 March 2016 Appendix Subject Page no. 5.1 Details of dimensions of accommodations of fire 118 stations of BMC 5.2 Details of availability of personal protective 119 equipment in test checked ULBs 5.3 Details of sanctioned strength of fire staff and 120 men-in-position 5.4 Short realisation of supervision fee 121 iv P R E F A C E This Report for the year ended March 2016 has been prepared for submission to the Governor of Madhya Pradesh under the Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971. The Report contains significant results of the audit of Panchayati Raj Institutions and Urban Local Bodies in the State including the Departments concerned. The issues noticed in the course of test audit for the period 2015-16 as well as those issues which came to notice in earlier years, but could not be dealt with in the previous Reports have also been included, wherever necessary. The audit has been conducted in conformity with auditing standards issued by the Comptroller and Auditor General of India. OVERVIEW This Report contains five chapters. The first and third Chapters provide an overview of the functioning, accountability mechanism and financial reporting issues of Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) respectively. The fourth Chapter contains one Performance Audit report on ULBs. The second and fifth Chapters contain Compliance Audit Paragraphs and six Audit Paragraphs on PRIs and ULBs respectively. A summary of the important findings is presented in this overview. Chapter I: An Overview of the Functioning, Accountability Mechanism and Financial Reporting Issues of the Panchayati Raj Institutions • The Third State Finance Commission recommended (accepted by State Government in February 2010) that four per cent of divisible fund of the State Government should be devolved to PRIs. However, there was short devolution of ` 247.78 crore to PRIs during 2015-16. (Paragraph 1.7) • The funds allocated to PRIs by State Government through State budget increased from ` 7,911.12 crore during 2011-12 to ` 21,155.33 crore during the year 2015-16. However, PRIs could not spend the entire allocated grants and savings ranged from six per cent to 30 per cent during the period 2011-16 mainly due to considerable unspent balances in the Revenue Head. (Paragraph 1.8) • State Government received ` 1,463.61 crore of Fourteenth Finance Commission (14th FC) basic grant as per entitlement from Government of India in two instalments of ` 731.81 crore (July 2015) and ` 731.80 crore (February 2016). However, State Government delayed the release of first instalment of grants to Gram Panchayats (GPs). As a result of delays, State Government sanctioned ` 5.17 crore as interest, which was not released to GPs along with instalments as recommended by 14th FC. (Paragraph 1.12) Chapter II: Compliance Audit 2.1 Asset Management in Panchayati Raj Institutions The assets of PRIs include movable and immovable assets historically owned by them and those acquired from time to time. A compliance audit on ‘Asset Management in PRIs’ in two districts, Anuppur and Dewas revealed the following: • The annual plan and annual budget for economic development of panchayat areas and maintenance of assets was not prepared. GPs did not prioritise the maintenance of existing assets, which led to deterioration of assets. (Paragraphs 2.1.2 and 2.1.3) • GPs did not earmark fund for maintenance of assets under Panch Permeshwar scheme, which resulted in short utilisation of ` 4.55 crore on maintenance of assets. None of the GPs maintained separate bank account Audit Report on Local Bodies for the year ended 31 March 2016 for executing maintenance works, though required as per instructions of State Government. PRIs incurred inadmissible expenditure of ` 46.69 lakh, out of 13th Finance Commission Performance Grants released for construction of infrastructure development work. Audit noticed cases of suspected misappropriation and diversion of fund. (Paragraphs 2.1.3, 2.1.3.1, 2.1.3.2 and 2.1.3.3) • Due to lackadaisical approach of test checked PRIs, 1,764 works remained incomplete despite lapse of two to ten years which resulted in unfruitful expenditure of ` 55.72 crore on these works. Further, ` 6.00 crore received for construction of stadiums in rural areas was lying unutilised in ZPs Anuppur and Dewas despite the lapse of 15 to 36 months. The executing agency, Madhya Pradesh Laghu Udyog Nigam, did not construct/hand over e-panchayat rooms despite release of ` 6.24 crore in advance by Zila Panchayats in December 2012 and January 2014. Community assets in test checked GPs were not utilised for intended purposes. (Paragraphs 2.1.4.1, 2.1.4.2, 2.1.4.3 and 2.1.4.4) • Code wise database regarding immovable assets of GPs was not prepared and Geographical Information System (GIS) mapping of the infrastructure of the GPs was also not done despite recommendations of Third State Finance Commission. Internal control mechanism in the PRIs was not effective and essential records were not maintained. (Paragraph 2.1.5) 2.2 Compliance Audit Paragraphs • Zila Panchayat, Tikamgarh failed to deposit the Employer’s and Employees’ contributions under Employee’s Provident Fund Scheme within prescribed time, which resulted in avoidable liability of ` 26.21 lakh as interest and penalty. (Paragraph 2.2.1) • Interest amounting to ` 35.29 lakh received on account of Madhya Pradesh Assembly Constituency Area Development Scheme was not deposited in the Government Account, out of which ` 24.06 lakh was deposited on being pointed out by Audit.
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