J.

Manjunatha Rao
[Link], MBA, NET

PART –A-ACCOUNTING FOR RURAL LOCAL GOVERNMENTS

UNIT-1-INTRODUCTION TO LOCAL GOVERNMENT INSTITUTIONS
The 73rd amendment to constitution accorded constitutional status to
Panchayat Raj Institutions (PRIs) and established a system of uniform
structure, election, regular flow of funds through the Finance Commission,
etc. As a follow-up, the State Governments were required to entrust the PRIs
with powers, functions and responsibilities to enable them to function as
institutions of local self-government.
Consequent upon the 73rd amendment of the Constitution, the State
Legislature enacted the Tamil Nadu Panchayats Act, 1994. Under this Act, a
three-tier system of PRIs viz., Village Panchayats (VPs) at the village level,
Panchayat Unions or Block Panchayats (BPs) at the intermediary level and
District Panchayats (DPs) at the district level were established.
A three-tier structure of the Indian administration for rural development is
called Panchayati Raj. The aim of the Panchayati Raj is to develop local self-
governments in districts, zones and villages.

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Introduction to Panchayati Raj

Rural development is one of the main objectives of Panchayati Raj and this
has been established in all states of India except Nagaland, Meghalaya and
Mizoram, in all Union Territories except Delhi and certain other areas. These
areas include:

a. The scheduled areas and the tribal areas in the states

b. The hill area of Manipur for which a district council exists and
c. Darjeeling district of West Bengal for which Darjeeling Gorkha Hill Council
exists.

Panchayati Raj Institution (PRI) is a system of rural local self-government in

India. Local Self Government is the management of local affairs by such local
bodies who have been elected by the local people. In its present form and
structure PRI has completed 26 years of existence. However, a lot remains to
be done in order to further decentralization and strengthen democracy at the
grass root level. Panchayati Raj institutes plays a significant role in the
development of villages especially in areas like primary education, health,
agricultural developments, women and child development and women
participation in local government, etc.

Evolution of Panchayati Raj

The Panchayati system in India is not purely a post-independence
phenomenon. In fact, the dominant political institution in rural India has been
the village panchayat for centuries. In ancient India, panchayats were usually
elected councils with executive and judicial powers. Foreign domination,
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especially Mughal and British, and the natural and forced socio-economic
changes had undermined the importance of the village panchayats. In the
pre-independence period, however, the panchayats were instruments for the
dominance of the upper castes over the rest of the village, which furthered
the divide based on either the socio-economic status or the caste hierarchy.
The evolution of the Panchayati Raj System, however, got a fillip after the
attainment of independence after the drafting of the Constitution.
The Constitution of India in Article 40 enjoined: “The state shall take steps to
organise village panchayats and endow them with such powers and authority
as may be necessary to enable them to function as units of self-government”.
There were a number of committees appointed by the Government of India to
study the implementation of self-government at the rural level and also
recommend steps in achieving this goal.
The committees appointed are as follows:

 Balwant Rai Mehta Committee

 Ashok Mehta Committee
 G V K Rao Committee
 L M Singhvi Committee

Balwant Rai Mehta Committee & Panchayati Raj

The committee was appointed in 1957, to examine and suggest measures for
better working of the Community Development Programme and the National
Extension Service. The committee suggested the establishment of a
democratic decentralised local government which came to be known as
the Panchayati Raj.
Recommendations by the Committee:

 Three-tier Panchayati Raj system: Gram Panchayat, Panchayat Samiti and

Zila Parishad.
 Directly elected representatives to constitute the gram panchayat and
indirectly elected representatives to constitute the Panchayat Samiti and
Zila Parishad.
 Planning and development are the primary objectives of the Panchayati
Raj system.
 Panchayat Samiti should be the executive body and Zila Parishad will act
as the advisory and supervisory body.
 District Collector to be made the chairman of the Zila Parishad.
 It also requested for provisioning resources so as to help them discharge
their duties and responsibilities.
The Balwant Rai Mehta Committee further revitalised the development of
panchayats in the country, the report recommended that the Panchayati Raj
institutions can play a substantial role in community development
programmes throughout the country. The objective of the Panchayats thus
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was the democratic decentralisation through the effective participation of

locals with the help of well-planned programmes. Even the then Prime
Minister of India, Pandit Jawaharlal Nehru, defended the panchayat system by
saying, “Authority and power must be given to the people in the villages ….
Let us give power to the panchayats.”

Ashok Mehta Committee & Panchayati Raj:

The committee was appointed in 1977 to suggest measures to revive and
strengthen the declining Panchayati Raj system in India.
The key recommendations are:

 The three-tier system should be replaced with a two-tier system: Zila

Parishad (district level) and the Mandal Panchayat (a group of villages).
 District level as the first level of supervision after the state level.
 Zila Parishad should be the executive body and responsible for planning at
the district level.
 The institutions (Zila Parishad and the Mandal Panchayat) to have
compulsory taxation powers to mobilise their own financial resources.

G V K Rao Committee & Panchayati Raj:

The committee was appointed by the planning commission in 1985. It
recognised that development was not seen at the grassroots level due to
bureaucratisation resulting in Panchayat Raj institutions being addressed as
‘grass without roots’. Hence, it made some key recommendations which are
as follows:

 Zila Parishad to be the most important body in the scheme of democratic

decentralisation. Zila Parishad to be the principal body to manage the
developmental programmes at the district level.
 The district and the lower levels of the Panchayati Raj system to be
assigned with specific planning, implementation and monitoring of the
rural developmental programmes.
 Post of District Development Commissioner to be created. He will be the
chief executive officer of the Zila Parishad.
 Elections to the levels of Panchayati Raj systems should be held regularly.

L M Singhvi Committee & Panchayati Raj:

The committee was appointed by the Government of India in 1986 with the
main objective to recommend steps to revitalise the Panchayati Raj systems
for democracy and development. The following recommendations were made
by the committee:

 The committee recommended that the Panchayati Raj systems should be

constitutionally recognised. It also recommended constitutional provisions
to recognise free and fair elections for the Panchayati Raj systems.

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 The committee recommended reorganisation of villages to make the gram

panchayat more viable.
 It recommended that village panchayats should have more finances for
their activities.
 Judicial tribunals to be set up in each state to adjudicate matters relating
to the elections to the Panchayati Raj institutions and other matters
relating to their functioning.
Though there are variations among states, there are some features that are
common. In most of the states, for example, a three-tier structure including
panchayats at the village level, panchayat samitis at the block level and the
zila parishads at the district level-has been institutionalized. Due to the
sustained effort of the civil society organisations, intellectuals and progressive
political leaders, the Parliament passed two amendments to the Constitution –
the 73rd Constitution Amendment for rural local bodies (panchayats) and the
74th Constitution Amendment for urban local bodies (municipalities) making
them ‘institutions of self-government’. Within a year all the states passed
their own acts in conformity to the amended constitutional provisions.

73rd Constitutional Amendment Act of 1992

Significance of the Act

 The Act added Part IX to the Constitution, “The Panchayats” and also
added the Eleventh Schedule which consists of the 29 functional items of
the panchayats.
 Part IX of the Constitution contains Article 243 to Article 243 O.
 The Amendment Act provides shape to Article 40 of the Constitution,
(directive principles of state policy), which directs the state to organise the
village panchayats and provide them powers and authority so that they
can function as self-government.
 With the Act, Panchayati Raj systems come under the purview of the
justifiable part of the Constitution and mandates states to adopt the
system. Further, the election process in the Panchayati Raj institutions will
be held independent of the state government’s will.
 The Act has two parts: compulsory and voluntary. Compulsory provisions
must be added to state a law, which includes the creation of the new
Panchayati Raj systems. Voluntary provisions, on the other hand, is the
discretion of the state government.
 The Act is a very significant step in creating democratic institutions at the
grassroots level in the country. The Act has transformed the representative
democracy into participatory democracy.

CONSTITUTIONAL BACKGROUND THREE TIER PANCHAYAT RAJ SYSTEM

Panchayats have been one of the basic features of Indian society. As we
know, even Mahatma Gandhi advocated for panchayats and village republics.

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Since independence, we have had multiple provisions of Panchayats in India

from time to time finally reaching the Epitome with the 73rd Constitutional
Amendment Act of 1992.
The Act aims to provide a three-tier system of Panchayati Raj, which
consists of:
 Village Level - Gram Panchavat
 Taluka /Block Level - Panchavat Samiti
 District Level - Zilla Parishad

Salient Features of the Act:

1. Gram Sabha: Gram Sabha is the primary body of the Panchayati Raj
system. It is a village assembly consisting of all the registered voters
within the area of the panchayat. It will exercise powers and perform such
functions as determined by the state legislature. Candidates can refer to
the functions of gram panchayat and gram panchayat work, on the
government official website – [Link]
2. Three-tier System: The Act provides for the establishment of the three-
tier system of Panchayati Raj in the states (village, intermediate and
district level). States with a population of less than 20 lakhs may not
constitute the intermediate level.
3. Election of Members and Chairperson: The members to all the levels
of the Panchayati Raj are elected directly and the chairpersons to the
intermediate and the district level are elected indirectly from the elected
members and at the village level the Chairperson is elected as determined
by the state government.
4. Reservation of Seats:

 For SC and ST: Reservation to be provided at all the three tiers in

accordance with their population percentage.
 For women: Not less than one-third of the total number of seats to be
reserved for women, further not less than one-third of the total number of
offices for chairperson at all levels of the panchayat to be reserved for
women.
 The state legislatures are also given the provision to decide on the
reservation of seats in any level of panchayat or office of chairperson in
favour of backward classes.

5. Duration of Panchayat: The Act provides for a five-year term of office to

all the levels of the panchayat. However, the panchayat can be dissolved
before the completion of its term. But fresh elections to constitute the new
panchayat shall be completed –

 Before the expiry of its five-year duration.

 In case of dissolution, before the expiry of a period of six months from the
date of its dissolution.

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6. Disqualification: A person shall be disqualified for being chosen as or for

being a member of panchayat if he is so disqualified –

 Under any law for the time being in force for the purpose of elections to
the legislature of the state concerned.
 Under any law made by the state legislature. However, no person shall be
disqualified on the ground that he is less than 25 years of age if he has
attained the age of 21 years.
 Further, all questions relating to disqualification shall be referred to an
authority determined by the state legislatures.

7. State Election Commission:

 The commission is responsible for superintendence, direction and control

of the preparation of electoral rolls and conducting elections for the
panchayat.
 The state legislature may make provisions with respect to all matters
relating to elections to the panchayats.

8. Powers and Functions: The state legislature may endow the Panchayats
with such powers and authority as may be necessary to enable them to
function as institutions of self-government. Such a scheme may contain
provisions related to Gram Panchayat work with respect to:

 The preparation of plans for economic development and social justice.

 The implementation of schemes for economic development and social
justice as may be entrusted to them, including those in relation to the 29
matters listed in the Eleventh Schedule.

Finances: The State Legislature may –

 Authorize a panchayat to levy, collect and appropriate taxes, duties, tolls

and fees.
 Assign to a panchayat taxes, duties, tolls and fees levied and collected by
the state government.
 Provide for making grants-in-aid to the panchayats from the consolidated
fund of the state.
 Provide for the constitution of funds for crediting all money of the
panchayats.

9. Finance Commission: The state finance commission reviews the financial

position of the panchayats and provides recommendations for the
necessary steps to be taken to supplement resources to the panchayat.

10. Audit of Accounts: State legislature may make provisions for the
maintenance and audit of panchayat accounts.

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11. Application to Union Territories: The President may direct the

provisions of the Act to be applied on any union territory subject to
exceptions and modifications he specifies.
12. Exempted States and Areas: The Act does not apply to the states of
Nagaland, Meghalaya and Mizoram and certain other areas. These areas
include,

 The scheduled areas and the tribal areas in the states

 The hill area of Manipur for which a district council exists
 Darjeeling district of West Bengal for which Darjeeling Gorkha Hill
Council exists.
However, Parliament can extend this part to these areas subject to the
exception and modification it specifies. Thus, the PESA Act was enacted.

