Budgetary Reforms and New Financial Management Initiatives_CRSundaramurti

8/3/2019 Budgetary Reforms and New Financial Management Initiatives_CRSundaramurti

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Budgetary Reforms

and

New Financial Management Initiatives

in

Government of India

C.R.SundaramurtiController General of Accounts

Ministry of Finance


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Budget Management and Financial

Administration in Government

Receipts

Management

Expenditure

Borrowing


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Structural Features of Financial

Administration in Government

Constitutional or legal features

Organisational or institutional features

Custody and operational features


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Revenue Management

Sources of Revenue

Instruments of Revenue Management

Custody of Revenues

Revenue Institutions


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Sources of Revenue

Tax Receipts

For Center For Other Levels of Government

Non-Tax Receipts

External Grants

Miscellaneous Capital Receipts

Repayment of Loans


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Tax Receipts

Constitutional Features

Taxes to be imposed only by an Act - Article

265 of The Constitution

Custody of Taxes in The Consolidated Fund of

India


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Consolidated Fund

All revenues raised by Govt., loans raised by itand also receipts from recoveries of loansgranted by it form the Consolidated Fund;

All expenditure is incurred from theConsolidated Fund; and

No amount can be withdrawn from the Fundwithout authorisation from Parliament.

Article 266


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Distribution of Revenues

Collected by

Union

Collected by

UnionCollected by

States

Collected by

States

Distributed

between

Union &States

Distributed

between

Union &States

Retained

by the

Union

Retained

by the

Union

Distributed

between the

States and

Local Bodies

Retained

by the

States


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Tax ReceiptsConstitutional Features (cont 3 )

Distribution of Revenues Between The Union

and The States (cont)

Distribution of Revenues between the Union

and the States is as recommended by the

Finance Commission

- Article 280


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Tax Receipts

Taxation Acts

Main Taxation Acts are :-

Income Tax Act

Central Excise and Salt Act

Customs Act

Service Tax

Cess Acts


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Tax Receipt Institutions

Central Board of Excise and Customs

Central Board of Direct Taxes

Part of Ministry of Finance

Department of Revenue


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Non -Tax Receipts

Mainly consists of :-

Interest on loans given by Government

Dividends on Government Investments

Fees

User charges

Receipts of Commercial Departments Grants from Foreign Governments and

Institutions


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Non -Tax Receipts

Administered by All Administrative Ministries

in accordance with the over all policies ofGovernment

Grant assistance from Foreign Governments andInstitutions is administered by Ministry ofFinance - Department of Economic Affairs


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Expenditure ManagementNature of Expenditure charecterised as

Expenditure pertaining to the activities

of the Central Government

Funding of States and other levels of

Government as recommended by

Finance Commission and Planning

Commission


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Expenditure Management ( Cont )Nature of Expenditure characterised as

Plan expenditure

Non - Plan Expenditure

AND

Revenue ( or Recurring or Current orMaintenance) Expenditure

Capital Expenditure


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Instruments of Expenditure

Grants in Aid

Subsidy

Loans

Investments

Other Capital Outlay

Other Revenue Expenditure


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Non-Plan Expenditure

Non-Plan Expenditure

Non-Plan Expenditure by Broad Categories

Non-Plan Subsidies - Interest Subsidies

Non-Plan Subsidies Other Subsidies

Non-Plan Capital Outlay

Non-Plan Loans to Public Enterprises

Non-Plan Grants and Loans to State and UT Govts.

Other Budget Statements - OBS - 1


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Plan Outlay

Plan Outlay

Central Plan Outlay by Ministries/Departments

Central Plan Outlay by Heads ofDevelopment

Plan Investments in Public Enterprises

Resources of Public Enterprises

Central Assistance for State and Union TerritoryPlans

Other Budget Statements - OBS -2


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Expenditure Management

Operational Procedures

Constitutional Features

Administrative and Legal Features

Ministry / Departmental Features


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Annual Financial Statement

The President shall in respect ofevery

Financial Year cause to be laid before both theHouses of Parliament a statement of the

estimated receipts and expenditure of the

Government of India for that year, in this Part

referred to as the Annual FinancialStatement.

Article 112


Constitutional Features -1


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Expenditure ManagementConstitutional Features-2

Annual Financial Statement

The AFS shall

show separately, the expenditureVoted and

charged upon the Consolidated Fund of India; and

distinguish expenditure on

other expenditure.

revenue account from


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Estimates for Charged Expenditure shall not besubmitted to the vote of Parliament.

Estimates as relate to other expenditure shall besubmitted in the form ofDemand for Grants tothe House of the People.

