STATE FINANCES for the Year Ended 31 March 2017 Government of Kerala
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REPORT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA on STATE FINANCES for the year ended 31 March 2017 Government of Kerala Report No. 1 of 2018 http://www.cag.gov.in Table of contents Reference to Paragraph Page no Preface - v Executive Summary - vii Chapter I Finances of the State Government Profile of Kerala - 1 Introduction 1.1 1 Resources of the State 1.2 6 Revenue Receipts 1.3 8 Capital Receipts 1.4 13 Public Account Receipts 1.5 14 Application of Resources 1.6 15 Quality of Expenditure 1.7 22 Financial Analysis of Government Investments, Loans 1.8 25 and Advances Assets and Liabilities 1.9 28 Debt Management 1.10 32 Fiscal Imbalances 1.11 34 Management of loans raised from financial institutions 1.12 38 Conclusion and Recommendations 1.13 42 Chapter II Financial Management and Budgetary Control Introduction 2.1 45 Summary of Appropriation Accounts 2.2 46 Financial Accountability and Budget Management 2.3 48 Non-reconciliation of departmental figures 2.4 55 Review on Budgetary Process and Appropriation Control 2.5 56 Overstated expenditure 2.6 61 Inspection of Treasuries 2.7 62 Conclusion and Recommendations 2.8 63 i Audit Report on State Finances for the year ended 31 March 2017 Table of contents Reference to Paragraph Page no Chapter III Financial Reporting Delay in furnishing utilisation certificates 3.1 65 Non-submission/delay in submission of Accounts 3.2 66 Delay in submission of accounts/Audit Reports of 3.3 66 Autonomous Bodies Departmentally Managed Commercial Undertakings 3.4 66 Misappropriations, losses, defalcations, etc. 3.5 67 Management of funds entrusted to District Collectors 3.6 68 Conclusion and Recommendation 3.7 74 ii Table of contents APPENDICES No. Page no 1.1 State Profile 77 1.2 Structure and form of Government Accounts 78 Part A Part B Layout of Finance Accounts 78 1.3 Methodology adopted for assessment of fiscal position 79 Part A Part B Medium Term Fiscal Plan 2016-17 80 1.4 Abstract of receipts and disbursements for the year 2016-17 81 Part A Summarised financial position of the Government of Kerala Part B 84 as on 31 March 2017 1.5 Time series data on the State Government finances 86 1.6 Receipt and utilisation of GoI flagship programmes 89 Gross collection in respect of major taxes and duties 1.7 vis-à-vis budget estimates and the expenditure incurred on 90 their collection Statement showing quarter-wise due dates and delays in 1.8 91 making payment of interest on HUDCO loan Details showing savings in Grants/Appropriations during 2.1 92 the year Details of Grant-wise Plan/Non-plan savings (exceeding 2.2 95 `100 crore) during the year Schemes with more than `10 crore savings in 2.3 96 Grants/Appropriations having substantial savings 2.4 Statement of persistent savings for the last three years 98 Schemes showed excess expenditure under Grants which 2.5 102 exceeded budget allocation Schemes in which expenditure was incurred after budget 2.6 104 was re-appropriated/surrendered Excess over provision of previous years requiring 2.7 105 regularisation Grants/Appropriations where supplementary provision 2.8 106 (`one crore or more in each case) proved unnecessary Cases of excessive supplementary Grants/ Appropriations 2.9 107 (Savings of ` one crore and above) Re-appropriation of funds (in excess of `one crore) proved 2.10 unnecessary as the final expenditure was less than 108 original/supplementary budget allocation Sub-heads in which injudicious re-appropriation led to final 2.11 110 excess 2.12 Sub-heads in which re-appropriation proved insufficient 112 iii Audit Report on State Finances for the year ended 31 March 2017 APPENDICES No. Page no Heads in which entire budget allocation (`five crore and 2.13 113 above) surrendered Surrender (`one crore or more in each case) in excess of 2.14 115 actual savings Sub-heads in which injudicious surrender (exceeding `one 2.15 117 crore) led to excess expenditure Pendency in submission of Detailed Contingent bills against 2.16 120 Abstract Contingent bills drawn during 2016-17 List of Chief Controlling Officers/Controlling Officers who 2.17 122 did not reconcile the expenditure figures during 2016-17 Advances pending settlement by Drawing and Disbursing 2.18 123 Officers Statement showing names of bodies and authorities, the 3.1 124 accounts of which were not received as of March 2017 3.2 Statement showing performance of Autonomous Bodies 125 Statement of finalisation of pro forma accounts and 3.3 Government investment in departmentally managed 127 commercial and quasi-commercial undertakings Department/duration-wise break-up of cases of 3.4 128 misappropriation, defalcation, etc. Department/category-wise details in respect of cases of loss 3.5 to Government due to theft, misappropriation and loss of 129 Government material Scheme-wise unutilised funds retained by District 3.6 130 Collectors as on 31 March 2017 Glossary of terms used in the Report 132 iv PREFACE 1. This Report is prepared for submission to the Governor of Kerala under Article 151 of the Constitution of India for being placed in the State Legislature. 