What is a PRI?
 Panchayati Raj Institution (PRI) is a system of rural local self-
government in India.
 Local Self Government is the management of local affairs by such local
bodies who have been elected by the local people.
 PRI was constitutionalzed through the 73rd Constitutional Amendment
Act, 1992 to build democracy at the grass roots level and was entrusted
with the task of rural development in the country.
 In its present form and structure PRI has completed 26 years of
existence. However, a lot remains to be done in order to further
decentralization and strengthen democracy at the grass root level.
How did Panchayati Raj System Evolve in India?
The history of Panchayat Raj in India can be divided into the following periods
from the analytical point of view:

 Vedic Era: In the old Sanskrit scriptures, word ‘Panchayatan’ has been
mentioned which means a group of five persons, including a spiritual man.
 Gradually the concept of the inclusion of a spiritual man in such groups
vanished.
 In the Rigveda, there is a mention of Sabha, Samiti and Vidatha as
local self-units.
o These were the democratic bodies at the local level. The king used to
get the approval of these bodies regarding certain functions and
decisions.
 Epic Era indicates the two great epic periods of India, that is, the
Ramayana and the Mahabharata.
 The study of Ramayana indicates that the administration was divided into
two parts - Pur and Janpad or city and village.
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o In the whole of the state, there was also a Caste Panchayat and one
person elected by the Caste Panchayat was a member of the king's
Council of Ministers.
 Self-government of a village finds ample expression in the ‘Shanti Parva’
of the Mahabharata; in the Manu Smriti as well as in Kautilya’s
Arthashastra.
 Asper the Mahabharata, over and above the village, there were units of
10, 20, 100, and 1,000 village groups.
o ‘Gramik’ was the chief official of the village, ‘Dashap’ was the chief
of ten villages, Vinshya Adhipati, Shat Gram Adhyaksha and Shat
Gram Pati were the chiefs of 20, 100, and 1,000 villages, respectively.
o They collected the local taxes and were responsible for the defense of
their villages.
 Ancient Period: There is a mention of village panchayats in Kautilya’s
Arthashastra.
o The town was referred to as Pur and its chief was the Nagarik.
o Local bodies were free from any royal interference.
o During the Mauryan and Post-Mauryan periods too, the
headman, assisted by a council of elders, continued to play a
prominent role in the village life.
o The system continued through the Gupta period, though there
were certain changes in the nomenclature, as the district official was
known as the vishya pati and the village headman was referred
to as the grampati.
o Thus, in ancient India, there existed a well established system of local
government which was run on a set pattern of traditions and customs.
o However, it is significant to note that there is no reference of women
heading the panchayat or even participating as a member in the
panchayat.
o Medieval Period: During the Sultanate period, the Sultans of Delhi
divided their kingdom into provinces called ‘Vilayat’.
o For the governance of a village, there were three important officials
- Mukkaddam for administration, Patwari for collection of
revenues, and Choudhrie for settling disputes with the help of
the Panch.
o The villages had sufficient powers as regards self governance in their
territory.
o Casteism and feudalistic system of governance under the Mughal rule
in the medieval period slowly eroded the self-government in villages.
o It is again noteworthy to note that even in the medieval period there is
no mention of women participation in the local village administration.
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 British Period: Under the British regime, village panchayats lost their
autonomy and became weak.
 It is only from the year 1870 that India saw the dawn of representative
local institutions.
 The famous Mayo’s resolution of 1870 gave impetus to the
development of local institutions by enlarging their powers and
responsibilities.
 The year 1870, introduced the concept of elected representatives, in
urban municipalities.
 The revolt of 1857 had put the imperial finances under considerable strain
and it was found necessary to finance local service out of local taxation.
Therefore it was out of fiscal compulsion that Lord Mayo’s resolution on
decentralization came to be adopted.
 Following the footsteps of Mayo, Lord Rippon in 1882 provided the
much needed democratic framework to these institutions.
o All boards (then existing) were mandated to have a two-thirds majority
of non-officials who had to be elected and the chairman of these bodies
had to be from among the elected non-officials.
o This is considered to be the Magna Carta of local democracy in
India.
 Local self-government institutions received a boost with the appointment
of the Royal Commission on centralisation in 1907 under the
Chairmanship of C.E.H. Hobhouse.
o The commission recognized the importance of panchayats at the
village level.
 It is in this backdrop that the Montagu Chelmsford reforms of
1919 transferred the subject of local government to the domain of the
provinces.
o The reform also recommended that as far as possible there should be a
complete control in local bodies and complete possible independence
for them from external control.
o These panchayats covered only a limited number of villages with
limited functions and due to organisational and fiscal
constraints they did not become democratic and vibrant institutions
of local self government at the village level.
 However, by 1925, eight provinces had passed the Panchayat Acts and by
1926, six native States had also passed panchayat laws. Local bodies were
given more powers and functions to impose taxes were reduced. But, the
position of the local self-government institutions remained unaffected.
 Post–Independence Period: After the Constitution came into
force, Article 40 made a mention of panchayats and Article

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246 empowers the state legislature to legislate with respect to any

subject relating to local self-government.
 However, this inclusion of panchayats into the Constitution was not
unanimously agreed upon by the then decision-makers, with the major
opposition having come from the framer of the Constitution himself i.e.
[Link].
o It was after much discussion among the supporters and opponents of
the village panchayat that the panchayats finally got a place for
themselves in the Constitution as Article 40 of the Directive
Principles of State Policy.
 Since the Directive Principles are not binding principles, the result was the
absence of a uniform structure of these bodies throughout the country.
 After independence, as a development initiative, India had implemented
the Community Development Programmes (CDP) on the eve of Gandhi
Jayanti, the 2nd October, 1952 under the major influence of the Etawah
Project undertaken by the American expert, Albert Mayer.
o It encompassed almost all activities of rural development which were
to be implemented with the help of village panchayats along with the
participation of people.
o In 1953, the National Extension Service was also introduced as a
prologue to CDP. But the programme did not yield much result.
 There were various reasons for the failure of CDP like bureaucracy
and excessive politics, lack of people participation, lack of trained
and qualified staff, and lack of local bodies interest in
implementing the CDP especially the village panchayats.
 In 1957, the National Development Council constituted a committee
headed by Balwant Rai Mehta to look into the working of community
development programme.
o The team observed that the major reason for the failure of the CDP was
the lack of people’s participation.
o The committee suggested a three-tier PRIs, namely, Grama Panchayats
(GPs) at the village level, Panchayat Samiti (PSs) at the block level, and
Zilla Parishad (ZPs) at the district level.
 As a result of this scheme of democratic decentralization was
launched in Rajasthan on October 2, 1959.
 In Andhra Pradesh, the scheme was introduced on 1st November, 1959.
The necessary legislation had also been passed and implemented in
Assam, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Orissa, and
Punjab etc.
 The appointment of the Ashok Mehta Committee in 1977 did bring new
thinking in the concepts and practice of the Panchayat Raj.

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o The committee recommended a two-tier Panchayat Raj

institutional structure consisting of Zilla Parishad and Mandal
Panchayat.
 In order to use planning expertise and to secure administrative support,
the district was suggested as the first point of decentralization below the
state level.
 Based on its recommendation, some of the states like Karnataka
incorporated them effectively.
 In subsequent years in order to revive and give a new lease of life to the
panchayats, the Government of India had appointed various committees.
 The most important among them are the Hanumantha Rao Committee
(1983), G.V.K. Rao Committee (1985), [Link] Committee
(1986) and the Sarkaria Commission on Centre-State relations
(1988), P.K. Thungan Committee (1989) and Harlal Singh Kharra
Committee (1990).
 The G.V.K. Rao Committee (1985) recommended making
the “district” as the basic unit of planning and also holding regular
elections while the [Link] committee recommended providing
more financial resources and constitutional status to the
panchayats to strengthen them.
 The Amendment phase began with the 64th Amendment Bill (1989) which
was introduced by Rajiv Gandhi seeking to strengthen the PRIs but the Bill
was not passed in the Rajya Sabha.
 The Constitution (74th Amendment) Bill (a combined bill for the PRIs and
municipalities) was introduced in 1990, but was never taken up for
discussion.
 It was during the Prime Ministership of [Link] Rao that a
comprehensive amendment was introduced in the form of the Constitution
72nd Amendment Bill in September 1991.
 73rd and 74th Constitutional Amendments were passed by
Parliament in December, 1992. Through these amendments local
self-governance was introduced in rural and urban India.
 The Acts came into force as the Constitution (73 rd Amendment) Act, 1992
on April 24, 1993 and the Constitution (74th Amendment) Act, 1992 on
June 1, 1993.
What are the Salient Features of the Constitution 73 rd and
74th Amendments?
 These amendments added two new parts to the
Constitution, namely, added Part IX titled “The Panchayats” (added
by 73rd Amendment) and Part IXA titled “The Municipalities” (added
by 74th Amendment).

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 Basic units of democratic system-Gram Sabhas (villages) and Ward

Committees (Municipalities) comprising all the adult members
registered as voters.
 Three-tier system of panchayats at village, intermediate
block/taluk/mandal and district levels except in States with population is
below 20 lakhs (Article 243B).
 Seats at all levels to be filled by direct elections Article 243C (2).
 Seats reserved for Scheduled Castes (SCs) and Scheduled Tribes (STs) and
the chairpersons of the Panchayats at all levels also shall be reserved for
SCs and STs in proportion to their population.
 One-third of the total number of seats to be reserved for women.
 One third of the seats reserved for SCs and STs also reserved for women.
 One-third offices of chairpersons at all levels reserved for women (Article
243D).
 Uniform five year term and elections to constitute new bodies to be
completed before the expiry of the term.
 In the event of dissolution, elections compulsorily within six months
(Article 243E).
 Independent Election Commission in each State for superintendence,
direction and control of the electoral rolls (Article 243K).
 Panchayats to prepare plans for economic development and social
justice in respect of subjects as devolved by law to the various levels of
Panchayats including the subjects as illustrated in Eleventh Schedule
(Article 243G).
 74th Amendment provides for a District Planning Committee to
consolidate the plans prepared by Panchayats and Municipalities (Article
243ZD).
 Budgetary allocation from State Governments, share of revenue of certain
taxes, collection and retention of the revenue it raises, Central
Government programmes and grants, Union Finance Commission grants
(Article 243H).
 Establish a Finance Commission in each State to determine the
principles on the basis of which adequate financial resources would be
ensured for panchayats and municipalities (Article 243I).
 The Eleventh Scheduled of the Constitution places as many as 29
functions within the purview of the Panchayati Raj bodies.

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Panchayati Raj System in India:

 Salient Features of the Constitution (73rd amendment) Act, 1992:
1. To provide three-tier system of Panchayati Raj for all States having
population of over 20 lakh,
2. To hold Panchayat elections regularly every five years,
3. Provision of reservation of seats for Scheduled Castes, Scheduled Tribes
and women,
4. To appoint State Finance Commissions to make recommendations on
financial powers of the Panchayats,
5. To constitute District Planning Committee to prepare draft development
plan for the district as a whole.
 Organisation of Panchayati Raj Institution

The three-tier system comprises the following:

i) Gram Panchayats at village level.
ii) Panchayat Samiti at block level or middle level.
iii) Zilla Parishad at district level. In addition, a Nyaya Panchayat has been
provided for every three or four village Panchayats.

Qualification for election to local bodies

i) He must be an Indian citizen and not be less than 21 years of age.

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ii) He must be a registered voter, in the case of Panchayats, member of the

Gram Sabha, in the constituency.
iii) He should not be a convict or have been disqualified by a Law of the
Parliament or an undischarged insolvent.
iv) He should not hold any office of profit under the Government.

 Introduction to Gram Panchayat:

 Gram Panchayat is a basic village institute. It is a formal and democratic
structure at grass root level in the country. It acts as a cabinet of the
village. It is a political institute. The members of the Gram Panchayat are
elected by the Gram Sabha. The Gram Sabha functions as the general
body of the Gram Panchayat.

 Composition of Gram Panchayat:

 Sarpanch: He is the head of the Gram Panchayat. He is elected directly
and in some cases indirectly by members of the Gram Panchayat.
Members: The membership of a Village Panchayat is between 5 to 31.
One-third of seats of the Panchayat are reserved for women. Seats are also
reserved for Scheduled Castes/ Tribes.
Office-bearers: The Sarpanch and Vice-Sarpanch are honorary members.
They are not paid a salary. A paid Secretary to the Panchayat and a
Treasurer, if the Panchayat is large, are also appointed by the State
government.

 Functions of Gram Panchayat

i) Administrative functions:

1. Public works and welfare functions like construction repair and

maintenance of village roads, bridges, drains and wells.

2. Registration of births and deaths.

3. Providing primary education, etc.

Social and economic functions: These are not obligatory.

