Report of the Comptroller and Auditor General of India on Local Bodies for the year ended 31 March 2016 Government of Chhattisgarh Report No: 3 of the year 2017 Report of the Comptroller and Auditor General of India on Local Bodies For the year ended 31 MARCH 2016 GOVERNMENT OF CHHATTISGARH Report No. 3 of the year 2017 www.cag.gov.in Table of Contents TABLE OF CONTENTS Description Reference to Para No. Page Preface v Overview vii PART A CHAPTER I An Overview of the functioning, accountability mechanism and financial reporting issues of Panchayati Raj Institutions Introduction 1.1 1 Organisational setup of PRIs 1.2 2 Functioning of PRIs 1.3 3 Formation of various Committees 1.4 5 Audit arrangement 1.5 6 Response to Audit observations 1.6 7 Ombudsman 1.7 8 Social Audit 1.8 8 Submission of Utilisation Certificates 1.9 8 Internal Audit and Internal Control System of PRIs 1.10 9 Financial Reporting Issues 1.11 9 CHAPTER II COMPLIANCE AUDIT Financial Management and Implementation of schemes by 2.1 15 PRIs in Surguja District PART B CHAPTER III An Overview of the functioning, accountability mechanism and financial reporting issues of Urban Local Bodies Introduction 3.1 31 Organisational setup of ULBs 3.2 32 Functioning of ULBs 3.3 33 Formation of various Committees 3.4 34 Audit arrangement 3.5 35 Response to Audit observations 3.6 36 Ombudsman 3.7 37 Social Audit 3.8 37 Property Tax Board 3.9 38 Service Level Benchmark 3.10 38 Fire hazard response 3.11 38 Submission of Utilisation Certificates 3.12 39 Internal Audit and Internal Control System of ULBs 3.13 39 Financial Reporting Issues 3.14 39 CHAPTER IV PERFORMANCE AUDIT Management of own funds by Municipal Bodies including 4.1 45 collection of revenue i Audit Report on Local Bodies for the year ended 31 March 2016 CHAPTER V COMPLIANCE AUDIT Failure to comply with rules and regulations 5.1 71 Infructuous expenditure 5.1.1 71 Undue benefit to Shopkeepers and loss of Revenue 5.1.2 73 Failure to adhere with EPF Act 5.1.3 74 Appendices Appendix Description Reference to No. Para Page No. 2.1.1 Statement showing budget allotment and 2.1.2 77 expenditure 2.1.2 Statement showing delay in submission of 2.1.2.1 78 Budget estimates 2.1.3 Statement showing Finalisation of Budget 2.1.2.1 78 Estimate by ZP without inclusion of BEs of JPs 2.1.4 Statement showing the details of Outstanding 2.1.2.1 79 Advances 2.1.5 Statement showing amount recoverable from 2.1.2.1 80 Sarpanches 2.1.6 Statement showing outstanding interest 2.1.3.3 81 recovery of Jalashay lease 2.1.7 Statement showing recoverable rent of 2.1.3.4 82 meeting hall 2.1.8 Statement showing delay in completion of 2.1.4.1 83 works under BRGF 2.1.9 Statement showing the blockage of fund due to 2.1.4.1 85 incomplete works 2.1.10 Details of works other than approved annual 2.1.4.2 86 plan works in MGNREGA 2.1.11 Statement showing details of Delay in 2.1.4.2 87 Payment of wages under MGNREGA 2.1.12 Statement of excess expenditure on 2.1.4.2 90 Administrative Head under MGNREGA 2.1.13 Statement showing the Payment made to 2.1.4.4 91 executing agency without Test Report 2.1.14 Statement showing the payment of pension at 2.1.4.5 93 lower rate 2.1.15 Statement showing delay in decision of 2.1.4.5 94 pension cases (decision in 7+60days) 4.1.1 Statement showing delay in finalization of 4.1.8.1 95 Budget in ULBs 4.1.2 Statement showing difference between 4.1.8.2 96 budgeted and actual receipt and expenditure in ULBs 4.1.3 Blocking of Municipal Fund 4.1.8.5 98 ii Table of Contents Appendix Description Reference to No. Para Page No. 4.1.4 Details of Left out properties 4.1.9.1 98 4.1.5 Houses covered under Property tax and 4.1.9.1 99 Samekit kar 4.1.6 Short recovery of Property Tax 4.1.9.1 99 4.1.7 Short recovery of Samekit Kar 4.1.9.2 100 4.1.8 Shortfall of water connections 4.1.9.3 100 4.1.9 Short recovery of Water Tax 4.1.9.3 101 4.1.10 Failure to levy User Charges 4.1.9.4 102 4.1.11 Short collection of Advertisement Tax 4.1.9.5 102 4.1.12 Short Recovery of Rent and Premium of 4.1.9.6 103 shops/Markets etc. 4.1.13 Short deposit by contractors 4.1.9.6 104 4.1.14 Short recovery of installment of houses 4.1.9.6 105 constructed under Atal Awas Yojna 4.1.15 Recovery of beneficiary