Article 113 of the Constitution


Constitutional Features-3


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Reappropriation - 1

Legal Restrictions

No reappropriation between Revenue andCapital

No reappropriation between Voted andCharged


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Expenditure ManagementConstitutional Features-5

Reappropriation - 2

Parliamentary restrictions

cases requiring:-

reporting to Parliament

prior approval of Parliament

Administrative restrictions

Reappropriation between Plan & non-

Plan, Travel expenses, etc.


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Government Accounting Rules

List of Major and Minor Heads of Account

Issued under Article 150


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Administrative and Legal Features

Transaction of Business Rules

Delegation of Financial Powers Rules

Receipt and Payment Rules

General Financial Rules


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Ministry / Departmental Features

Financial Scrutiny and Appraisal

Internally by the Ministries

Ministry of Finance

Planning Commission

Other Agencies

Administrative Approval

Expenditure Approval


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Borrowings

Borrowings and giving of Guarantees is permitted under the

Constitution- Article 292

Constitution Envisages Statutory Limit on Borrowings and

Guarantees

Fiscal Responsibility and Budget Management Act has been

recently passed by Parliament


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Borrowings

Types of Instruments

Market Loans

External Loans

Treasury Bills

Bonds

Public Account

- Small Savings, Provident Fund


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Public Account

Public Moneys

Small Savings

DepositsMoneys set aside out of Consolidated Fund

Reserve Funds

Miscellaneous

Trusts & EndowmentsAdvances

Cash Balance


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Guarantees given by the

Union Government

To Indian lenders,banks, RBI, etc:

To International Financial Institutions, etc.,

To Railways/SEBs for prompt payment of dues/freight

charges;

Performance guarantees

Indian Companies in Foreign Countries

Foreign Companies in Foreign Countries

Guarantees devolved on the Government


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Management ofDeficit

Fiscal deficit

Revenue deficit

Primary Deficit


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Presentation of Account

Accounts

Parliamentary

Control

Executive MISPublic Service


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Executive MIS

Time Reportee

Week end Tasks (WETs)

Month End Tasks (METs)

Quarter End Tasks (QETs)

Year End Tasks (YETs)

Apex Level

Field Levels


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Week End Tasks [WETs]

Amount of Cheques Issued

Tax Revenue Collections


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Month End TasksAt Apex level

Review of Accounts to

Finance Minister

Finance Secretary Secretary (Expenditure)

Cabinet Secretary

Planning Commission

RBIStatements of Accounts to

UD, PLI, CBDT, CSO, CPAO, etc


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Month End Tasks (Contd...)

At the level of each Ministry/Dept

Reporting of Receipts & Expenditure to

The Secretary of the Ministry/Dept

The Financial Adviser

Various Executive wings

Heads ofDepartments

Other ministries/depts connected withthe receipts or payments

At PAO levels:

to the Heads ofDepts/Heads of offices


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Year End Tasks

Serve all the three functions

3 Management Information

3 Parliamentary Control & Accountability

3 Public Service


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Internal Audit

Core

Governmental

Functions

Core

Governmental

Functions

Accounts Related

Functions

Accounts Related

Functions

Carried out by the Inspection Wing of the

respective Ministries

Annual Consolidated Report at CGA Level

1. Carried out by the

inspection wing of the

respective Ministries2. Special audit of the

Accounts offices by CGAs

Inspection Wing


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Classification into Heads of

Accounts Major Head 4 Function

Sub-Major Head 2 Sub-Function

Minor Head 3 Programs or wings ofAdministration

Subordinate Head 2 Schemes

Detailed Head 2 Sub-Schemes

Object Head 2 Object of Exp..

Total digits of coding 15


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Object Heads

Personnel Services &

Benefits

Administrative

Expenses

Contractual Services &

Supplies

Other Expenditure

Acquisition ofCapital

Assets

Accounting

Adjustments

Grants, etc

Class ofObjects

1

2

3

4

5

6

7


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OBJECTCLASS 1PERSONNEL SERVICES AND BENEFITS

Salaries

Wages Overtime allowance

Pensionary Charges

Rewards

Medical Treatment


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OBJECTCLASS 2

ADMIN

IST

RAT

IVE EXPEN

SES

Domestic travel expenses

Foreign travel expenses Office Expenses

Rents, Rates and Taxes

Royalty

Publication Other Administrative expenses

Banking Cash Transaction Tax


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OBJECTCLASS 3CONTRACTUAL SERVICES AND

SUPPLIES

Supplies and Materials

Arms and Ammunition

Cost of ration

P.O.L.