1. Construction of guest houses, libraries, marriage halls, etc;

2. Planting of trees, parks, gardens and playgrounds for recreation;
3. Establishing fair price shops, Cooperative Credit Societies. It also performs
some judicial functions.

Introduction to Nyaya Panchayat

 Nyaya Panchayat also called Panchayati Adalat is set up for every three or
four Gram Panchayats. The chief characteristics of Nyaya Panchayats are the
following:
i) To ensure quick and inexpensive justice to the villagers.
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ii) They can impose a fine of upto Rs. 100.

iii) They cannot award a sentence of life imprisonment.
iv) Lawyers are not allowed to appear before these Panchayats.
v) The state Government or the State Judicial Service decides the jurisdiction
of these Panchayats.

Introduction to Panchayat Samiti (Block Level):

 This is the second tier above the Gram Panchayat and under the Zilla
Parishad. The long programmes are organized by officials and non-officials
of Panchayat Samiti with the help of a voluntary institution at Block
level. This intermediate body at the block level is known by different
names in different states, like Panchayat Samiti, Kshetra Samiti, Janapada
Panchayat and Panchayat Union Council.

 Composition of Panchayat Samiti:

 It has representatives of Panchayats and some others as its members as
given below:
i) Sarpanchs of all Panchayats concerned.
ii) Members of Legislative Assembly of the State from the area.
iii) Members of Parliament belonging to the area.
iv) Block Development officers of the block.
v) Co-opted members representing women, Scheduled Castes/Tribes.
vi) Representatives of Cooperative Societies.

 Functions of Panchayat Samiti

i) To supervise and co-ordinate the working of Gram Panchayats.
ii) To conduct higher education for a group of villages.
iii) To provide hospitals and health services at community block level.
iv) Develop agriculture by undertaking minor irrigation schemes,
distribution of quality seeds, etc.
v) To act as a link between the Gram Panchayat and Zilla Parishad.

 Introduction to Zilla Parishad ( District Level)

It is a local self-government unit at district level. Panchayat Samiti forms a
link between the Gram Panchayat and Zilla Parishad. The Zilla Parishad is a
link between the State government and the Gram Panchayats. The Zilla
Parishad is also known by different names in different States, like District
Develeopment Council, Zilla Parishad and Mohkuma Parishad.

Composition of Zilla Parishad

 It comprises of Deputy Commissioner of the District, Presidents of all

Panchayat Samitis in the district and Heads of all Government
Departments in the district; Members of Parliament and Legislative
Assembly in the district; a representative of each cooperative society;

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some women and Scheduled Caste members; and Co-opted members

having extraordinary experience and achievements in public
service. Besides, there are some office bearers such as a Chairperson,
Deputy Chairperson and Secretary.

Functions of Zillla Parishad

1. Overseeing all round development work of the district under the Deputy
Commissioner.
2. The Standing Committees having a Chairperson and Deputy Chairperson
holds discussions and takes decisions.
3. The Working Committee functions as the executive body of the District
Board.
4. Supervision of working of Gram Panchayats.
5. Advise the State Government on all matters relating to the Gram
Panchayats and Panchayat Samitis under their own jurisdiction.

 Achievements of the Panchayati Raj Syatem

1. Panchayati Raj system now ensures effective coordination between
government programmes and those of voluntary agencies.
2. The District Rural Development Agencies in close co-operation with Zilla
Parishads release funds to Gram Panchayats under the Jawahar Gram
Samridhi Yojana.
3. The Mahatma Gandhi National Rural Employment Guarantee Act,
2005, provides every rural household 100 days of work in a year which
involves unskilled manual work.
Introduction about Gram Panchayat
 Gram Panchayat:
1. The local development needs are discussed at the Gramsabhas at the
village level.
 2. The demands generated are compiled and presented in the form of
plans.

 Introduction about Panchayat Samiti

 Panchayat Samiti or Block Panchayat: The projects submitted by
panchayats are listed and submitted to District Panchayat on the basis of
preference.

The following are some of the key functions of a panchayat:

1. Providing basic services such as sanitation and medical support, as well as
schools, irrigation, roads, and drinking water.
2. Developing annual development plans for the area, including strategies for
more scientific agriculture, job creation, and so on.
3. Creating an annual budget and overseeing the district’s finances.

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4. Putting into action and coordinating government-sponsored programmes,

such as the Public Distribution System.
Powers to impose Taxes and Funds of Panchayats:
Clearly, a panchayat has a lot of responsibilities. And, as we all know, nothing
in this world is free; we need money to do anything. So, where do the
panchayats’ monetary resources come from?
On our earnings and expenses, we all pay taxes to the government. The
government can use this as a source of money. The panchayats receive a
portion of these revenues. Panchayats, like the government, collect their own
taxes, tolls, and fees from the public to keep their machinery working
efficiently.
According to Article 243H, the State has the authority to:

 Provide the panchayat the authority to charge taxes, tolls, and fees.
 Assign some of the money collected by the panchayat in a similar manner to
the panchayat.
 Lend the panchayat money or set up a fund for it.

Finance Commission:
The Constitution provides for the appointment of a Finance Commission by
the Governor under Article 243I to make the process of mobilizing finances for
the panchayats easier.
The following are the provisions of the Article:

1. The Finance Commission appointed by the Governor would examine the

panchayat’s financial situation and provide suggestions on two issues: how
to allocate money between the state and the panchayat, and how to
improve the latter’s financial situation.
2. The composition of the Commission, as well as the qualifications of its
members and the powers it would wield, would be determined by the
Legislature.
3. The Governor must inform the state of all of the Commission’s
recommendations, as well as the steps that must be taken to put them into
effect.

Audit of Accounts of Panchayats:

According to Article 243J of the Indian Constitution, state governments have
the authority to decide who would audit panchayat accounts and what
method will be followed in their own states.
Election to the Panchayats:

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Article 243K of the Indian Constitution establishes the right to vote in

panchayat elections. The State Election Commissions are to conduct and
manage the Panchayat elections, according to the law. Hence, election rules
differ from state to state.
3-Tier Structure of Panchayati Raj:

This article throws light upon the three-tier structure of Panchayati

Raj.
1. Gram Sabha:
The constitution (73rd Amendment) Act gives constitutional status to the
Gram Sabha. Gram Sabha means a body consisting of persons registered in
the electoral rolls relating to a village comprised within the area of Gram
Panchayat.

Gram Sabha may exercise such powers and performs such functions at the
village level as the Legislature of a state may by law provide.

Thus, all villagers above the age of 18 years have an inherent right to
determine their own destiny. Gram Sabha is the forum where the
marginalized poor can influence decisions affecting their lives.

There are some basic functions of Gram Sabha:

1. The Gram Sabha has a key role in bringing about transparency in the
functioning of the Gram Panchayats.
2. In ensuring equitable distribution of benefits.
3. In creation of community assets where these are needed and in bringing
about social cohesion.
4. Gram Sabhas shall plan and priorities development works to be taken up in
the village.
5. Approve the annual plan for the Gram Panchayat.
6. Seek active participation of women, scheduled castes and scheduled tribes.
7. Exercise the right to check the accounts of the Gram Panchayat.
8. Select beneficiaries under various schemes of the Central Government
undertaken for rural development and move towards full control over
management of natural resources.
So the Grain Sabha is the primary body lo which the Gram panchayat owes
responsibility. The Gram Panchayat must present l budget, accounts of the
previous year and annual administrative report before the Gram Sabha.

2. Gram Panchayat:
It is the first tier of Panchayati Raj system. It is the executive body of Gram
Sabha. The size and term of Gram Panchayat varies from state to state. The
Assam Act provides for the smallest number (I to 15), whereas Andhra

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Pradesh and Orissa have provision for larger bodies (15 to 17) and (11 to 25)
respectively.

The term of office is three years in Arunachal Pradesh, Rajasthan, and Delhi,
four years in Tripura, Andaman and Nicober Islands and Assam, five years in
Andhra Pradesh, Tamilnadu, Madhya Pradesh, Uttar Pradesh, Karnataka,
Orissa, Punjab, Haryana and other states.

Role and Function of Sarpanch:

Every Panchayat elects a President or Sarpanch and a vice- president or
Upsarpanch. In some states the sarpanch is directly elected by the Gram
Sabha either through the show of hands or through secret ballot while in
some the mode of election is indirect. The office of the sarpanch is of great
importance.

He is charged with the responsibility of supervision and co-ordination of the

activities of the panchayat He is an ex-officio member of the Panchayat
Samiti (Block level). He participates in its decision making as well as in the
election of the pradhan and of the members of various standing committees.

He acts as the executive head of the panchayat, represents it in the

panchayat samiti as its spokesman and co-ordinates its activities and those of
other local institutions like co-operatives. The panchayat secretary and the
village level worker are the two officers at the panchayat level to assist the
sarpanch in administration.

CONSTITUTION OF GRAM PANCHAYAT

The members of the Gram Panchayat the Panchas and Sarpanch. Their
number in each panchayat varies from 5 to 31 according to population of the
concerned village (s). In addition to the elected Panchas and Sarpanch, there
is a provision for co-option of two ladies, and one SC and ST member each, if
they have not been elected as Panchas.
The powers and functions of Gram Sabha are fixed by state legislature
according to the law on the subject. Fresh elections must be conducted before
the expiry of the term. In the event of dissolution, elections compulsorily
within six months (Article 243E).
Panchayats have the responsibility to prepare plans for economic
development and social justice with respect to the subjects as per the law put
in place, which also extends to the various levels of Panchayat including the
subjects as illustrated in the Eleventh Schedule (Article 243G).

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FUNCTIONS OF GRAM PANCHAYAT:

The Grama Panchayat shall perform the functions specified in accordance
with the Guidelines or norms laid down for performing such function as per
Section I:
a) Providing sanitary latrines to not less than ten percent of the households
every year and achieve full coverage as early as possible.
b) Constructing adequate number of community latrines for the use of men
and women and maintaining them.
c) Maintaining water supply works either on its own or by annual contract by
generating adequate resources.
d) Revising and collecting taxes, rates and fees periodically which are leviable
under this
Act.
e) Ensuring universal enrollment of children in primary school.
f) Achieving universal immunization of children.
g) Ensuring prompt registration and reporting of birth and deaths.
h) Providing sanitation and proper drainage.
i) Construction, repair and maintenance of public streets.
j) Removing encroachments on public streets or public places.
k) Providing adequate number of street lights and paying electricity charges
regularly.
1) Filling-up insanitary depressions and reclaiming unhealthy localities.
m) Destruction of rabid and owner less dogs;
n) Maintenance of all community assets vested in it
o) Maintenance of records relating to population census, crop census, cattle
census, census of unemployed persons and person below poverty line
p) Earmarking places away from the dwelling houses for dumping refuse and
manure.

TALUK PANCHAYAT:
Taluka Panchayats or Block Panchayats is the intermediate level in
Panchayati Raj Institutions. The Panchayat Samiti acts as the link between
Gram Panchayat (Village) and District Panchayat (Zilla). These blocks do not
hold elections for the Panchayat Samiti council seats.
The block council consists of all of the Sarpanchas and the Upa Sarpanchas
from each Gram Panchayat along with members of the legislative assembly
(MLA), members of parliament (MPs), associate members (like a
representative from a cooperative society) and members from the Zilla
Parishad who are a part of the taluk. The Gram Panchayat members nominate
their Sarpanch and Upa Sarpanch amongst their ranks, which extend to the
selection of the chairperson and vice-chairperson as well. The Executive
Officer (EO) is the head of the administration section of the Panchayat Samiti.

CONSTITUTION OF TALUK PANCHAYAT:

Every Taluk Panchayat shall consist of:
1. The elected members as determined under Section 121;

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2. The members of the House of People and the State Legislative Assembly
representing a part or whole of the Taluk, whose constituencies lie within
the Taluk
3. The members of the Council of States and the State Legislative Council who
are registered as electors within the Taluk; and
4. One-fifth of the Adhyaksha of the Grama Panchayats in the Taluk by
rotation for a period of one year as the [Adhyaksha of the Taluk
Panchayat] may determine by lot.

