session title audit of ulb budget and audit points

Session Title

Audit of ULB Budget and Audit Points

Training Module on Audit of ULBs Session 5 2

Session Overview

In this session we will discuss

budget of municipalities and

municipal corporations,

its time schedule, format, approval and

audit points thereon.


Learning Objectives

Necessary information will enable the

participants, to acquire basic concepts of budget

procedure,

budget calendar,

approval of budget and budgetary control.

.


Introduction

• Budget = a financial plan

– describing proposed expenditure and

– means of financing the same.

• It embodies

– the estimated receipts and expenditure for a financial

year.


Introduction

• It is a proposal

– how much money is to be spent on what and

– how much of it will be contributed by whom or

– how it would be raised during a financial year.

• It plays

– an important role in planning and controlling

operations of the municipalities / corporations.


Introduction

• State Governments as well as

municipalities/Corporations should develop

– detailed manual for Budget preparation on the basis of

the guideline recommended by the C&AG of India.


Objective of the Budgeting System of Municipality and Municipal Corporation

• to arrive at a scientific basis

– for building linkage between the nature of receipt or

payment with the functions / services or other

Budget control centres.

• Budget shall reflect

– the principles and programmes of the municipalities

and municipal corporations.


• Budget must also enable

– in measuring and promoting accountability in respect

of service delivery.

• Public expenditure must be spent in the most

productive way.

Objective of the Budgeting System of Municipality and Municipal Corporation


Budgeting Process

• Budgets shall reflect:

– the estimated inflows,

– outflows,

– surplus / deficit under the various Receipts

and Payment heads,

– Opening and Closing balances.


• The receipts and payments shall be classified under four broad heads:– Revenue Receipts,

– Revenue Expenditure,

– Capital Receipts, and

– Capital Expenditure.

Budgeting Process


• The receipts and payments shall be estimated

– for each of the accounting subjects under every

Budgeting centre.

• The budget preparatory process follows

– a budget calendar.

Budgeting Process


Budgeting Calendar

• It provides

– various details of deadlines and dates by which various

officials in the municipalities/corporations need to

prepare and

– place the budget before the concerned authorities.


Budgeting Calendar

• The time schedule for preparation, placing and

revision of the budget and budget approval by

Standing Committee/Council

– would be governed by the provisions of the State laws

or Acts governing the municipalities/corporations.


• The budgeting activity for any financial year shall

commence

– by September or any other month (as may be specified

in the relevant laws/Acts) of the financial year

preceding it.

• The various stages of budget preparation and

approval should be within the time limits.

Budgeting Calendar


An illustrative timetable forbudgeting and review

Requisition from the Accounts section for Budget activity plan

By September

Receipt of Budgets plans for all Departments

By mid of October

Compilation of Budget for review by Municipal Commissioner

By end of October

Budget finalisation by Municipal Commissioner for placing before the Standing Committee

At the beginning

of November


Approval of Budget

• The State laws/Acts shall define

– the approving authority for approval of the budgets of

the municipalities/corporations.

• In the cases of municipalities/corporations,

– the approving authority may be the Municipal

Councils.


Budget Revision

• Some of the forms in which budget allocations

are changed:

– Re-appropriation,

– Additional Budget,

– reduction in Budget and Budget Cut etc.


Budgetary Controls

• Budget utilisation should be reviewed

periodically.

• No expenditure can be incurred unless backed by

a budget;


Preparation of budget estimate –Position in West Bengal

This is to be adopted as per State specific scenario

• The departmental heads shall prepare their

estimated receipts and expenditure of the

following year and report the same to the

Chairman/Mayor within the 10th day of January

each year.


Preparation of budget estimate –Position in West Bengal


• On receipt of the reports, Draft Annual Budget

Estimate alongwith schedules is prepared by the

7th day of February each year for consideration.


Preparation of budget estimate – Position in WB


• The Chairman/Mayor with the help of the

Executive Officer or the Finance Officer, or the

Secretary, finalise

– the Draft Annual Budget Estimate and

– place the same to the Chairman-in-Council/Mayor

within the 21st day of February each year for

consideration.


