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TABLEOFCONTENTS Paragraph Page(s) Preface v Overview viͲviii ChapterͲIͲIntroductiontoULBintheStateofBihar ConstitutionalBackground 1.1 1 OrganisationalStructureofULBs 1.2 1 AuditArrangement 1.4 4 StatusofRecoverybySurchargeProceedings 1.5 5 RecoveryattheInstanceofAudit 1.6 5 ChapterͲIIͲFinancialManagementandReporting FundflowArrangement 2.1 6 DiversionofGrantsin21ULBs 2.2 6 NonͲproductionofVouchers 2.3 6 NonͲrevisionofAssessmentofHoldings 2.4 7 NonͲimpositionofHoldingTax 2.5 7 NonͲdepositofEducationandHealthCesstoGovernmentAccount 2.6 7 Non/shortcollectionofEducationandHealthCess 2.7 7 Non/shortrealizationofEducationandHealthCess 2.8 8 NonͲrealizationofTaxesoutstandingagainstGovernmentBuildings 2.9 8 NonͲrealizationofTaxesoutstandingagainstPrivateholdings 2.10 8 RentOutstanding 2.11 8 RevenuelossonTransmissionTowers 2.12 8 Non/ShortCreditofRevenueCollected 2.13 9 DirectAppropriationofRevenueCollected 2.14 9 Non/Short realization of Bid amount on account of Settlement of 2.15 9 Properties Blockageoffund 2.16 10 Defalcationof` 13.08LakhinRaxaulNagarParishad 2.17 10 Fraudincollectionbytamperingin‘H’receiptbooksinBuxarNagar 2.18 10 Parishad Collection of money against fake receipts in Dehri Dalmianagar 2.19 10 NagarParishad MisappropriationofsettlementmoneyinForbesganjNagarParishad 2.20 11 MiscellaneousObservationsonEstablishment 2.21 11 i ChapterͲIIIͲInternalControlMechanism InternalControls 3.1 18 MaintenanceofAccountsbyULBs 3.2 18 PreparationofBudget 3.3 18 UpkeepofRecords 3.4 19 MaintenanceofCashͲBook 3.5 19 CommonLapsesinMaintenanceofRecordsrelatingtoExecutionof 3.6 20 Works Reconciliation 3.7 20 Verification 3.8 21 SegregationofDuties 3.9 21 Monitoring 3.10 21 InternalAudit 3.11 23 ExternalAudit 3.12 23 ChapterͲIVͲExecutionofSchemes Unfruitful/WastefulExpenditure 4.1 24 Irregular/DoubtfulExpenditure 4.2 27 ExcessPayment 4.3 28 UnutilizedGrants 4.4 30 MiscellaneousObservations 4.5 31 ChapterͲVͲReviewon“ProvisionofDrinkingWaterFacilities”byULBsintheStateofBihar Introduction 5.1 33 FundFlow 5.1.1 33 ModalitiesofExecution 5.1.2 34 ExecutionofLongTermWorksbyPHED/BRJP 5.1.2.1 34 ExecutionofShortTermScheme/SmallScaleWorksbyULBs 5.1.2.2 34 AuditObjectives 5.2 34 ScopeofAuditandAuditMethodology 5.3 35 AuditCriteria 5.4 35 AuditFindings 5.5 35 PreparationofEstimates 5.5.1 35 SelectionofSite 5.5.2 37 ReleaseofthefundstoExecutingAgencies 5.5.3 37 NonͲExecutionofWorksinstipulatedtime 5.5.4 38 Paucityoffund 5.5.5 38 NonͲCompletionofSchemesduetocostoverrun 5.5.6 39 MonitoringandSupervision 5.5.7 40 ii NonͲfulfilment of purpose for providing drinking water to urban 5.5.8 41 population Postinstallation/maintenanceoftubewells 5.5.9 41 UtilisationCertificates 5.6 41 Conclusion 5.7 42 Recommendation 5.8 42 iii ListofAppendices Appendix Particulars PageNo. AppendixI StatementshowingSurchargeNoticesissuedduring2008Ͳ09&2009Ͳ10 43 AppendixII StatementshowingSurchargeOrdersissuedduring2008Ͳ09&2009Ͳ10 44 AppendixIII Statement showing details of grants received, spent and unutilized 45Ͳ59 balanceason31.03.2009in45ULBs&31.03.2010in33ULBs AppendixIV StatementshowingpositionofreleaseoffundstoExecutingagencies 60 AppendixV