FUNCTIONS TALUK PANCHAYAT

Notwithstanding anything contained in sub-section (1) or schedule I, it shall
be obligatory on the part of the Taluk Panchayat, in so far as the Taluk
Panchayat fund at its disposal will allow, to make reasonable provision within
the area under its jurisdiction in respect of the following matters, namely:
1. Construction and augmentation of water supply works to the level of not
less than forty litres per capita per day.
2. Filing half yearly report regarding the activities of Grama Panchayats within
the taluk regarding:
a) Holding of Grama Sabha;
b) Maintenance of Water supply works;
c) Construction of individual and community latrine
d) Collection and revision of taxes, rates and fees; Payment of electricity
charges;
e)Enrolment in schools;
g) Progress of immunisation.
3. Providing adequate number of class rooms and maintaining primary school
buildings in proper condition including water supply and sanitation;
Acquiring land for locating the manure pits away from dwelling houses in the
villages.

ZILLA PANCHAYAT
The Zila Panchayat or District Development Council or Mandal Parishad or
District Panchayat is the third tier of the Panchayati Raj system and functions
at the district levels in all states. Zilla Parishad is located at the apex of the
Panchayat system at the district level. A Zila Parishad is an elected body.

CONSTITUTION OF ZILLA PANCHAYAT

The Zilla Panchayat shall consist of:
1. The elected members as determined under section 160. The elected
members of the Zilla Panchayat shall consist of persons elected from the
Taluks in the district, the number of members to be elected from each
Taluk fixed by the government, in accordance with the scale of one
member for forty thousand or part thereof of the population.
2. It consists of the Chairman of the Panchayat Samities as ex-officio
Members, MLAs, and MPs of the area. Representatives of women,
scheduled castes and tribes and backward class are coopted as members.
3. The chairman and vice-chairman are elected by the chairman of Panchayat
Samities in the district.
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Role and Function of Panchayat Secretary:

As the funds of the panchayats are meagre, the panchayat secretary Is
usually appointed by the panchayat on part-time basis. He mainly assists the
panchayats in recording decisions, keeping minutes, preparing budget
estimates and reports, does other sundry Jobs like preparing notices,
explaining circulars or legal provision, helping in organising Gram Sabha
meetings.

Role and Function of Village Level Worker or Gram Sevak:

(Now Village Development Officer)
The Gram Sevak or village level worker, now the Village Development Officer
(VDO) who is a multi-purpose extension functionary of the development
department. He assists the panchayat in drawing up agricultural production
plans, helps fanners in securing loans for agriculture, arranges the supply of
inputs like seeds and fertilizers and educates farmers about modern
agricultural practices. He serves as the main official link between Panchayats,
the Block and the Panchayat Samiti.

He keeps the panchayat informed of various development programmes and

reports to the Panchayat Samiti about the progress of the schemes and
achievement of targets. He is therefore accountable to the Sarpanch at the
panchayat level on the one hand and to the Vikas Adhikari (Block
Development Officer) BDO and of extension officers on the other hand at the
Samiti Level.

Functions of Gram Panchayat:

Panchayats have both obligatory and discretionary functions:
(a) Obligatory function.
(b) Discretionary function.
The experience shows that panchayats have been charged with too many
functions and their resources are not adequate even to perform the
mandatory functions effectively. The Balvantray Mehta Committee did not
recommend provision for statutory committees in the panchayats.
However, there are provisions for the constitution of committees of village
panchayats, in several states. For example, Andhra Pradesh provides for four
committees of village panchayats, Gujarat and Karnataka three obligatory
committees, Madhya Pradesh seven committees, Rajasthan one committee

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and UP provides for four committees. In Tamilnadu there is no provision for

the formation of committees of the panchayats.

Panchayats have two-fold functions—civic and developmental. Civic functions

include sanitation, conservancy, water supply, construction and maintenance
of roads, lighting, maintenance of burial grounds, primary education etc. In
addition, the panchayat also acts as the agent of the panchayat samiti in
executing schemes of development at the village level.

2. Panchayat Samiti:
This is the second tier of the Panchayati Raj. The Balvantray Mehta
Committee report envisaged the Samiti as a single representative and
vigorous democratic institution to take charge of all aspects of development
in rural areas.

Since the Samitis correspond geographically to the Community Development

blocks, there is a good deal of convergence with regard to their functions. The
Panchayat Samitis perform most of the functions related to planning and
development. Their nomenclature differs from state to state.

Features of 73rd Amendment Act 1992:

The 73rd Amendment to the Constitution enacted in 1992 added a new part-
IX to the Constitution. It also added a new XI schedule containing list of 29
functional items for Panchyats and made statutory provisions for the
establishment, empowerment and functioning of Panchayati Raj institutions.
Some provisions of this amendment are binding on the States, while others
have been left to be decided by respective State Legislatures at their
discretion.

The Salient Features of this amendment are as follows:

1. Organization of Gram Sabhas;

2. Creation of a three-tier Panchayati Raj Structure at the District (Zila),
Block and Village levels;
3. Almost all posts, at all levels to be filled by direct elections;
4. Minimum age for contesting elections to the Panchayati Raj institutions be
twenty one years;
5. The post of Chairman at the District and Block levels should be
filled by indirect election;

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6. There should be reservation of seats for Scheduled Castes/

Scheduled Tribes in Panchayats, in proportion to their population, and for
women in Panchayats up to one-third seats;
7. State Election Commission to be set up in each State to conduct
elections to Panchayati Raj institutions;
8. The tenure of Panchayati Raj institutions is five years, if dissolved
earlier, fresh elections to be held within six months; and
9. A State Finance Commission is to be set up in each State every five
years.

Some of the provisions, which are not binding on the states, but are
only guidelines:

1. Giving representation to the members of the Central and State legislatures

in these bodies;
2. Providing reservation for backward classes; and
3. The Panchayati Raj institutions should be given financial powers in relation
to taxes, levy fees etc. and efforts shall be made to make Panchayats
autonomous bodies.

Composition of Panchayats:

The Panchayati Raj system, as established in accordance with the 73rd

Amendment, is a three- tier structure based on direct elections at all the three
tiers: village, intermediate and district. Exemption from the intermediate tier
is given to the small States having less than 20.

Exemption from the intermediate tier is given to the small States having less
than 20 lakhs population. It means that they have freedom not to have the
middle level of panchayat.

All members in a panchayat are directly elected. However, if a State so

decides, members of the State Legislature and Parliament may also be
represented in a district and middle-level panchayats.

The middle-level panchayats are generally known as Panchayat Samitis.

Provisions have been made for the inclusion of the chairpersons of the village
panchayats in the block and district level panchayats.

The provision regarding reservation of seats for Scheduled Castes/Scheduled

Tribes has already been mentioned earlier. However it should also be noted
here that one-third of total seats are reserved for women, and one-third for
women out of the Quota fixed for Scheduled Castes/Tribes.

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Reservation is also provided for offices of Chairpersons. The reserved

seats are allotted by rotation to different constituencies in a panchayat area.
State Legislatures can provide for further reservation for other backward
classes (OBC) in panchayats.

Term of a Panchayat

The Amendment provides for the continuous existence of Panchayats. The

normal term of a Panchayat is five years. If a Panchayat is dissolved earlier,
elections are held within six months. There is a provision for State Election
Commission, for superintendence, direction, and control of the preparation of
electoral rolls and conduct of elections to Panchayats.

Powers and Responsibilities of Panchayats:

State Legislatures may endow Panchayats with such powers and authority as
may be necessary to enable the Panchayats to become institutions of self-
government at the grassroots level.

Responsibility may be given to them to prepare plans for economic

development and social justice. Schemes of economic development and social
justice with regard to 29 important matters mentioned in XI schedule such as
agriculture, primary and secondary education, health and sanitation, drinking
water, rural housing, the welfare of weaker sections, social forestry and so
forth may be made by them.

Three-tier Structure of Panchayati Raj:

Panchayat Samiti

The second or middle tier of the Panchayati Raj is Panchayat Samiti, which
provides a link between Gram Panchayat and a Zila Parishad.

The strength of a Panchayat Samiti also depends on the population in a Samiti

area. In Panchayat Samiti, some members are directly [Link] of
Gram Panchayats

Sarpanchs of Gram Panchayats are ex-officio members of Panchayat

Samitis. However, all the Sarpanchs of Gram Panchayats are not members of
Panchayat Samitis at the same time.

The number varies from State to State and is rotated annually. It means that
only chairpersons of some Gram Panchayats in a Samiti area are members of
Panchayat Samiti at a time.

In some panchayats, members of Legislative Assemblies and Legislative

Councils, as well as members of Parliament who belong to the Samiti area,
are co-opted as its members. Chairpersons of Panchayat Samitis are,
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elected indirectly- by and from amongst the elected members

thereof.

Zila Parishad

Zila Parishad or district Panchayat is the uppermost tier of the Panchayati Raj
system.

This institution has some directly elected members whose number differs
from State to State as it is also based on population. Chairpersons of
Panchayat Samitis are ex-officio members of Zila Parishads.

Members of Parliament, Legislative Assemblies and Councils

belonging to the districts are also nominated members of Zila
Parishads.

The chairperson of a Zila Parishad, called Adhyaksha or President is elected

indirectly- by and from amongst the elected members thereof. The vice-
chairperson is also elected [Link] Parishad meetings are conducted
once a month. Special meetings can also be convened to discuss special
matters. Subject committees are also formed.

Zila Parishad meetings are conducted once a month. Special meetings can
also be convened to discuss special matters. Subject committees are also
formed.

Functions of Panchayat:

All Panchayati Raj Institutions perform such functions as are specified in state
laws relating to panchayati raj. Some States distinguish between obligatory
(compulsory) and optional functions of Gram Panchayats while other States
do not make this distinction.

 The civic functions relating to sanitation, cleaning of public roads, minor

irrigation, public toilets and lavatories, primary health care, vaccination, the
supply of drinking water, constructing public wells, rural electrification, social
health and primary and adult education, etc. are obligatory functions of
village panchayats.
 The optional functions depend on the resources of the panchayats. They may
or may not perform such functions as tree plantation on roadsides, setting up
of breeding centers for cattle, organizing child and maternity welfare,
promotion of agriculture, etc.
 After the 73rd Amendment, the scope of functions of Gram
Panchayat was widened. Such important functions like preparation of
annual development plan of panchayat area, annual budget, relief in natural
calamities, removal of encroachment on public lands and implementation and
monitoring of poverty alleviation programmes are now expected to be
performed by panchayats.
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 Selection of beneficiaries through Gram Sabhas, public distribution system,

non-conventional energy source, improved Chullahs, biogas plants have also
been given to Gram Panchayats in some states.

Functions of Panchayat Samiti:

 Panchayat Samitis are at the hub of developmental activities.

 They are headed by Block Development Officers ([Link]).
 Some functions are entrusted to them like agriculture, land improvement,
watershed development, social and farm forestry, technical and vocational
education, etc.
 The second type of functions relates to the implementation of some specific
plans, schemes or programmes to which funds are earmarked. It means that
a Panchayat Samiti has to spend money only on that specific project. The
choice of location or beneficiaries is, however, available to the Panchayat
Samiti.

Functions of Zila Parishad:

 Zila Parishad links Panchayat Samitis within the district.

 It coordinates their activities and supervises their functioning.
 It prepares district plans and integrates Samiti plans into district plans for
submission to the State Government.
 Zila Parishad looks after development works in the entire district.
 It undertakes schemes to improve agricultural production, exploit ground
water resources, extend rural electrification and distribution and initiate
employment generating activities, construct roads and other public works.
 It also performs welfare functions like relief during natural calamities and
scarcity, the establishment of orphanages and poor homes, night shelters, the
welfare of women and children, etc.
 In addition, Zila Parishads perform functions entrusted to them under the
Central and State Government sponsored programmes. For example, Jawahar
Rozgar Yojna is a big centrally sponsored scheme for which money is directly
given to the districts to undertake employment-generating activities.

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UNIT 2-RECEIPTS AND PAYMENTS OF PRI’S

Gram Panchayat Role:
Grama Panchayat Political Setup:-
Adhyaksha
1. The Adhyaksha of the Grama Panchayat shall, in addition to the power
exercisable under any other provision of the Act or rules made there under :-
o Convene meetings of the Grama Panchayat;
o Have access to the records of the Grama Panchayat; and
o Exercise supervision and control over the acts of the officers and employees
of the Grama Panchayat including the Secretary.
2. The Adhyaksha may, if in his opinion the immediate execution of any work or
the doing of any act which requires the sanction of a Committee of the Grama
Panchayat, is necessary in public interest convene a meeting for the purpose
with a notice of twenty four hours.