2. Chapters I and II of this Report contain audit observations on matters arising from examination of Finance Accounts and Appropriation Accounts respectively, of the State Government for the year ended 31 March 2017. Information has also been obtained from the Government of Kerala, wherever necessary. 3. Chapter III on ‘Financial Reporting’ provides an overview and status of the State Government’s compliance with various financial rules, procedures and directives during the current year. 4. The Report containing the findings of performance audit and audit of transactions in various departments and observations arising out of audit of Statutory Corporations, Boards and Government Companies and the Report containing observations on Revenue Receipts are presented separately. v EXECUTIVE SUMMARY EXECUTIVE SUMMARY Background The State is located at the southern end of the country, sharing borders with Tamil Nadu and Karnataka. Geographical area-wise, Kerala is ranked 22nd in the country with an area of 38,863 sq.km. The State has a population of 3.58 crore (12th in the country) and it is ranked as the third most densely populated State with a density of 860 persons per sq.km. The decadal growth rate of population was 6.20 per cent (3.37 crore in 2007 to 3.58 crore in 2016), which is the lowest rate among Indian states. The literacy rate of Kerala (94 per cent) is the highest among the Indian states. Gross State Domestic Product (GSDP) of the State in 2016-17 at current prices was `6,55,205 crore. The per capita income (2016-17) of the State at current prices stands at `1,83,039. About the Report This Report of the Finances of the Government of Kerala is being brought out with a view to assess objectively, the financial performance of the State during 2016-17 and to provide the State Government and the State Legislature with timely inputs based on audit analysis of financial data. In order to give a perspective to the analysis, an effort is made to compare the achievements with the targets envisaged by the State Government in the budget estimates of 2016-17. Based on the audited accounts of the Government of Kerala for the year ended March 2017, this Report provides an analytical review of the Annual Accounts of the State Government. This Report is structured in three Chapters. Chapter 1 is based on the audit of Finance Accounts and makes an assessment of the Kerala Government’s fiscal position as on 31 March 2017. It provides an insight into trends in committed expenditure, borrowing pattern and quality of expenditure, besides giving comparison on State’s expenditure with other General Category States. Chapter 2 is based on the audit of Appropriation Accounts and gives a Grant-by- Grant description of appropriations and the manner in which the allocated resources were managed by the service delivery departments. Chapter 3 is an inventory of the Kerala Government’s compliance with various reporting requirements and financial rules. The report also compiles the data compiled from various Government departments/organizations in support of the findings. vii Audit Report on State Finances for the year ended 31 March 2017 Audit findings and recommendations Chapter I: Finances of the State Government Overall financial status In 2016-17, fiscal position of the State deteriorated as compared to 2015-16 in terms of three key fiscal parameters viz., revenue, fiscal and primary deficits, which were at the higher side during 2016-17. Revenue deficit increased from ` 9,657 crore in 2015-16 to ` 15,484 crore in 2016-17 and fiscal deficit increased from ` 17,818 crore in 2015-16 to ` 26,448 crore in 2016-17. The revenue receipts were insufficient to meet its non-plan revenue expenditure, indicating insufficiency of revenue receipts for routine expenditure of the State. State did not achieve any of the targets fixed in its Medium Term Fiscal Plan. As per the recommendation of the Fourteenth Finance Commission, Fiscal deficit to GSDP ratio was to be anchored at 3 per cent but it was 4 per cent during 2016-17 indicating increased growth of expenditure with respect to the growth of GSDP. Revenue resources of the State Revenue receipts of the State increased from `69,033 crore in 2015-16 to `75,612 crore in 2016-17 and recorded a growth of 9.53 per cent, which was the lowest growth rate shown during the last five years period.