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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.
Training Module on Audit of ULBs Session 5 3
Learning Objectives
Necessary information will enable the
participants, to acquire basic concepts of budget
procedure,
budget calendar,
approval of budget and budgetary control.
.
Training Module on Audit of ULBs Session 5 4
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.
Training Module on Audit of ULBs Session 5 5
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.
Training Module on Audit of ULBs Session 5 6
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.
Training Module on Audit of ULBs Session 5 7
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.
Training Module on Audit of ULBs Session 5 8
• 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
Training Module on Audit of ULBs Session 5 9
Budgeting Process
• Budgets shall reflect:
– the estimated inflows,
– outflows,
– surplus / deficit under the various Receipts
and Payment heads,
– Opening and Closing balances.
Training Module on Audit of ULBs Session 5 10
• The receipts and payments shall be classified under four broad heads:– Revenue Receipts,
– Revenue Expenditure,
– Capital Receipts, and
– Capital Expenditure.
Budgeting Process
Training Module on Audit of ULBs Session 5 11
• 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
Training Module on Audit of ULBs Session 5 12
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.
Training Module on Audit of ULBs Session 5 13
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.
Training Module on Audit of ULBs Session 5 14
• 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
Training Module on Audit of ULBs Session 5 15
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
Training Module on Audit of ULBs Session 5 16
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.
Training Module on Audit of ULBs Session 5 17
Budget Revision
• Some of the forms in which budget allocations
are changed:
– Re-appropriation,
– Additional Budget,
– reduction in Budget and Budget Cut etc.
Training Module on Audit of ULBs Session 5 18
Budgetary Controls
• Budget utilisation should be reviewed
periodically.
• No expenditure can be incurred unless backed by
a budget;
Training Module on Audit of ULBs Session 5 19
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.
Training Module on Audit of ULBs Session 5 20
Preparation of budget estimate –Position in West Bengal
This is to be adopted as per State specific scenario
• On receipt of the reports, Draft Annual Budget
Estimate alongwith schedules is prepared by the
7th day of February each year for consideration.
Training Module on Audit of ULBs Session 5 21
Preparation of budget estimate – Position in WB
This is to be adopted as per State specific scenario
• 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.
Training Module on Audit of ULBs Session 5 22
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.
Training Module on Audit of ULBs Session 5 23
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.
Training Module on Audit of ULBs Session 5 24
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.
Training Module on Audit of ULBs Session 5 25
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.
Training Module on Audit of ULBs Session 5 26
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.
Training Module on Audit of ULBs Session 5 27
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
Training Module on Audit of ULBs Session 5 28
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.
Training Module on Audit of ULBs Session 5 29
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.
Training Module on Audit of ULBs Session 5 30
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.
Training Module on Audit of ULBs Session 5 31
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.
Training Module on Audit of ULBs Session 5 32
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.
Training Module on Audit of ULBs Session 5 33
Budget format
•The receipts/expenditure of revenue, capital and
extra-ordinary nature would be booked
– under Revenue, Capital, ‘Extra-Ordinary and
– Debt Accounts’ respectively.
Training Module on Audit of ULBs Session 5 34
Budget format
•The Development Grants and Loans available
from the State Government, Development Loans
from LIC, HUDCO and Banks shall constitute
– capital receipt.
Training Module on Audit of ULBs Session 5 35
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.
Training Module on Audit of ULBs Session 5 36
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.
Training Module on Audit of ULBs Session 5 37
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.
Training Module on Audit of ULBs Session 5 38
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.
Training Module on Audit of ULBs Session 5 39
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.
Training Module on Audit of ULBs Session 5 40
Budget Estimates forBudget Estimates for
Kolkata CorporationKolkata Corporation
Training Module on Audit of ULBs Session 5 41
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.
Training Module on Audit of ULBs Session 5 42
Annual Budget of the Kolkata Corporation
•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.
Training Module on Audit of ULBs Session 5 43
Annual Budget of the Kolkata Corporation
• 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.
Training Module on Audit of ULBs Session 5 44
Annual Budget of the Kolkata Corporation
• 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.
Training Module on Audit of ULBs Session 5 45
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?
Training Module on Audit of ULBs Session 5 46
Audit queries
•Could the auditor ensure
– 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?
Training Module on Audit of ULBs Session 5 47
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?
Training Module on Audit of ULBs Session 5 48
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.
Training Module on Audit of ULBs Session 5 49
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?
Training Module on Audit of ULBs Session 5 50
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.?
Training Module on Audit of ULBs Session 5 51
Audit queries
•Were the budget heads broadly divided into
three categories of accounts, viz.
– Revenue Account
– Capital Account and
– Extra-ordinary Debt Account?
Training Module on Audit of ULBs Session 5 52
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?
Training Module on Audit of ULBs Session 5 53
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?
Training Module on Audit of ULBs Session 5 54
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?
Training Module on Audit of ULBs Session 5 55
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?
Training Module on Audit of ULBs Session 5 56
Audit queries
•Could the auditor ensure
– 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?
Training Module on Audit of ULBs Session 5 57
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.
Training Module on Audit of ULBs Session 5 58
Audit queries
•Could the auditor ensure
– 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?
Training Module on Audit of ULBs Session 5 59
Audit queries
•Could the auditor ensure
– 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?
Training Module on Audit of ULBs Session 5 60
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