Upadyaksha:
The Upadyaksha of the Grama Panchayat shall exercise the powers and
perform the duties of the Adhyaksha when the Adhyaksha is absent, on leave
or is incapacitated from functioning.

ADHYAKSHA AND UP-ADHYAKSHA

The elected members of the Zilla Parishad referred to in section 50 shall, as
soon as may be, elect two members from amongst themselves to be
respectively Adhyaksha and UpAdhyaksha thereof and so often as there is a
casual vacancy in the Office of the Adhyaksha and Up-Adhyaksha, they shall
elect another member from amongst themselves to be Adhyaksha or Up-
Adhyaksha, as the case may be:
1. Provided that no election shall be held if the vacancy is for period of less
than one month The State Government, shall in the prescribed manner
reserve:
2. a) Such number of offices of the Adhyaksha and Up-Adhyaksha of Zilla
Parishad in the State for persons belonging to the Scheduled Castes and
Scheduled Tribes shall as nearly as may be

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b) The same proportion to the total number of offices in the Zilla Parishad as
the population of the Scheduled Castes or of the Scheduled Tribes in the State
bear to the total population of the State
c) Not less than one-third of the total number of offices of Adhyaksha and Up
Adhyaksha in the State from each category which are reserved for persons
belonging to the Scheduled Castes.

POWERS, FUNCTIONS AND DUTIES OF AND UP-ADHAYAKSHA

The Adhyaksha:
1. The Adhyaksha shall perform all the duties imposed and exercise all the
powers conferred on the Adhyaksha under this Act and rules made
thereunder;
2. Convene, preside over, and conduct meetings of the Zilla Parishad;
3. Exercise administrative supervision and control over the Chief Executive
Officer and through him, all officers and other employees of the Zilla
Parishad and the officers and employees whose services may be placed at
the disposal of the Zilla Parishad by the State Government.
4. Exercise such other powers, perform such other functions and discharge
such other duties as the Zilla Parishad may, by general resolution direct or
as the government may, by rules made in this behalf, prescribe.
5. Exercise overall supervision over the financial and executive administration
of the Zilla Parishad place before the Zilla Parishad all questions connected
therewith which shall appear to him to require its orders and for this
purpose may call for records of the Zilla Parishad.

The Up-Adhyaksha
In the absence of the Adhyaksha, preside over the meetings of the Zilla
Parishad.
Exercise such powers and perform such duties of the Adhyaksha as the
Adhyaksha from time to time may, subject to the rules as may be prescribed
delegate to him by order in writing.
Pending the election of the Adhyaksha or during the absence of the
Adhyaksha from the district, or by reason of leave for a period exceeding
thirty days, exercise the powers and perform the duties of the Adhyaksha.

Salary, travelling allowances and other allowances to adyaksha,

upadyaksha and members of zilla panchayat, taluk panchayat, gram
panchayat
Few State Governments have implemented the 6 th pay commission's
recommendations. While, some states have their own pay structures. For
latter category of the States, it may be difficult to follow the 6th Pay
Commission's pay structures for PRIS.
They would necessarily have to follow the pay structure applicable to other
State Government employees of the State.
Salary and allowances to the Adhyaksha and Upadhyaksha and other
members:
The salary and allowances of Adhyaksha and Upadhyaksha shall be as
prescribed.
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Every member of the Zilla Panchayat other than the Adhyaksha and the
Upadhyaksha shall be entitled to receive such sitting fee and allowances, as
may be prescribed.
Gram panchayat presidents will draw Rs 3000 as against an earlier
honorarium
of Rs 1000, and vice prez, Rs 2000 as against Rs 600 earlier.
Payment Honorarium of Adyaksha and Upadyaksha of Gram Panchayat
Payment of honoraria and other allowances of Pradhan, Upa-Pradhan,
Sanchalaks, Members and salary to the employees of the Gram Panchayat. - A
Gram Panchayat shall maintain an acquittance register in Form 10 for
disbursement of honorarium and allowances to the Pradhan. Upa-Pradhan.
Sanchalaks, or the members and in Form 11 for disbursement of salary to its
employees.

GRANTS AND FUNDS:

For every Panchayati Raj Institution, there shall be constituted a fund bearing
the name of the concerned Panchayati Raj Institution and there shall be
placed to the credit thereof:
a) Contributions and grants, if any, made by the Central or the State
Government including such part of the land revenue collected in the State
as may be determined by the government.
b) Share of taxes or other revenues as approved by the State Finance
Commmission; Contribution and grants, if any, made by any local authority.
d) Loan, if any, granted by the Central or the State Government or raised by
the Panchayati Raj Institution concerned.
e) All receipts on account of tolls, taxes and fees levied by the concerned
Panchayati Raj Institution.
f) All receipts in respect of any school, hospitals, dispensaries, building
institution or works vested in, constructed by or placed under the control
and management of the concerned Panchayati Raj Institution.
g) All sums received as gift or contribution and all income from any trust or
endowment made in favour of the concerned Panchayati Raj Institution.
h) All fines or penalties imposed and realised under the provisions of this Act
or of the byelaws, made thereunder; and all other sums received by or on
behalf of the concerned Panchayati Raj Institution.

TAXES:
Taxes which may be imposed by a Panchayat are as follows:
1. Subject to the rules and any orders made by State Government in this
behalf, a panchayat may impose one or more of following taxes, namely:
a) A tax on building owned by persons not exceeding such rate as may be
prescribed.
b) An octroi on animals or goods brought within the Panchayat Circle for
consumption or use therein. Vehicle tax except on those which are used for
the purpose or cultivation.
c) Pilgrim tax;

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2. The taxes under Sub-sec shall be imposed, assessed and raised in such
manner and paid or realised at such times, as may be prescribed.
3. The State Government, by notification in the Official Gazette, require any
Panchayat to impose, subject to the provisions of Sub-sec, any of the taxes
specified in Sub-sec from such date and at such rates, as may be specified
in the notification.
4. The panchayat shall proceed to impose the tax or taxes therein specified,
as if a resolution of the Panchayat had been passed for the imposition
thereof and it shall not be lawful for it to abandon, modify or abolish any
tax so imposed:

Special Tax for Community Service:

A Panchayat may charge fees for:
1. Any licence or permission granted or given by it for making any temporary
erection or for putting up any projection
2. For the temporary occupation of any public or other land vested in the
Panchayat
3. For any service rendered by it or in respect of any duty performed by it or
under the provisions of the Panchayat Raj Act.
Such fees shall be charged at such rates and in such manner as may be
provided for in any rules made under this Act or in bye-laws by the
Panchayat and it shall be lawful for the panchayat to lease the levy of any
such fees by public auction.

Powers of Panchayat Samiti to impose taxes:

A tax on such trades, calling professions and industries as may be prescribed.
A primary education cess; and A tax in respect of Panchayat Samiti fairs held
within the limits of its jurisdiction.
Subject to such maximum rates as the Government may prescribe, a Zila
Parishad may levy:
1. A fee for licence for a fair or mela;
2. Water rate, where management for the supply of water for drinking,
irrigation or any purpose is made by the Zila Parishad within its jurisdiction.

Standing Committeess:-
(1) Every Grama Panchayat shall constitute the following Committees by
election:-
o Production Committee
o Social Justice Committee
o Amenities Committee

Production Committee:-
This committee shall perform functions relating to agricultural production,
animal husbandry and rural industries and poverty alleviation programmes.

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Social Justice Committee:-

This committee shall perform functions relating to
o Promotion of educational, economic, social, cultural and other interests of the
Scheduled Castes and Scheduled Tribes and Backward Classes;
o Protection of such castes and classes from social injustice and any form of
exploitation;
o Welfare of women and children;

Amenities Committee:
This committee shall perform functions in respect of education, public health,
public works and other functions of the Grama Panchayat.

Staff of Grama Panchayats:-

Panchayat Development Officer / G.P. Secretary
o Every Grama Panchayat shall have a whole time PDO/Secretary who shall be
an officer of the Government and shall draw his salary and allowance from the
Zilla Panchayat fund.
o The PDO/Secretary shall perform all the duties and exercise all the powers
imposed or conferred upon him by or under this Act or any rules or bye-laws
made there under.
Staffing pattern and schedule of employees:-
1. The Government may, by order, specify the staffing pattern, the scales of pay
and mode of recruitment of staff of Grama Panchayats.
2. The Grama Panchayat shall, subject to the sub-section(1), determine and
submit for approval of the Chief Executive Officer a schedule of employees
specifying the designation and grades and the salaries and allowances
payable to its officers other than the Secretary required for carrying out the
duties imposed upon the Grama Panchayat by or under this Act.

Functions of the Grama Panchayat:-

1. The Grama Panchayat shall perform the functions specified in Schedule I:
2. Provided that where the state Government or Central Government provide
fund for the performance of any function specified in Schedule I, the Grama
Panchayat shall perform such function in accordance with the guidelines or
norm laid down for performing such function.
Notwithstanding anything contained in sub-section (1) and Schedule I, it shall
be obligatory on the part of a Grama Panchayat in so far as the Grama
Panchayat fund at its disposal will allow, to make reasonable provision within
the Panchayat are in regard to the following matters, namely :-
o Providing sanitary latrines to not less than ten percent of the households
every year and achieve full coverage as early as possible;

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o Constructing adequate number of community latrines for the use of men and
women and maintaining them;
o Maintaining water supply works either on its own or by annual contract by
generating adequate resources;
o Revising and collecting taxes, rates and fees periodically which are leviable
under this Acct;
o Ensuring universal enrolment of children in primary school;
o Achieving universal immunization of children;
o Ensuring prompt registration and reporting of birth and deaths;
o Providing sanitation and proper drainage;
o Construction, repair and maintenance of public streets;
o Removing encroachments on public streets or public places;
o Providing adequate number of street lights and paying electricity charges
regularly;
o Filling-up insanitary depressions and reclaiming unhealthy localities;
o Destruction of rabid and owner less dogs;
o Maintenance of all community assets vested in it;
o Maintenance of records relating to population census, crop census, cattle
census, census of unemployed persons and person below poverty line
o Earmarking places away from the dwelling houses for dumping refuse and
manure.
3. The Grama Panchayat may also make provision for carrying out within the
Panchayat area any other work or measure which is likely to promote the
health, safety, education, comfort, convenience or social or economic well
being of the inhabitants of the Panchayat area.
4. The Grama Panchayat may, by a resolution, passed at its meeting and
supported by two-thirds of its total number of members and with the prior
approval of the Taluk Panchayat :-
o Make provision for or make contribution towards, any exhibition, conference
or seminar within or outside the Panchayat area but within the district; or
o Make contribution to any medical, educational or charitable institutions or any
other institutions of public utility, within the Panchayat area which are
registered under the Karnataka Societies Registration Act, 1961, Karnataka
Co-operative Societies Act, 1959 or under any other law for the time being in
force.

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UNIT -3 PREPARATION OF ACCOUNTS OF PRI’S

Meaning: Government audit is an audit conducted to ensure that the social
welfare has been uplifted in a given period through various activities of
different types of govt or different layers of govt.

Origin of government audit: The govt audit came into existence on the
account of following factors:
 With the increase of democratic govt, it called for public accountability to
report about the performance of such govt.
 The financial stakes involved in the govt organizations necessitated the
performance evaluation in the evaluation in the systematic way to ensure
the upliftment of social welfare.
 There was a necessity to compare the plan and performance of such govt
undertakings.

Types of Govt. Audit:

 Compliance Audit: It is an audit conducted to ensure that the various
rules and regulations, contractual obligations, provisions of any law or
legislation procedure, if they are not properly observed, it is the duty of
the auditor to enlighten such limitation in the audit report.
 Financial Audit: Financial audit is to ensure that the finance is used
properly for the pre-determined purpose or channels, the auditor has to
confirm that the specific grants are appropriated towards the specific
programs and properly authorized and accounted.
 Performance Audit: A performance audit is to ensure that the system is
working efficiently to result in expected end result and the auditor must
check whether such expected end result has been achieved and if not,
what are the possible causes so that an improvement can be made in the
future.

