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Report No 8 of 2016 Report of the Comptroller and Auditor General of India on Local Bodies for the year ended 31 March 2016 Government of Telangana Report No.8 of 2016 Table of Contents Reference to Paragraph Page Preface v Overview About this Report 1 vii Significant Audit findings 2 vii Part – A Panchayat Raj and Rural Development Department Chapter I An Overview of the Functioning, Accountability Mechanism and Financial Reporting issues of Panchayat Raj Institutions An overview of the Functioning of the Panchayat Raj Institutions (PRIs) in the State Introduction 1.1 1 Organisational set-up of PRIs 1.2 2 Functioning of PRIs 1.3 3 Formation of various committees 1.4 3 Audit arrangement 1.5 3 Response to Audit Observations 1.6 4 Accountability Mechanism Ombudsman 1.7 5 Social Audit 1.8 5 Submission of Utilisation Certificates 1.9 6 Internal Audit and Internal Control System of PRIs 1.10 6 Financial Reporting Issues Sources of Funds 1.11 7 Recommendations of the State Finance Commission (SFC) 1.12 10 Recommendations of the Central Finance Commissions 1.13 10 Maintenance of Records 1.14 11 Maintenance of Accounts by PRIs 1.15 12 Page i Reference to Paragraph Page Issues related to AC/DC Bills 1.16 13 Maintenance of database and the formats therein on the 1.17 13 finances of PRIs Conclusion 1.18 13 Chapter II Compliance Audit Information Technology Audit on implementation of 2.1 15 e-Panchayat in Telangana Follow up Audit Report on Implementation of Rural 2.2 28 Water Supply Schemes Idle investment 2.3 38 Irregular payment towards hiring of vehicles 2.4 38 Fraudulent payments towards contingent 2.5 39 expenditure Part – B Municipal Administration and Urban Development Department Chapter III An Overview of the Functioning, Accountability Mechanism and Financial Reporting issues on Urban Local Bodies An overview of the Functioning of the Urban Local Bodies (ULBs) in the State Introduction 3.1 41 Organisational set-up of ULBs 3.2 42 Functioning of ULBs 3.3 43 Formation of various committees 3.4 43 Audit arrangement 3.5 43 Response to audit observations 3.6 44 Accountability Mechanism Ombudsman 3.7 45 Social Audit 3.8 45 Page ii Reference to Paragraph Page Property Tax Board 3.9 45 Service Level Benchmark 3.10 46 Fire hazard response 3.11 46 Financial Reporting Issues Sources of funds 3.12 46 Recommendations of the State Finance Commission 3.13 48 Recommendations of the Central Finance Commissions 3.14 49 Maintenance of Records 3.15 49 Maintenance of Accounts by ULBs 3.16 51 Maintenance of database and the formats therein on the 3.17 51 finances of ULBs Conclusion 3.18 51 Chapter IV Performance Audit Water supply in Urban Local Bodies 4 53 Chapter V Compliance Audit Sewerage and Underground drainage in Urban areas 5.1 77 Delayed remittances of EPF contribution resulted in 5.2 88 avoidable expenditure Unfruitful expenditure on construction of office 5.3 88 building Page iii Appendices Appendix Reference to Subject No. Paragraph Page Statement showing district-wise and 1.1 department-wise devolution of funds to PRIs 1.3 91 during 2015-16 2.1 Brief of Panchayat Enterprise Suite applications 2.1.3.1 91 2.2 Misclassification of vouchers in PRIASoft 2.1.5.12 93 Status of incomplete/not commissioned projects 2.3 2.2.4 96 as of August 2016 Statement showing the details of gap between 4.1 4.9.1 97 demand and supply of water in the ULBs Statement showing the details of tests 4.2 4.10.1 97 conducted in the laboratories during 2011-16 Statement showing details of receipts and 5.1 5.1.5 98 expenditure of test-checked projects Statement showing the background and 5.2 5.1.6 99 objectives of the projects test-checked in audit Statement showing quality control remarks of 5.3 5.1.8 100 third party agencies Glossary of abbreviations 101 Page iv Preface This Report for the year ended March 2016 has been prepared for submission to the Governor of Telangana under the CAG’s DPC Act, 1971. The Report contains significant results of the audit of the Panchayat Raj Institutions and Urban Local Bodies in the State including 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 within 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. Page v Overview Overview 1. About this Report This Report of the Comptroller and Auditor General of India (CAG) relates to matters arising from performance audit of selected programmes of Panchayat Raj and Rural Development (PR&RD) and Municipal Administration and Urban Development (MA&UD) departments implemented with involvement of Local Bodies along with compliance audit of Panchayat Raj Institutions (PRIs) and Urban Local Bodies (ULBs). This Report also contains overview of finances and accounts of local bodies and observations on financial reporting. 