Clothing and Tentage

Advertising and Publicity MinorWorks

Professional Services

Other Contractual Services


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OBJECTCLASS 4GRANTS , ETC

Grants-in-Aid

Contributions

Subsidies

Scholarships/Stipend


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OBJECTCLASS 5OTHER EXPENDITURE

Secret Service expenditure

Lump Sum Provision

Suspense

Exchange Variations

Interest

Share of taxes/duties

Other Charges


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OBJECTCLASS 6ACQUISITION ofCAPITAL ASSETS, etc

MotorVehicles

Machinery & Equipment

MajorWorks

Investments

Loans & Advances

Repayment of borrowings

Other Capital Expenditure


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OBJECTCLASS 7ACCOUNTING ADJUSTMENTS

Depreciation

Reserves

Inter-Account Transfer

Write off/losses

Deduct recoveries


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2210 Medical & Public Health (In Rs. Thousands)

06 Public Health

06.101 Prevention and Control of

Diseases

8 NationalVector Borne Disease

Control Programme

08.01 Directorate of NVBDCP

(General Component)

08.01.01 Salaries 4,11,50 4,87,25 8,98,7508.01.02 Wages 3,50 75 4,25

08.01.03 Overtime Allowance 2,60 1,50 4,10

08.01.06 Medical Treatment 12,00 10,00 22,00

08.01.11D

omestic Travel Exp.. 35,85 17,20 53,05

Plan Non-Plan Total

Sample Detailed Demand for Grants -

Demand No.47 Department ofHealth


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08.01.13 Office Expenses 1,68,75 21,00 1,89,75

08.01.14 Rent, Rates & Taxes 8,00 8,00

08.01.20 Other Admnstrative Expenses 1,00 1,00

08.01.50 Other Charges 8,41,65 8,41,65

08.01.51 MotorVehicles 30,15 30,15Total Directorate Of NVBDCP

General Component 15,07,00 5,50,00 20,57,00

08.02. Directorate Of NVBDCP

Externally aided Component08.02.13 Office Expenses 70,00 . 70,00

08.02.20 Other Administrative Expenses 4,20,00 4,20,00

08.02.26 Advertisement & Publicity 10,00,00 10,00,00

Total - Externally Aided Component 13,96,00 13,96,00


Demand No.46 Department ofHealth 2

Plan Non-Plan Total


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3601 Grants-in-aid to State

Governments

04 Grants for Centrally

Sponsored Plan Schemes

06National Leprosy ControlProgramme (Externally Aided Component)

06.01 General Areas (Cash Grant)

06.02 Tribal Areas (Cash grant)

06.03 Special Component Plan for

Scheduled Castes (Cash Grant) 06.04 General Areas (Commodity Grant) 5,70,00 5,70,00

06.05 Tribal Areas (Commodity Grant) 80,00 80,00

06.06 Special Component Plan for

Scheduled Castes (Commodity Grant) 1,50,00 1,50,00

Plan Non-Plan Total


Demand No.46 Department ofHealth 3


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New Initiatives

The Charter for Financial Advisers has been

redefined.

To assist in the achievement of objectives /goals of their respective Ministries.

Assist Ministries in ensuring value for

money.

Move to a role akin to CFO in corporates.


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New Initiatives - 2

Financial Advisers to facilitate budget formulation

moving from itemized to budgetary control of

expenditure.Ministries to prepare Outcome Budgets defined in

measurable and monitorable terms.

Evaluation of Outcomes of major schemes to be

evaluated by independent agencies.

Ministries to prepare Performance Budgets for

previous year Outcome of the Outcome budget


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New Initiatives - 3

Fiscal Responsibility Legislation - 1

Fiscal Responsibility and Budget Management Act

and Rules (framed under the Act) notified.

Requires Government to adhere to specified deficitceilings.

To present Statements on the Medium Term Fiscal

Policy, Fiscal Policy Strategy, Macro economic

Framework.


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New Initiatives - 4

Fiscal Responsibility Legislation - 2

Rigid disclosure requirements for assets, guarantees,

arrears of tax and non-tax revenue.Bar on borrowing from the Reserve Bank of India

(Central Bank).

Quarterly reporting to Parliament.

Provides for extraordinary situations.

Twelfth Finance Commission has mandated a Fiscal

Responsibility legislation for each state.


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New Initiatives - 5

Ministries to be subjected to monthly / quarterly cash

management ceilings linked budget provisions.

Periodical review of user charges and other non-taxreceipts viz. dividends, rent, license fees.

Monitor assets and liabilities and guarentees.

Leverage non-budgetary resources for sectoral

development evolving strategies for Private Sector

investment, Public- Private Partnership, etc.


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New Initiatives - 6

Financial Advisors / Ministries to submit to

Ministry of Finance :

Annual Finance Report.

Annual Outcomes and Systems Report.

Disclosure Statements on deviations /

violations.


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New Initiatives - 7

In principle decision for introductionof Accrual Accounting in

Government.

Pilot projects in two Ministries alreadyunder way.


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New Initiatives - 8

Urban Local Bodies mandated to adoptAccrual Accounting to be eligible for

assistance under various development

schemes of Government.

Documents

Budgetary Reforms and New Financial Management Initiatives_CRSundaramurti