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 Transaction Audit: A transaction audit is an audit conducted for all the

transaction of a certain period or some specified transaction based on
some criteria. It is to ensure that the transactions are legal and proper
and to ensure that the organizational result would be achieved.
 CCO Based Audit [Chief Controlling Officer]: CCO based audit is an
audit conducted on the direction of CCO of the auditor general office of
the govt. this audit normally conducted when the CCO has sufficient proof
to believe that the things are normal in a particular govt department or
office.
 Thematic Audit: The thematic audit is the in depth audit conducted to
bring into light any abnormalities which may involve in one or more
entities or departments. An auditor would go and audit the accounts to
identify any serious error or a fraud. This is not a normal or periodic audit
and it is conducted in special or emergency situation.
 IT Audit: An IT audit is the audit of informational technology. The
infrastructure development and the effective utilization of IT in
implementing the various schemes of the govt.
 Employee welfare or benefit Audit: An employee benefit audit is an
audit conducted to ensure that a proposed benefit has been actually
passed into the employees he should ensure that the benefit to the
employees has been helpful to boost up their efficiency.

Objectives of Govt Audit: The following are the important objective of

govt audit:
 To ensure that procedure or other formalities are duly observed in the
contact of activities.
 To ensure that any payment is made out of the authorized funds or pre-
determined funds, an off-hand payment is not allowed in the govt
departments.
 Every payment must be authorized by an official before it is disbursed.
 To ensure that payments are properly classified as capital and revenue
and recorded as per canons of accounting.
 The auditor has to ensure that the receipts are properly classified into
capital and revenue, any capital receipts must be added to specific fund
or a fresh fund should be created if it is not already existing.
 To ensure that the stock and stores are properly accounted and valued.
The accounting and valuation of stock and stores in the most scientific
way would protect the public wealth.
 To ensure that all the expenditure is in the public interest.
 All the amounts due to the govt should be properly recovered and the
auditor should ensure that amounts received are duly credited to the
accounts concerned.

Difference between Private Audit & Govt Audit:

Sl. No Basis Private Audit Govt. Audit
1. Appointing In case of the owner will The auditor is
authorities appoint the auditor. appointed by the govt

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In case of partnership on the advice of

partners will appoint the Comptroller and Auditor
auditor. General.
In case of company and
societies, the auditor is
appointed in general
meeting.
2. Person who The auditor is an external The audit is conducted
carries out party who is an qualified by the employees of the
audit CA or Cost Accountant. govt.
3. Type of audit It is always periodical It is a continuous audit
audit, but for certain in the case of govt
exceptional cases. organizations.
4. Payment of The remuneration is fixed The govt. which
Remuneratio by the owners of the appoints the auditor
n business on the would also fix the
appointment. remuneration.
5. Submission The audit report is The audit report would
of Report submitted to the owner of be presented to the
the business proprietor, head or chief of the
partners or BOD. dept whose Accounts
are audited.
6. Presentation The audit report would be The report would be
of audit presented in the meeting submitted in the
report of the partners or parliament - if it is
members. central govt.
undertaking, in state
legislative – if it is state
level undertaking & to
the bodies, if local govt.
– if it is local
organization.
7. Preliminary In private organization A treasury officer,
examination there is no preliminary either actual or
examination of any designated always
transaction and its owner conducts a preliminary
discretion. examination of all
transactions.
8. Qualification A qualified CA or Cost Any govt. employee [AG
of auditor Accountant is eligible to office] are eligible to
become auditor and conduct a govt. audit.
conduct the audit.

Scope of Govt Audit: The scope of govt audit covers the various areas in
the process conducting audit:

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 The procedures: While conducting a govt audit, it should be

confirmed that all the procedures that all the procedures are
systematically followed. There is no scope for flouting the procedures.
 Policies: A policy defines how a task should be performed a govt
auditor should ensure that the various relevant policies are duly
observed and followed.
 Rules: It define do’s and dont’s of an organization a govt auditor must
verify that these do’s and don’ts rules clearly followed by the
organization subject to audit.
 Technology: The govt auditor should ensure that infrastructure exist
to acquire and use the latest technology and the technology is been
put into use.
 People: The govt audit covers only those people who are employed by
any govt department or govt ministry. It may include people employed
in central govt or state govt or local govt. The activities of govt
employees only is covered under the govt audit.

Characteristics of Govt Audit:

 A govt audit evaluates whether the standards are accepted principles of
the system has been followed and to report any deviation which are
cognizable. The idea is to improve quality of the system.
 Impartial Process or Activity: A govt audit is impartial process in the
sense that the audit is commenced with a trust on the work of the
employees no negative presumption is made any deviations from the
accepted principle are being brought to light.
 It is a Reporting Activity: An auditor can only report on the work he
has audited he can make suggestions, indicate corrective actions to be
taken any other comments towards a positive end he has no
authority to implement any of his recommendations.
 Its Comparison Process: An auditor compares the actual work done
with the standard practices or accepted practices. Any deviation which
are cognizable are reported with suggestions to improve.
 It is a Protection Process: Through govt audit various public
properties and resources are being protected by ensuring that their
utilization or appropriation is proper and in the public interest.

Benefits/Role of Govt Audit: The following are the benefits of govt

audit:
 It improves the financial performance of the organization: Though audit
the efficiency of the employees is measured and reporting qualifications
are made regarding area of improvement and there by overall
efficiency and financial performance is lifted.
 It prevents or reduces the fraud: Through govt audit it is possible to
detect the frauds which may be committed by bureaucratic or the

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concerned officials. Detection of frauds is useful to save loss of revenue

to the govt and there by improve the social welfare.
 It protects public money and public property: Through govt audit
the public money flow to the wrong areas and the swindling of the
public property is been protected in so many cases the govt audit is
able to bring to light the misuse of public money and public property
and protect them in the public interest.
 It develops an internal control system: Through govt audit it is
possible to build up a good internal control system after an audit an
auditor would suggest the improvements to be affected in the policies
and procedures such as improved would prevent or reduce the wrong
usage of the public resources.
 It enhances the external functions: A govt audit steps up the
efficiency of the govt organizations it also influences the external
agencies to step up their level of performance and reduction of the cost
of operations. Many external or private organizations are compelled to
become cost effective over a period of time.
 It improves economic structure of the society: When the govt
audit becomes the part of the system it is useful to create a sound
economic system and improve the economic structure of the society. All
the economic resources are properly protected and also used to
enhance the social welfare.

Professional Ethics: The term professional ethics refers to the generally

accepted standards of professional and personal behavior by professionals.
The professional ethics acts as guiding factors of the behaviour while
executing the professional duties or otherwise.
The following are some of the professional ethics:
 Integrity: A professional auditor must be very loyal for his profession
and to its clients he must provide the best service to protect the
interest of his service to protect the interest of his clients at no point of
time he must get yielded to any kind of attractions.
 Principle of Objectivity: A professional auditor must be objective in
his outlook in carrying out of his professional duties, the purpose for
which the auditor is taken up should be his prime mover of his work he
should not be influenced by any subjective factors like the relationships,
influence, monetary consideration so on, he must do his best to be
transparent in executing the professional duties with the objective in
the mind.
 Professional Competence: An auditor must be highly knowledgeable
in the area in which he is working he must have a expertise knowledge
of accounting, tax matters, supporting legislations, supporting software
in the modern days and any related area to give the best service to his
clients. He must be so capable or competent has to install confidence in
the minds of his clients.
 Confidentiality: The professional must maintain the confidentiality
about all the aspects of his clients the various points which comes to his
knowledge has a professional council should be kept as top secret
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should not be shared or leaked with other clients or other people. This
would add to his reputation only decided cases can be quoted, but not
undecided instance as it would endanger the interest of his clients.
 Professional Behavior: A professional must have a dignified behavior
physically and professionally his language of expression, his body
language physical posture, and such are credentials must be such has
to emulate him or follow him he must be able to present himself with lot
of dignity and honor.
 Compliance of Social Behavior: A professional must comply with all
the requirements of a good social behavior as everyone is a social being
by such a social behavior he is identified as a part of society.

Professional Threats: An auditor has to be impartial objective and fair in

his approach while auditing the client’s organization he has to be frank
enough to express a true and fair view of state of affairs in his report. But
in some situation, he is hindered not to be unbiased and be partial in his
report and such situations or instance are known as professional threats.
The following are the instance of professional threats:
 Self Interest Threat: In some situations, the auditor would not
express his opinion as frankly as he should have done because he
posses an interest as a partner or ex-partner or director or ex-director
or officer or ex-officer or any kind of personal benefit accrues to him or
has accrued to him. These factors of personal favour or benefit which
would make him not to express things as they are is known as self
interest threat or professional interest threat.
 Professional Review Threat: An auditor may sometime make a
review of his own work or report or statement in the past in such a
situation the auditor holds back from making an impartial report or
expression and is known as professional review threat. He would
present an altered report to hide his mistakes in the past.
 Advocacy Threat: Sometimes, the auditor would have given advices
on certain factors or issue or would have made certain
recommendations which may not have resulted in the expected level of
success while analyzing the reasons for the failure of his advocacy, he
would not be frank or cannot be frank about his own mistake and such a
threat is known as advocacy threat.
 Familiarity Threat: Sometimes, the auditor and the client would be so
close and familiar that the auditor will not be able to express his true
opinion on the true state of affairs such previous knowledge or
friendship or close relationship which alters his audit report is known as
familiarity threat.
 Intimidation threat: In some situation an external party would
threaten either morally or physically to make the auditor to alter his
report or adjust his report to the liking of such external party and such a
threat is known as intimidation threat.

Audit of Panchayat Raj Institutions: The audit of Panchayat Raj

Institution is conducted u/s 14, 15,16,17,18 and 19 of the CAG
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[Comptroller & the Auditor General Act and rules there and all the
Panchayat Raj Institution must be subjected to annual audit under these
rules.
 Audit u/s 14: An audit u/s 14, a subject to the following aspects:
 The annual year period should be clearly defined and the financial
year of the govt should be the annual year for all the local bodies
under very rare situations an alteration may allowed subject to the
prior approval of the consult authorities.
 The Quantum of grant, the amount granted and released the
sponsorship, the amounts and sponsorship directly from the central
govt should be properly recorded this is to ensure that a proper
control is maintained over the grants which is a critical component of
local bodies and will be useful for the development of the local areas.
 A list of all the village panchayats must be maintained along with their
accounts. This will be useful to commence and complete the audit in a
systematic way.

 Audit u/s 15: Under section 15 the audit conducted include the
following:
 Full details about the various grants received or sponsorship received
should be kept ready as a statement.
 The authorities have a direct access to the books or documents to
ensure that everything is proper by instant visits.

Procedure of audit of bodies: The following procedures should be

followed in the local bodies.
 The date of commencement of audit should be intimated in advance
this will help for the preparation to present the accounts and documents
so that the audit is conducted in a scientific way.
 An audit program has to be prepared to commence and finish the audit
work in a systematic way.

General auditing of Panchayat Raj Institutions and the aspects to

be covered there:
The following aspects has to be covered in the audit of Panchayat Raj
Institutions:
 The various procedures laid down under the specific orders or by the
CAG are followed or not should be checked.
 The policies which are pre-decided are duly observed or not should be
ensured.
 The various receipts and payments should be properly accounted and
authenticated.
 Special care must be taken to audit the grants received during the audit
period.
 The utilization of grants for the general or specific purpose as per the
notification should be ensured.
 Any other area specifically assigned particular period should be properly
inspected and reported.
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 Property like Equipments and Buildings should be audited.

Audit Report: After the audit work is completed, an auditor would prepare
and present a report to the authority which has appointed him under the CAG
Rules. If all the points or the area of audit are properly carried out he gives a
clean report stating that all the aspects are duly fulfilled. If any of the
requirements are not duly satisfied, the auditor would give a qualified report
with audit objections and attaches audit paras.

Audit objections: During the audit the auditor may come across certain
areas or aspects not fulfilled by an organization or a department of a govt
such area or aspect of non-fulfilment of the credentials are known as Audit
objections. The audit objections may fall under one of the following areas:
► Any financial irregularity identified and pointed out by the auditor that is
misuse of funds.
► Non- compliance of the pre-determined procedures.
► Non-fulfilment or breach of policies like reservation policy, purchase
policy so on.
► Breach of rules laid down for specific function or functional area.
► Any other unauthorized commitments.

Rectification of Audit Objections:

 A written notice would be served for the person responsible for the
breach committed giving a fort night time to explain the causes for the
land and the reasons are pardonable, such official may be exonerated.
 If any amount was spent without proper authorization, the official who
has spent may be asked to reimburse such amount or recovered from his
salary.
 If any amount disallowed spent by the official, it may be recovered or he
may be asked reimburse.
 In some major cases of irregularity, it may be referred to Public Accounts
Committee [PAG] to consider and decide the action to be taken or to
exonerate the mistakes.
 If no other alternate is possible a penalty may be imposed on the person
committing irregularity.

