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Unit 19 System of Financial Committees

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Unit 19 System of Financial Committees Downloaded From http://economicsdiet.com UNIT 19 SYSTEM OF FINANCIAL COMMITTEES Structure Objectives Introduction Need for Committees Public Accounts Committee Estimates Committee Committee on Public Undertakings Functioning of Committees-An Appraisal Let Us Sum up Key Words References Answers to Check Your Progress Exercises 19.0 OBJECTIVES After reading the unit, you should be able to: explain the concept of Financial committees describe and discuss the composition and functions of public Accounts Committee, Estimates Committees and the Committee on Public Undertakings; and debate the various dimensions and issues involved in financial control The term financial administration is used in a broad sense to include all the processes involved in collecting, budgeting, appropriating and expending public money, auditing income and expenditures, auditing receipts and disbursements; accounting for assets and liabilities and accounting for the financial transactions of the government and reporting upon income and expenditures, reporting upon receipts and disbursements, and the condition's 'of funds and appropriations. Government like any other organisation, can achieve little without finance. Therefore, the efficiency of financial administration is an important aspect of Government's effectiveness. A government which has worked out a satisfactory system of financial administration has gone a long way towards putting the administration of its affairs upon an efficient basis. I The financial functions in Government are performed by the following agencies: I 1) The Legislature ; 2) The Executive 1 3) The Treasury or the Finance Department I I 4) The Audit Department i Downloaded From http://economicsdiet.com Financial < ontrol Legislature has to determ~neby law the sources of government revenue. Executive has to provide the machinery and lay down the procedure of the collection of the revenue. Proper records or accounts of these revenues are to be m'aintained so that the accounts may be audited by an independent officer, who should submit an audit report to the legislature. In financial administration , legislature plays the key rok. All other agencies of financial administration act on behalf of the legislature, and are responsible to the legislature for all their activities. Hence legislative control over the finances and financial administration of the country is direct and pervasive. In order to exercise proper control, the Parliament and legislature setup certain committees. Three such committees set up in India, namely, Estimates Committee, Public Accounts ~ommitkeand the Committee on Public Undertakings, which exercise financial control on behalf of the legislature. The purpose of financial control is to secure honesty and economy in expenditure. These agencies have to see that the tax payers money is rightly and properly used. 19.2 NEED FOR COMMITTEES a Effective legislative control over the expenditure of the government requires the Parliament to satisfy itself that the appropriations have been utilised economically for the approved purposes within the framework of the grants. It should also undertake a detailed examination of the annual budget estimates of the government to suggest possible economies in the implementation of plans and programmes embodied therein. Both these functions are of pivotal importance in making the parliamentary control over governmental expenditure comprehensive. The legislature as such has neither the energy not the time to perform these functions. It; therefore, constituted three committees, composed of members belonging to it. to devote themselves to these functions. These three committees are: a) Public Accounts Committee b) Estimates Committee c) and the Committee on Public Undertakings. State legislatures also have similar committees though all of them do not have separate committees on public undertakings. 19.3 PUBLIC ACCOUNTS COMMITTBE Historically, the Webly commission of 1896 indicated the need for an accounts committee to highlight financial irregularities. The Montague Chelmsford reforms suggested the creation of such committees out of the provincial legislatures. The first such committee on Public Accounts was created at the centre to deal with the appropriation of ~ccountsof the Governor General in Council and the report of the Auditor General thereon. The British Parliament acquired power to grant appropriation with the Revolution of 1688. The power to ascertain how the money had been spent was conferred only in 1861, when the House of Commons created the committe on Public Accounts. In India, the Public Accounts Committee was first created at the centre in 1923 with the coming into force of the Montford reforms in 1921. It became a major force in the legislative control of Public expenditure. Despite the limitations of its constitution and the restrictions on its authority, it exercised erlormous influence in bringing to bear upon government the need to enforce economy in the expknditure of public money. Downloaded From http://economicsdiet.com committee of Parliament, called the Public Accounts Committee. A committee of System of Financial Committees Parliament is preferred because the Parliament does not have the time to undertake detailed examination of the report. Secondly, the scrutlny being technical, can best be done by a committee and, lastly. the non-party character of the examination is possible only in a committee but not in the house. Composition Under the provisions of the Constitution, the Public Accounts Committee at the Centre is constituted of members from both the Houses of Parliament; it is composed of 22 members, 15 &om the Lok Sabha and 7 from the Rajya Sabha. The members are elected through a system of proportional representation by single transferable vote. Almost every sizeable party or group is represented on the Committee. Although the committee is elected annually, there is a convention that there should be a two year tenure of the membership to ensure continuity. The Chairman of the Committee is nominated by the Speaker from amongst the members of the Committee. Till 1966-67, the chairman belonged to the ruling party. Since then, a member of the opposition has been named the chairman. Functions of the Committee The ,func\ions of the Committee are to satisfy itself that a) the moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged; b) the expenditure conforms to the authority which governs it; and c) every reappropriation has been made in accordance with provisions made in this behalf under the rules framed by the competent authority. It shall also be the duty of the Public Accounts Committee: a) to examine, in the light of the report of the Comptroller and Auditor General, the Statement of accounts showing the income and expenditure of state corporations, trading and manufacturing schemes and projects, together with the balance sheets and statements of Profit and Loss accounts which the President may have required to be prepared, or are prepared, under the provisions of the statutory rules regulating the financing of a particular corporation, trading concern, or project; b) to examine the statements of accounts showing the income and expenditure of Autonomous and Semi-autonomous bodies, the audit of which may be conducted by the Comptroller and Auditor General of India either under the direction of President or by a statute of Parliament; and to consider the report of the Comptroller and Auditor General in cases where the President may have required him to conduct an audit. The committee also reviews the form and details in which the estimates are prepared in order to arrest any tendency to reduce the number of votes or to include large lump-sum provisions since these are regarded as diminishing the control of Parliament over the estimates. It goes into the technical accounting procedure, in order to find out its adequacy or otherwise to control departmental extravagance. Working of the Committee The Public Accounts Committee can organise itself into sub-committees and working groups. When.approved by the committee, the reports of the sub- committees are deemed to be the reports of the Public Accounts committee. The Committee may send for persons, papers and records. The conclusions of the Committee are submitted to Parliament in the form of a report. To make the work of the committee more effictive, the Comptroller and Auditor General now submits interim reports to it. The committee is thus able to reach the conclusions and finalise its recommendations. It has at its disposal the services of the Comptroller and Auditor General. who is the guide. vhilosovher and friend of the committee. Downloaded From http://economicsdiet.com A convention has evolved that the recommendations of the Committee are accepted by the Government. But sometimes these arc sent back for reconsideration Mo\t 01 the issues are thus settled through mutual diseussion and free and frank exchanrc of views. The Public Accounts Committee probes into the transactions carried out It conducts a post-mortem examination of the Public Accounts. To quote the first Speaker of the Lok SaWa (inlhe speeches and writings of G.V. Matalan har. Speaker to PAC, p. 97)-'The very fact of consciousness that there is someone wh will scrutinize what has been done. is a great check on the slackness or ncgiigence oJ the executive." The examination, if it is properly carried out. thus. leads to general efficiency of the administration. The examination by the committee may also be useful as a guide for both future estimates and policies The control exercised by the Public Accounts Committee is quite signrficant. I he controls relate to financial matters and are quasi-judicial in nature As a watchdog it acts as a deterrent on excesses committed by the executive It is hoped that the committee will emerge as an effective force in the control of Pu b~icexpenditure Check Your Progress 1 Note : i) Use the space given below for your answers ii) Check your answers with those given at the end of the Unit.
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