2. Significant Audit findings This Audit Report includes results of one performance audit and eight compliance audit paragraphs of PRIs and ULBs. Draft performance audit and compliance audit paragraphs were forwarded to Government and replies wherever received have been duly incorporated in the Report. Significant audit findings relating to their audits are discussed below: 2.1 Performance Audit on Water Supply in Urban Local Bodies Water is a natural resource essential for human existence. Lack of safe drinking water affects the health and wellbeing of the public. The objective of water supply system is to ensure supply of safe and adequate quantity of water at reasonable cost to the user. The responsibility of supplying safe drinking water to urban population rests with the Urban Local bodies (ULBs). Out of 531 Urban Local Bodies in the State, seven 2 ULBs were selected for detailed scrutiny based on lowest lpcd (litres per capita per day) in each stratum 3. Following significant observations were noticed in the Performance audit of Water Supply in Urban Local Bodies: • State Government had yet to frame policy/guidelines based on National Water Policy 2012 as per local requirement. Water Regulatory Authority was yet to be established for uniformity in operations and pricing for supply of water. (Paragraphs 4.5.1 and 4.5.2) • ULBs had not accorded much importance to construction of Rain water harvesting structures for conservation of ground water. No action was initiated by the ULBs for rejuvenation or recharging of sub-surface water. (Paragraph 4.6.3) 1 14 Nagar Panchayats formed on or after 2012 were not considered for sampling 2 Bodhan (Nizamabad district), Gadwal (Mahabubnagar), Kodad (Nalgonda), Mandamarri (Adilabad), Manuguru (Khammam), Metpally (Karimnagar) and Vikarabad (Rangareddy) 3 Stratum I (<= 70 lpcd), Stratum II (>70 and <=135) and Stratum III (>135) Page vii Audit Report on ‘Local Bodies’ for the year ended March 2016 • Water treatment plants were not available in four 4 test-checked ULBs where sub- surface was the source. In Kodad ULB there was shortfall in storage capacity of service reservoirs and water supplied through open/bore wells for drinking purposes confirmed presence of excess fluoride. (Paragraphs 4.7.1 and 4.7.2) • Water supply distribution network was inadequate. In the four 5 test-checked ULBs, there was shortfall in coverage of pipeline network ranging from 23 per cent to 67 per cent, when compared with internal road length. (Paragraph 4.7.3) • Flow meters were not installed at source/treatment plant/distribution zones in the test-checked ULBs. (Paragraph 4.7.4) • In Manuguru ULB, there was no household connectivity since water is supplied through public stand posts. Water Supply Improvement Scheme stipulated for completion by March 2016 was still under progress (60 per cent was executed with an expenditure of ``` 11.72 crore) as of March 2016. (Paragraph 4.8.2.1) • In Vikarabad ULB, infrastructure created under the scheme sanctioned in 2007 at the cost of ``` 23.81 crore remained unutilised since water was supplied through infrastructure created under another scheme sanctioned in 2011. In Gadwal ULB, the infrastructure created at the cost of ``` 5.57 crore was lying idle, since contractor stopped (June 2012) the work midway. (Paragraphs 4.8.2.2 and 4.8.2.3) • In all the seven 6 test-checked ULBs, there was a gap between demand and supply ranging from 19 per cent to 71 per cent. Duration of water supply ranged from one hour once in four days to one hour per day against target of supply of water for 24 hours. (Paragraphs 4.9.1 and 4.9.2) • The shortfall in House Service Connections in six 7 test-checked ULBs ranged from 48 per cent to 78 per cent. Water meters were not installed in any of the test-checked ULBs, and ULBs continued to levy water charges at fixed rate, irrespective of actual consumption causing possible loss of revenue to ULBs. (Paragraphs 4.9.3 and 4.9.4) • ULBs did not install their own laboratories. As such, there was shortfall in coverage of tests of water samples to confirm the quality of water. ULBs did not furnish action taken on the unsatisfactory reports on water samples. The 4 Kodad, Mandamarri, Manuguru and Metpally 5 Kodad (61 per cent ), Gadwal (67 per cent ), Manuguru (23 per cent ) and Mandamarri (28 per cent ) 6 Bodhan (19 per cent ), Gadwal (41 per cent ), Kodad (71 per cent ), Mandamarri (44 per cent ), Manuguru (56 per cent ), Metpally (71 per cent ) and Vikarabad (62 per cent ) 7 Bodhan 51 per cent , Gadwal 53 per cent , Kodad 48 per cent , Mandamarri 78 per cent , Metpally 62 per cent and Vikarabad 58 per cent Page viii Overview Surveillance agencies required to identify and evaluate factors posing health risk related to drinking water supplied and pinpoint the risk areas and give advice for remedial action to ULBs, were not formed in any of the test checked ULBs.
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