An Audit para is an extension of an audit report which includes any

comments or recommendations or measures suggested by the auditor to get
over with certain mistakes or objections raised by him in the audit report.

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THREE TIER ACCOUNTING CLASSIFICATION:

Three-Tier accounting classification are as follows:
1. First Tier i.e. Major Head (Four-digit): The first tire classification
represents the Major Heads. The Major Heads of terminology of functions has
been described in the Eleventh Schedule of the Constitution. The four digit
code of Major Heads is Receipt Head, Revenue Expenditure, or Capital
Expenditure Head. These are enumerated as follows like:
2. Second Tier i.e. Minor Head (Three-digit): The second tire of Minor
Heads with three digit code identifies the programme undertaken to the
functions. A major head is divided into minor heads. It has been illustrated in
Table
3. Third tier i.e. Sub-heads (Two-digit): Under Sub Head, a two-digit
categorization of the schemes has been as follows. In order to understand the
transactions of the below-specified scheme, the confederation of the
structures has been described in table below.

Priasoft Accounting Software in Panchayat Raj Institutions and

Panchatantra Software:
Ministry of Panchayati Raj (MoPR) has desired that CAG and NIC should work
together to bring out the new version of PRIASoft (Panchayati Raj Institutions
Accounting Software) that captures the 3-tier revised classification and
generates all the reports in the formats prescribed by the sub-Committee on
Budget and Accounting Standards for PRIs.
Accordingly, NIC is working closely with CAG to come out with a new version
of PRIASoft (PRIA Soft ver 2.0), which will have the following features:
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1. Three -Tier System: The three tier accounting classification consisting of

Major Heads, Minor Heads and Object Heads will be captured by the software.
In addition, as defined by CAG in the revised classification, wherever
Central/State scheme activities are to be captured as per the Scheme
guidelines, the software will provide for accounting the scheme as a Sub-head
under the respective Minor Head.
2. Facility to Classify Based on Sub- Heads and Auto Generation of
Reports: At the time of keying in the receipts and expenditure figures in to
the system, the software will prompt the user to select the appropriate
account heads from the three-tier classification.
In case the expenditure is being booked under a scheme, the software will
prompt the user to select the appropriate Subhead out of the standardized
scheme sub-head created. Once the receipts and expenditure entries are
captured in the system, the software will automatically generate the. Reports
in the revised formats prescribed by the CAG. Since the new format allows the
user to book expenditure explicitly under sub-head provided for the scheme,
scheme-wise expenditure will also be generated automatically.
3. State Specific Classification: In order to extend flexibility to states
which want to retain their own existing classification relating to the schemes,
the software will provide mapping of the state-specific classification to the
revised classification proposed by CAG.
This will enable the panchayats in those states to carry on with their ongoing
accounting classification while at the same time enabling Government of India
to view the accounting details of the PRIs as per the classification prescribed
by the CAG.
4. Availability of Online and Offline Version of the Software: In order to
bring about accountability and transparency in the functioning of PRIS, the
software will be a web-based software and all the accounting data of PRIs will
be available online on a centralized system. However, in view of the lack of
Internet connectivity in many PRIs, an offline version of the software will be
made available. Panchayat level users can enter their account details locally
and periodically update the data on the online site. This will encourage even
PRIs with no Internet connectivity to use the software.
5. Security: In view of the high security need of the accounting system, the
software will provide a strong authentication mechanism and also maintain
detailed audit logs of all the transactions carried out through the software.

Budget Heads:
The revenue and expenditure of GPs are grouped
1. Revenue Receipts/ Revenue Expenditure
2. Capital Receipts/Capital Expenditure
3. Deposits and Advances

GRAM PANCHAYAT FUNDS:

A major portion of Part IX of the Constitution deals with the structural
empowerment of the PRIS but the real strength in terms of both autonomy
and efficiency of these institutions is dependent on their financial position

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(including their capacity to generate own resources). In general, Panchayats

in our country receive funds in the following ways:
1. Grants from the Union Government based on the recommendations of the
Central Finance Commission.
2. Devolution from the State Government based on the recommendations of
the State Finance Commission.
3. Loans/grants from the State Government Internal Resource Generation (tax
and non-tax) powers have been given to states. States which have not
been given adequate attention to fiscal empowerment of the Panchayats.
Panchayats can generate their own resources. Kerala, Karnataka and Tamil
Nadu are the state which are considered to be progressive in PRI
empowerment but even there, the Panchayats are heavily dependent on
government grants.

Own Resource Generation:

Though, in absolute terms, the quantum of funds the Union/State Government
transfers to a Panchayat forms the major component of its receipt, the PRI's
own resource generation is the soul behind its financial standing. It not only a
question of resources; it is the existence of a local taxation system which
ensures people's involvement in the affairs of an elected body. It also makes
the institution accountable to its citizens.
In terms of own resource collection, the Gram Panchayats are, comparatively
in a better position because they have a tax domain of their own, while the
other two tiers are dependent only on tolls, fees and non-tax revenue for
generating internal resources.
1. The taxation power of the Panchayats essentially flow from Article 243 H
which reads as follows: "the Legislature of a State may, by law authorise a
Panchayat to levy, collect and appropriate such taxes, duties, tolls and fees
in accordance with such procedure and subject to such limits.
2. Assign to a panchayat such taxes, duties, tolls and fees levied and
collected by the state government for such purposes and subject to such
conditions and limits.
3. Provide for making such grants-in-aid to the panchayats from the
consolidated fund of the state.
4. Provide for constitution of such funds for crediting all moneys received,
respectively, by or on behalf of the panchayats and also for the withdrawal
of such moneys there from as may be specified in the law."

TALUK PANCHAYAT FINANCE AND ACCOUNT

Grants to Taluk Panchayat:
The Central Scheme grants are transferred to the TPs through the concerned
ZP. Though the allocations under central plan schemes and centrally
sponsored schemes are indicated in the Link Document, the funds flow to the

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TP through the banking channel. The expenditure under as indicated here.

The process flow for receipts and expenditure under banking channel is given
in Taluk Panchayat Accounts Manual of Karnataka.

Budget Preparation Process:

The process for preparation of budget estimates has been shown in the form
of a
Process Flow diagram in Annex 3 Chart [Link] with respect to Budget
Preparation process are explained below:
1. Preparation of Shelf of Projects: the Planning Officer (PO) shall ask the
concerned heads of the Line Departments to provide the list of
works/details of expenditure proposed under different schemes along with
the financial estimates. Similarly, the PO shall prepare a list of works/other
expenditure proposed out of any untied grants available to the TP.
2. Consolidated Budget Proposal: Estimates for salary and establishment
expenses shall be prepared based on the approved Appendix B. Based on
the approved Shelf of Projects and Appendix B; the AAO shall prepare the
consolidated budget proposal of the TP. The budget proposals shall be
prepared in the format given in Annex 6, Annual Budget.
3. Approval of Budget Proposals: The budget proposals of the TP along
with the Shelf of Projects shall be placed before the TP Finance, Audit and
Planning Committee and then forwarded to the General Body for final
approval.
4. Approval of State Budget: These budget proposals undergo multiple
rounds of discussion and iterations at various levels. The final proposals are
included in the State Budget and approved by the State Legislature. After
approval of the budget, a division wise Link Document is released by the
State Government.

TALUK PANCHAYAT ACCOUNTS:

The TP accounts staffs maintain the registers mentioned in the KPRTP (F&A)
Rules and certain additional registers for the purpose of control. In order to
suit the accounting system prescribed, certain new registers have been
prescribed in this manual. The manual has also modified formats of the
existing registers as necessary. Certain registers not relevant in the present
day context due to simplification have been left out. The key registers based
on which the accounts are compiled in a TP are:
1. Treasury Release Register: Receipt of grants during a period.
2. Receipts & Expenditure Tracking (RET) Register: Expenditure
incurred during a period head of account wise.
3. Collection & Remittance Register: Own source receipts during a period.
4. DCB Register: receivables position as on a date.
5. Scheme Cash Book: Closing balances of scheme bank accounts of the TP
as well as the LD DDOS.

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6. Treasury Fund Watch Register: Closing balances of fund accounts of

the Treasury.

Need and Relevance of Counter Signature:

Counter signature of bills is an internal control measure and has been
prescribed under the relevant statutory provisions. While on the one hand the
counter signature ensures expenditure within the allocation on the other hand
it acts as a check on the propriety of the expenditure.

Important aspects to be checked while counter Signing bills

The counter signing officer while counter signing bills presented to him by the
drawing officer shall verify the following:
1. Necessity and frequency of purchases made or tours undertaken.
2. Sanction for the expenditure is obtained from the competent authority.
3. Required appropriation to meet the expenditure is available.
4. Rates claimed are in order and economical.
5. Arithmetical accuracy of the claims preferred.
6. Sub-vouchers in support of the expenditure are attached to the bills,
wherever required.
7. Money is drawn only when it is required for immediate disbursement or
already paid out of the permanent advance.
8. Moneys drawn on AC bills by the DDOS are promptly accounted and
adjusted by submission of NDC bills within specified time.

ZILLA PANCHAYAT BUDGET AND ACCOUNT

Zilla Panchayat Budget:
Every Zilla Parishad shall, at such time and in such manner as may be
prescribed, prepare in each year a budget of its estimated receipts and
disbursements for the following year and submit it to the Government.
The Government may, within such time as may be prescribed either approve
the budget or return it to the Zilla Parishad for such modifications as it may
direct. On such modifications being made the budget shall be resubmitted
within such time as may be prescribed for approval of the Government. If the
approval of the Government is not received by the Zilla Parishad by the last
date of the financial year, the budget shall be deemed to be approved by the
Government.

Funds Flow in Zilla Panchayat

Zilla Panchayat receives the funds from the consolidated fund of the state
and centre in the following categories:
1. Planned Funds
2. Non- Planned Funds
3. Additional Grants

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1. Planned Funds: It is received both from State as well as Central

Government for the Execution of developmental activities/works including the
creation of the new infra structure, & their maintenance. In addition, various
centrally sponsored schemes such as JGSY, JAY, SGSY, PMGY, PMGSY, EAS etc.
For the Welfare of the scheduled castes & tribes grants is also released
through a separate programme called Special Component Programme (SCP).
For the planned programmes the financial allocation is made by the
government on the basis of Population, Actual Needs, Backwardness
(Determined by specific parameters).
2. Non-Planned Funds: It is mainly meant to meet the committed
expenditure of the different departments (mainly the salary) & also the
maintenance of the infrastructures which are already created. These funds
are exclusively released to the Zilla panchayat from the state Government.

3. Additional Grants: These funds are not provided in the budget of the
Zilla panchayat & hence it is called the extra budgetary or non-budgetary
Grants. Usually it is released by the State / Central Government to meet out
the emergency needs such as to provide drinking water, formation of roads,
to create rural employment at the drought prone areas, for the control of
epidemic diseases & to meet the deficiency of the budget.

Administrative Setup
ZP Administrative Setup

The Government appoints the Chief Executive Officer to carry out

administration of Zilla Panchayat and also appoints Chief Accounts Officer,
Chief Planning Officer and one or more Deputy Secretaries who work directly
under the Chief Executive Officer and assist him, at Taluk Level Executive
officers help CEO in implementing Taluk Level Programmes.

Functions of the Chief Executive Officer (CEO):

The Chief Executive Officer shall perform the following functions:-

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1. Exercise all the power specially, imposed or conferred upon him by or under
the Act or under any other law for the time being in force
2. Control the officers and official of, or holding office under, the Zilla Panchayat
subject to the general superintendence and control of the Adhyaksha and
such rules as may be prescribed;
3. Supervise and control the execution of all works of the Zilla Panchayat;
4. Take necessary measures for the speedy execution of all works and
developmental schemes of the Zilla Panchayat;
5. Have custody of all papers and documents connected with the proceedings of
the meetings of the Zilla Panchayat and its committees;
6. Draw and disburse monies out of the Zilla Panchayat Fund; and
7. Exercise such other powers and discharge such other functions as may be
prescribed.
8. The Chief Executive Officer shall attend meeting of the Zilla Panchayat and
shall have right to attend the meeting of any committee thereof and to take
part in the discussion but shall not have right to move any resolution or to
vote.