contribution under 4.1.9.6 105 IHSDP Yojna not ensured 4.1.16 Financial unsustainability of ULBs 4.1.9.7 106 4.1.17 Shortage of Staff 4.1.9.8 106 4.1.18 Outstanding liabilities of selected ULBs 4.1.10.2 107 4.1.19 Excess payment of EPF contribution to 4.1.10.3 108 placement Staff 4.1.20 Avoidable payment of surcharge on 4.1.10.3 109 Electricity bills 4.1.21 Avoidable payment on Energy Development 4.1.10.3 109 Cess 4.1.22 Temporary Advances not adjusted 4.1.10.3 110 4.1.23 Short deposit in Sanchit Nidhi 4.1.10.4 110 4.1.24 Loss of interest 4.1.10.4 111 5.1.1 Statement showing the dues of rent and Shop 5.1.2 112 premium 5.1.2 Details of Employees and Employers 5.1.3 115 Contribution iii Preface This Report for the year ended March 2016 has been prepared for submission to the Governor of Chhattisgarh under the CAG’s DPC Act, 1971. The Report contains significant results of the audit of the 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 within the previous Reports have also been included, wherever necessary. The audit has been conducted in conformity with the Auditing Standards issued by the Comptroller and Auditor General of India. v Overview OVERVIEW This Report contains five chapters. Chapter I and III contains an overview of the functioning, accountability mechanism and financial reporting issues of the Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) respectively. Compliance Audit observations on ‘Financial Management and Implementation of schemes by PRIs in Surguja district’ relating to PRIs and three Audit paragraphs relating to ULBs are presented in Chapters II and V respectively. Chapter IV contains Performance Audit Report on ‘Management of own funds by Municipal Bodies including collection of revenue’ relating to ULBs. The audit findings included in the Performance Audit and Compliance Audit paragraphs in this report have total money value of ` 187.27 crore. The audit has been conducted in accordance with the Auditing Standards prescribed for the Indian Audit and Accounts Department. Audit samples have been drawn on statistical sampling as well as risk based judgemental sampling. The specific audit methodology adopted has been mentioned in the Performance Audit. The audit conclusions have been drawn and recommendations have been made taking into consideration the views of the Government. A summary of main audit findings is presented in this overview. 1. An Overview of the functioning, accountability mechanism and financial reporting issues of Panchayati Raj Institutions Accountant General (Audit) had audited 450 units of PRIs during 2011-16 and 2868 observations were issued of which 2835 (99 per cent) observations were outstanding. The Panchayati Raj Department was not taking adequate steps for settlement of audit observations issued by the Accountant General (AG). Therefore, there was an increasing trend of outstanding audit paragraphs. The Audit Report of the CAG on Local Bodies for the year ending March 2015 has been placed in State Legislature. However, the Committee for discussion of Audit Report has not been constituted as of February 2017. Since, Panchayati Raj Department has not compiled the data of own revenue collection of PRIs, the Department was not aware of own revenue receipts of PRIs. All the obligatory/optional taxes/fees were not being levied in the test checked 119 Gram Panchayats. Savings from allocated funds were 36 per cent and 62 per cent during 2013-14 and 2014-15 respectively under the Thirteenth Finance Commission Grant. (Paragraphs 1.1 to 1.11.6) 2. Compliance Audit - PRIs 2.1 Financial Management and Implementation of schemes by PRIs in Surguja District Audit of ‘Financial Management and Implementation of schemes by PRIs in Surguja district’ of Chhattisgarh was conducted between May 2016 and September 2016 covering the period 2011-16 by test check of records of Zila vii Audit Report on Local Bodies for the year ended 31 March 2016 Panchayat (ZP) Surguja, five1 Janpad Panchayat (JPs) and 10 Gram Panchayat (GPs). Major audit findings are discussed below: Management of finances by PRIs were faulty as three test checked GPs did not levy property tax during 2011-16 and four GPs did not levy lighting tax.