Sanction of budget estimate

• Draft Annual Budget Estimate shall be placed

before

– the Board of Councillors within the 10th day of March

each year for final approval.

• The Board of Councillors shall adopt the said

budget estimate within two weeks of its

placement.

• No deficit shall be provided in Budget.


Preparation and sanction ofrevised budget estimate

• The budget estimate for the current year shall be

reviewed by the 30th day of September each

year;

• A revised budget estimate for the year shall be

prepared by 15th day of November each year

and adopted by the Board of Councillors within

the 31st day of December, each year.


Publication and submission of budgetand revised budget

• A copy of the same shall be published

– in the Notice Board for inspection of the members of

the public.

• A copy of such estimate along with a copy of the

relevant resolution shall be sent

– to the Director of Local Bodies, West Bengal, and the

District Magistrate of the district.


Alteration of budget andrevised budget grants

• Board of Councillors may, on a recommendation

of the Chairman-in-Council/Mayor, alter

– any budget grant for meeting any special or

unforeseen requirement and transferring the amount

or a portion thereof from one head to another.

• Proposal for such re-appropriation shall be drawn

in prescribed form.


Alteration of budget andrevised budget grants

• Any such alteration made prior to revision of the

annual budget estimate shall be incorporated in

the revised budget and alteration made

subsequently shall be reflected in the appropriate

column of the annual budget estimate for the

next financial year.


Budget format This is to be adopted as per State specific scenario

Form 1 is a combined budget format meant for original budget estimate/revised budget estimate with the following heads:-

• budget heads• actuals for the year lastly completed• actuals for 9/6 months of the current year


Budget format This is to be adopted as per State specific scenario

• sanctioned budget estimate/sanctioned revised budget estimate for the current year

• budget/revised budget estimate for the current year and

• explanation under columns (1, (2), (3), (4), (5) and (6) respectively both on its receipt and expenditure side.


Budget format

•Budget heads are broadly divided into three

categories of accounts e.g.

– Revenue Account

– Capital Account and

– Extra-Ordinary and Debt Account - both in the receipt

side as well as in the expenditure side.


Budget format

•The unspent balance of development grant and

loans as available from the Appropriation Register

and unspent balance of capital receipt from own

sources at the close of a particular year will

represent

– the opening balance of Capital Account of the

following year.


Budget format

•Ledger balance for Advance, Deposit and Material

Accounts at the close of a particular year will be

taken as

– opening balance of Extra-Ordinary and Debt Account

of the following year.


Budget format

•The opening balance of the Revenue Account of

the year would be worked out

– by subtracting the opening balances of Capital Account

and Extra-Ordinary and Debt Account from the

consolidated opening balance of that year.


Budget format

•The receipts/expenditure of revenue, capital and

extra-ordinary nature would be booked

– under Revenue, Capital, ‘Extra-Ordinary and

– Debt Accounts’ respectively.


Budget format

•The Development Grants and Loans available

from the State Government, Development Loans

from LIC, HUDCO and Banks shall constitute

– capital receipt.


Budget format

•All other receipts which do not fall under any of

the categories of revenue or capital nature shall

constitute

– Extra-Ordinary and Debt Receipt.


Budget format

•Establishment and other expenses shall constitute

– revenue expenditure.

•Expenses incurred by way of repairs, replacements

and renewals of existing assets, are chargeable to

– revenue head.


Budget format

•Expenditure incurred in the acquisition of

permanent assets such as land, building, vehicle,

etc. are taken as

– capital expenditure.

•Any expenditure made for extending or

improving the existing assets are also treated as

– capital expenditure.


Budget format•Advance payments, Refund of deposit,

•Deposit adjusted against tax,

•P.F. deposits paid to treasury,

•income tax deposits

•expenditure incurred for procuring materials for

development work and

•contra entries for bank transfers

are treated as Extra-Ordinary and Debt expenditure.


Budget format

•If any capital expenditure is met out of own

revenue income of that year

– in that case an equivalent amount would have to be

transferred to Capital Account from Revenue

Account for which appropriate budget heads have

been provided in the format.