StatementshowingdetailsofNonͲ executionofworkinstipulatedtime 61Ͳ62 AppendixVI StatementshowingpositionofUrbanWaterSupplySchemeexecutedby 63Ͳ68 PHED/BRJP AppendixVII StatementshowingpositionofinstallationoftubewellsbytheULBs 69Ͳ72 AppendixVIII GlossaryofAbbreviations 73 iv PREFACE TheExaminerofLocalAccounts,Bihar,PatnaheadstheLocalAuditDepartment(LAD)under thesupervisionofthePrincipalAccountantGeneral(Audit),Bihar,Patna.TheGovernmentof BiharhasappointedtheELAasstatutoryauditorofUrbanLocalBodiesvidenotificationdated: 15.11.2007.TheELAconductsAuditofalltheLocalBodiesinaccordancewithprovisionsunder LocalFundAudit(LFA)Act,1925oftheBiharStateandvariousotheracts,rulesandmanualsof theBiharGovernmentfromtimetotime. TheELApreparesReportontheaccountsofULBsunitwiseandsendssuchreporttotheChief MunicipalOfficerandacopythereoftotheStateGovernment. ThisReportoftheELAfortheyearended31March’2009and31March2010isconsolidation ofmajorauditfindingsarisingoutofauditofaccountsofULBsintheStateofBiharandthe performanceauditofselectedschemes/activities/grantsbeingimplemented/utilizedbythem. The audit findings in the Report are those which came to notice in the course of audit of accountsofULBsconductedduring2008Ͳ2010aswellasthosewhichhadcometonoticeinthe earlieryearsbutcouldnotbedealtwithinpreviousReport. v OVERVIEW The report contains five chapters. A synopsis of the findings contained in paragraphs is presentedinthisoverview:Ͳ 1. STATUSOFRECOVERYBYSURCHARGE/CERTIFICATEPROCEEDINGS x Sixtyfourcasesofsurchargeinvolving`68.87Lakhwereproposedandnotices wereissuedforrecoverybytheELA,Biharin24ULBs. (ParagraphͲ1.5) x SeventeenSurchargeOrderswereissuedin10ULBsamountingto` 81.76Lakh during2008Ͳ09to2009Ͳ10. (Paragraph–1.5) x ELA, Bihar has sent eight Certificate Requisitions amounting to ` 20.77 Lakh in four ULBs to respective District Certificate Officers for filing Certificate Cases underSection5ofPublicDemandRecoveryAct,(PDRA)1914during2008Ͳ09to 2009Ͳ10. (Paragraph–1.5) x Atotalsumof`90.34Lakhrepresentingnon/shortcredit,rentoutstanding,bid moneyduesetc.wasrecoveredattheinstanceofauditin63ULBs. (Paragraph–1.6) 2. FINANCIALMANAGEMENTANDREPORTING x Atotalsumof` 3.82CroreofspecificgrantssanctionedbytheGovernmentwas divertedby21ULBs,towardspaymentofsalaryandallowancestostaff,meeting otherrecurringandestablishmentexpenses. (Paragraph–2.2) x In 30 ULBs, vouchers worth ` 10.44 crore were not produced before audit for necessarychecks. (Paragraph–2.3) x TheStateGovernmentwasdeprivedofrevenuetothetuneof`18.78Croredue tonondepositofEducationandHealthCessinGovernmentAccountby62ULBs. (Paragraph–2.6) x DuetononimpositionofEducationandHealthCessandimpositionatlowerrate thelosssustainedby10ULBsandStateGovernmentwasof`24.24Lakhand` 218.18Lakhrespectively. (Paragraph–2.7) vi x In 75 ULBs the Tax Collectors, Tax Darogas, Cashiers, Accountants and other collectingstaffseitherfailedtodepositorshortdeposited`2.07Crorebeingthe collectionamountonaccountoftax,feesandothermiscellaneousrevenues. (Paragraph–2.13) x Collectionmoneytothetuneof` 81.49Lakhwasdirectlyappropriatedbythe cashier/collectingstaffstowardsexpenditurein17ULBs. (Paragraph–2.14) x Losstothetuneof`1.65Crorewasincurredin42ULBsduetonon/short