Audit of ULB Budget and Audit Points Session Title Audit of ULB Budget and Audit Points

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 Objective of the Budgeting System of Municipality and Municipal Corporation Budget must also enable in measuring and promoting accountability in respect of service delivery. Public expenditure must be spent in the most productive way. Training Module on Audit of ULBs Session 5

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 Budgeting Process The receipts and payments shall be classified under four broad heads: Revenue Receipts, Revenue Expenditure, Capital Receipts, and Capital Expenditure. Training Module on Audit of ULBs Session 5

Training Module on Audit of ULBs Session 5 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. Training Module on Audit of ULBs Session 5

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 Budgeting Calendar 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. Training Module on Audit of ULBs Session 5

An illustrative timetable for At the beginning of November budgeting 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

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

Preparation and sanction of revised 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

Publication and submission of budget and 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

Alteration of budget and revised 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

Alteration of budget and revised 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

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

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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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 Training Module on Audit of ULBs Session 5

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Budget Estimates for Kolkata Corporation Training Module on Audit of ULBs Session 5

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

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

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

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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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

Training Module on Audit of ULBs Session 5 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 Training Module on Audit of ULBs Session 5