Budget Estimates forBudget Estimates for

Kolkata CorporationKolkata Corporation


Annual Budget of the Kolkata Corporation

•The Corporation shall on or before the 22nd day

of March in each year, adopt for the ensuing year

– a budget estimate which shall be the estimate of the

receipts and the expenditure of the Corporation to be

received and incurred on account of the municipal

government of Kolkata.



•The budget estimate shall separately state the

income and the expenditure to be received and

incurred in terms of the following accounts-

– the Water-supply, Sewerage and Drainage Account,

– the Road Development and Maintenance Account,

– the Bustee Service Account,

– the Commercial Projects Account, and

– the General Account.



• The budget estimate shall state

– the rates at which various taxes, surcharges, cesses

and fees shall be levied in the year next following.

– the amount of money to be raised as loan during the

year next following.



• The Mayor shall present

– the budget estimate to the Corporation on the 15th day

of February in each year or as soon thereafter as

possible.


Audit queries

•Were the various prescribed dates adhered to?

If not, the reasons therefor should be analysed.

•Could the auditor ensure

– that the different departmental heads

prepared their estimated receipts and

expenditure of the following year in

consultation with the respective Borough

Committees/Ward Committees?


Audit queries


– the Accounts Department prepared the Draft Annual

Budget Estimate in the prescribed form in

consideration of the departmental requirements?

•Was the Annual Budget Estimate sanctioned

within two weeks after a specially convened

meeting of the Board of Councillors?


Audit queries

•Was any deficit provided in the sanctioned

budget?

– If so, the same would be irregular and the auditor

should record his observations accordingly.

•Were copies of the sanctioned budget sent to the

prescribed authorities?


Audit queries

•Was there any case of extension of time for

adoption of budget and revised budget?

•Was such extension approved by the State

Government? If not, the same was irregular.


Audit queries

•Was there any case of alteration of budget and

revised budget?

•Was such alteration made in the prescribed

form and approved by the Board of Councillors

and the same intimated to the prescribed

authorities?


Audit queries

•Did the budget format for original and revised

budget estimate contain the prescribed heads viz.

– budget head actuals for the year lastly completed

– actuals for 9/6 months of the current year etc.?


Audit queries

•Were the budget heads broadly divided into

three categories of accounts, viz.

– Revenue Account

– Capital Account and

– Extra-ordinary Debt Account?


Audit queries

•Did the aggregate of the opening and closing

balances of the respective Account heads tally with

the opening and closing balances of the

Municipality?


Audit queries

•Did the unspent balance of development grant

and loans as would be available from Appropriation

Register as well as unspent balance of capital

receipt from own sources at the close of a particular

year represent

– the opening balance of Capital Account of the

following year?


Audit queries

•Did the Ledger balance for Advance, Deposit

and Material Accounts at the close of a particular

year represent

– the opening balance of Extra-ordinary and Debt

Account of the following year?


Audit queries

•Could the auditor ensure on a test check of a

particular period

– the items of receipts/expenditure of revenue, capital

and extra-ordinary nature were booked under

Revenue, Capital and Extra-ordinary and Debt

Accounts respectively?


Audit queries


– the receipts on account of Development Grants and

Loans available from the State Government as well as

Development Authorities and Development Loans

from LIC, HUDCO and Banks constitute

• capital receipt?


Audit queries

•Did the Municipality have its own sources of

receipt like sale proceeds of land and property,

etc? If so, were such receipts shown as Capital

receipts?

– If not, the same would be irregular and the auditor

should take action accordingly.


Audit queries


– in case any capital expenditure was met out of own

revenue income of that year,

– an equivalent amount was actually transferred to

Capital Account from the Revenue Account, and

– the same duly reflected under the appropriate budget

head in the prescribed format?


Audit queries


– ordinarily an average of five years’ receipts and

expenditure was taken as the required estimate under

each head?

– In case of any variations, were the same duly

explained in the budget estimate?


Audit queries

•Could the auditor ensure that the details of

outstanding liabilities, if any, were duly shown in

the budget?

•Did the budget estimate state the rates at which

various taxes, surcharges, cesses and fees would be

levied during the proposed year?

The End

session title audit of ulb budget and audit points

Documents

audit of ulbs session

training module

budget calendar

approval of budget

budget approval

introduction budget

budget of municipalities

audit points