realizationofbidmoneyonaccountofsettlementofproperties. (Paragraph–2.15) x Asumof` 13.08LakhwasdefalcatedbythecashierofRaxaulNagarParishad. (Paragraph–2.17) x Irregular Payment ` 31.07 lakh was made on account of Salary to eight employeesduetoContinuanceinServicebeyondthedateofsuperannuationin MuzaffarpurMunicipalCorporation(MMC) (Paragraph–2.21) x Asumof`8.24lakhwaspaidtothe13staffsofSamastipurNagarParishadon accountofirregularappointment. (Paragraph–2.21) x Casual labourers were paid ` 10.38 Crore by 53 ULBs despite ban on engagementofcasuallabourersondailywagebasisbytheStateGovernment. (Paragraph–2.21) x In17ULBs,P.F.deductionsamountingto` 118.93Lakhwerenotdepositedinto individualP.F.account. (Paragraph–2.21) 3. INTERNALCONTROLMECHANISM x Out of 95 ULBs test checked, 32 ULBs did not prepare budget estimates for varying periods. Without preparation of budget estimates, 28 ULBs incurred expenditureof`46.06CroreandfigureofexpenditureoffourULBscouldnotbe ascertained. (Paragraph–3.3) x Advancesamountingto`41.63croregrantedto52ULBsduring2008Ͳ09and` 20.63 crore granted to 28 ULBs during 2009Ͳ10 for various purposes remained unadjusted. (Paragraph–3.10) vii 4. EXECUTIONOFSCHEMES x Expenditure of` 39.87 Lakh became unfruitful due to non functioning of PumpingStationsatPatnaWaterBoardunderPatnaMunicipalCorporation. (Paragraph–4.1) x Wasteful expenditure of ` 13.96 Lakh due to abandonment of schemes of constructionofCommercialComplexinNarkatiyaganjNagarParishad. (Paragraph–4.1) x VehiclesandEquipmentworth`24.82Lakhremainedidlefortwotoeightyears infiveULBs. (Paragraph–4.1) x Excesspaymentof`9.66lakhwasincurredforpurchaseofcementinBarhNagar Parishad. (Paragraph–4.3) x Doublepaymentofatleast`4.95lakhwasmadeinexecutionofschemesunder BRGFinDanapurNizamatNagarParishad. (Paragraph–4.3) 5. REVIEWON“PROVISIONOFDRINKINGWATERFACILITIES”BYULBSINTHESTATEOF BIHAR x Due to lack of sufficient fund, land dispute, nonͲavailability of site, delay in issuance of N.O.C, faulty DPRs, tardiness of contractor etc., the water supply workwasnotcompletedinstipulatedtimein19ULBs. (Paragraph–5.5.4) x TheUD&HDfailedtoprovideadequatefundtotheULBsevenafterlapseof fouryears` 102.46Crorewasyettobereleasedto17ULBsagainsttheoriginal estimatedcost. (Paragraph–5.5.5) x Eleven ULBs submitted demands for additional funds to ` 69.86 Crore for completion of works but no additional fund has been provided by the GovernmenttotheseULBs.Thecostoverrunwas53.40percentfortheseULBs. (Paragraph–5.5.6) viii CHAPTERͲI IntroductiontoULBsintheStateofBihar 1.1 ConstitutionalBackground Afterthe74thConstitutionalAmendmentAct,GovernmentofBiharenactedtheBihar MunicipalAct(BMA),2007forNagarNigam,NagarParishadandNagarPanchayat.Thereare11 NagarNigams,43NagarParishadsand87NagarPanchayatsinthestateofBihar.Atthestate leveltheUrbanDevelopmentandHousingDepartment(UD&HD)coͲordinatesthefunctioning oftheUrbanLocalBodies(ULBs).ImportantstatisticsoftheStatearegiveninthetablebelow:Ͳ TableͲ1 ImportantStatisticsoftheState Sl. Unit State Ranking AllIndia No. figure among figure states 1ShareinCountry'sPopulation percent 8.07 2ShareofRuralPopulation percent 89.5 3 TotalArea km² 94,163 12 32,87,240 4 PopulationDensity perkm² 881