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Chief Accounts Officer (CAO):

The Chief Accounts Officer shall advice the Zilla Panchayat in matters of
financial policy and shall be responsible for all matters relating to the
accounts of the Zilla Panchayat including the preparation of the annual
accounts and budget. The Chief Accounts Officer shall ensure that no
expenditure is incurred except under proper sanction and in accordance with
this Act and rules and regulations made there under and shall disallow any
expenditure not warranted by the Act or the rules or regulations for which no
provision is made in the budget.

Accounts Section:
It is headed by a senior Officer from the State Accounts Department,
designated as Chief Accounts Officer. This section acts as Finance department
as well as Audit department in Zilla Panchayat System. There will be two
accounts officers to assist the Chief Accounts Officer in his duties functions.
The CAO is the custodian of the Zilla Panchayat Fund also he advises the
Chief Executive Officer President of the Zilla Panchayat in Financial matters.
He will directly Work under the Chief Executive Officer
Preparation of Budget Monthly/Annual accounts:
The Chief Accounts officer prepares the Budget of the Zilla Panchayat for
Non–plan expenditure (Appendix-B). He prepares the Monthly Annual
Accounts based on the Treasury Schedules Utilization certificates obtained
from the Implementing officers.
Funds Flow in Zilla Panchayat
Zilla Panchayat receives the funds from the Consolidated Fund of the State
and Central in the following categories.
o Planned Funds
o Non- Planned funds.
o Additional grants

Plan and Non-plan funds are released by the State Government to the Z.P in a
Quarterly basis Zilla Panchayat in turn releases these funds to the District
level Officers of different Departments, Taluk Panchayats Grama Panchayats
in monthly/Quarterly basis. Funds is also released from the Central
Government to the various Programmes/Schemes implemented through the

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Zilla Panchayat its subsidiary systems such as Taluk Panchayats Grama

Panchayats .

Planned Funds
It is received both from State as well as Central Government for the Execution
of developmental activities/works including the creation of the new infra
structures their maintenance. In addition, various centrally sponsored
schemes such as MNREGA, 12TH 13TH FINANCE, ARWS, IAY, SGSY, TSC etc.
For the Welfare of the Scheduled castes Tribes grants is also released through
a separate programme called Special Component Programme (SCP). For the
planned programmes the financial allocation is made by the Government on
the basis of-
o Population
o Actual Needs
o Backwardness (Determined by specific parameters)

Non-Plan Funds
It is mainly meant to meet the committed expenditure of the different
departments (mainly the salary) also the maintenance of the infrastructures
which are already created. These funds are exclusively released to the Zilla
panchayat from the State Government.

ADDITIONAL GRANTS:
These funds are not provided in the budget of the zilla panchayat hence it is
called the extra budgetary or non-budgetary Grants. Usually it is released by
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the State /Central Government to meet out the emergency needs such as to
provide drinking water, formation of roads, to create rural employment at the
drought prone areas, for the control of epidemic diseases to meet the
deficiency of the budget.

Financial Control Audit:

The Chief Accounts Officer through his Accounts officer (Audit Compilation)
conducts the internal audit of the different departments/Institutions, which
are coming under the administrative control of the Zilla panchayat. He will
watch the expenditure of the implementing officers against the grants
released to them. He will also keep an eye on the strict adherence of the
norms prescribed for schemes during their implementation by the Executives.

Planning Section:
Functions of the Chief Planning Officer (CPO):
o Formulating Perspective Plan, Five Year Plan and Annual Plan for the
development of district.
o Determining priorities for the District. Based on these priorities, allocating
outlays to sectors/departments and ensuring outlays for some earmarked
programmes.
o Guiding the District Officers in the formulation of suitable schemes in
accordance with local needs and local resources in the framework of District
Objectives.
o Finalizing physical targets for various sectors in consultation with concerned
Department.
o Identifying area for integration and ensuring their integration in the sectoral
plans.
o Determining size of the Taluk Panchayat Sector outlay and distribution of the
same among Taluk Panchayats on the basis of the objective criteria.
o Assisting in inter-departmental co-ordination, guiding the Taluk Panchayats in
formulation of Taluk sector Plan and ensuring incorporation of the Plan
proposals of Taluk sector plan in the District Plan.
o Assisting Gram Panchayats in the preparation of the Annual Development
Plan and incorporating the same in the District Plan
o Preparing the Action Plan of various schemes, including RD PR schemes in
consultation with field departments.
o Monitoring the progress of implementation of District Plan including
achievement in targets, maintenance of time schedule and initiation of
corrective action.

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o Assisting in releasing the grants to various departments based on priorities

and MMRs.
o Furnishing vital information concerning Planning to the Planning Department
at the State level and creating the data bank at the district level with help of
district level officers.
o Carrying out such assignments as are given from time to time by the State
Level District Planning Division.
o To tour at least ten days in a month to closely monitor the implementation of
various Plan programmes in relation to annual action plan, targets and
achievements as per MMR KDP and to know the bottlenecks and suggest
suitable solutions to overcome the bottlenecks, if any. To invariably send the
approved tour dairy to the Director, District Planning division.
o 13th Finance Commission Growth.
o Any other work entrusted by the CEO, Zilla Panchayat.

Manpower and Credit Planning Officer:

1. Preparing the Manpower Budget for the district. Identifying pockets of
unemployment, period and nature of unemployment and formulating an
employment Plan and dovetailing the same with the district’s development
plan.
2. Identifying and initiating training programmes in area suited to the district
needs.
3. Organizing coordinated training programme for officers and personnel in the
field cadres from time to time.
4. Maintaining liaison with the Lead Bank of the district in the preparation of the
credit plan for the district.
5. Preparing Banking plan and credit plans for the district, taluk and ensuring
mobilization of institutional credit through various financing agencies
6. Reviewing District Credit Plans.
7. Integrating District Credit Plan with the District Development plan.
8. Any other work entrusted by the Chief Planning Officer.
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Statistical Officer:
o Maintaining all statistical information Taluk wise/Grama Panchayat wise
relevant to Planning Development and ensuring the updating of such data
periodically
o Maintaining benchmark data on important socio-economic aspects in
“Grama-Namune” and updating the same every year.
o Reviewing and monitoring plan expenditure periodically.
o Preparing monthly review of the implementation of the plan programme in
the district.
o Any other work entrusted by the Chief Planning Officer.

Planning Assistant:
Carry out such assignments as are entrusted from time to time by the Chief
Planning Officer and other officers of planning unit of Zilla Panchayat.

Deputy Secretary:
He shall assist the Chief Executive Officer in the performance of his duties.
Administration and Development Section Under the provisions of Section
196(2) of The Karnataka Panchayat Raj Act 1993, Government have
appointed two Deputy Secretaries to the Tumakuru Zilla Panchayat. They will
assist the Chief Executive Officer in the performance of his duties prescribed
under Section 197 of the said Act. Accordingly the Deputy Secretary(Admin)
will assist in respect of Administration matters and the Deputy Secretary(Dev)
will assist in respect of Developmental activities. They will also be functioning
as Ex-officio Secretaries of Standing Committees constituted under the
provisions of section 186 of Karnataka Panchayat Raj Act 1993.

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Functions of Deputy Secretary (Administration):

o Control over Personnel coming under the Jurisdiction of Zilla Panchayat
including Rural Development Department.
o Sanction of Leave and Advances.
o Purchases of Vehicles and maintenance.
o Purchase of Stationery and Furniture etc.,
o Administrative control of all departments including Taluk Panchayat.
o Reviewing of Diaries of Subordinate Officers.
o According of administrative sanctions on the proposal of subordinate
Officers.
o Any other work entrusted by the Chief Executive Officer.

Functions of Deputy Secretary (Development)

o Implementation of Rural Development and Panchayat Raj Schemes.
o Drinking water supply schemes
o Minor Irrigation works.
o Roads, Bridges and Buildings.
o Special Component Programmes.
o Stamp Duty.
o Central Government Schemes.
o Any other work entrusted by the Chief Executive Officer.
o Administrative control of Grama Panchayat.

Development Section Setup:

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DRDA Section: DRDA Section Setup Headed by Project Director, This section
looks after Housing, Centrally sponsored schemes, SGSY, Suvarna Gramodaya
Yojane and any other work exempted by CEO.

Adhyaksha
The Adhyaksha shall be the executive head of the Zilla Panchayat and shall
o Convene, preside at and conduct meetings of the Zilla Panchayat;
o Discharge all duties imposed and exercise all the powers conferred on him by
or under this Act of perform such functions entrusted to him by the
Government from time to time.
o Exercise overall supervision over the financial and executive administration of
the Zilla Panchayat and place before the Zilla Panchayat all questions
connected therewith which shall appear to him to require his orders and for
this purpose may call for records of the Zilla Panchayat; and Have power to
accord sanction up to a total sum of rupees one lakh in a year for the purpose

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of providing immediate relief to those who are affected by natural calamities

in the district.

Upadhyaksha
The Upadhyaksha of the Zilla Panchayat shall-
o Exercise the powers and perform the functions of the Adhyaksha when he
is absent on leave or incapacitated from functioning or when the office of
Adhyaksha is vacant; and
o In the absence of the Adhyaksha or when the office of the Adhyaksha is
vacant, preside over the meeting of the Zilla Panchayat.

Standing Committees
The Zilla Panchayat has the following Standing Committees, namely: –
o General Standing Committee
o Finance, Audit and Planning Committee
o Social Justice Committee;
o Educational and Health Committee;
o Agricultural and Industries Committee.

General Standing Committee:

The Upadhyaksha shall be the ex officio member and Chairman of the
committee. This committee shall perform functions relating to the
establishment matters and functions relating to communications, buildings,
rural housing, village extensions, relief against the natural calamities and
allied matters and all miscellaneous residuary matters.

Finance, Audit and Planning Committee:

The Adhyaksha shall be the ex officio member and Chairman of this
committee. This committee shall perform:-
o The functions of finances of the Zilla Panchayat framing of budgets,
scrutinizing proposals for increase of revenue, examination of receipts and
expenditure statements, consideration of all proposals affecting the finances
of the Zilla Panchayat and general supervisions of the revenue and
expenditure of the Zilla Panchayat.
o The Plan priorities, allocation of outlays to developments, horizontal and
vertical linkages, implementation of guidelines issued by the Government,
regular review of planned programmes, evaluation of important programmes
and small saving schemes.

Social Justice Committee:

This Standing committee shall elect the Chairman from among their
members. This committee shall perform the functions relating to : –

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o Promotion of educational, economic, social, cultural and other interest of the

Schedule Caste and Schedule Tribes and Backward Classes;
o Protecting them from social injustice and all other forms exploitation.
o Amelioration of the Schedule Caste and Schedule Tribes and Backward
Classes.
o Securing social justice to the Schedule Caste and Schedule Tribes, women
and other weaker sections of the society.

Education and Health Committee:

This Standing committee shall elect the Chairman from among their
members. This committee shall perform the following functions: –
o Be in-charge of all Educational activities of the Zilla Panchayat.
o Undertake the planning of education in the district within the framework of
the national policy and the national and State plans;
o Survey and evaluate the educational activities of the Zilla Panchayat.
o Perform such other duties pertaining to education, adult literacy and cultural
activities as the Zilla Panchayat may assign to it;
o Health services, hospitals, water supply, family welfare and other allied
matters.

Agriculture and Industry Committee

This Standing committee shall elect the Chairman from among their
members. This committee shall perform the following functions: –
o Agricultural production, animal husbandry, co-operation, contour bunding and
reclamation;
o Village and cottage industries;
o Promotion of industrial development of the district.

Taluk Panchayat Role:

Taluk Panchayat Political Setup:-
o Every Taluk Panchayat shall consist of the Elected members of Taluk
Panchayat;
o The members of the House of People and the State Legislative Assembly
representing a part or whole of Taluk , whose constituencies lie within the
taluk;
o The members of the Council of States and the State Legislative Council who
are registered as electors within the Taluk; and
o One-fifth of the Adhyakshas of the Grama Panchayats in the Taluk by rotation
for a period of one year as the Adyaksha of the Taluk Panchayat may
determine by lot: Provided that an Adhyaksha who was a member under this
clause for one term shall not be eligible to become member for a second term
during the remainder of his term of office as Adhyaksha.

Taluk Panchayat Setup:-

Adhyaksha
The Adhyaksha shall be the executive head of the Taluk Panchayat and shall:

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o Convene, preside at and conduct meetings of the Taluk Panchayat;

o Discharge all duties imposed and exercise all the powers conferred on him
under the Act and the rules made hereunder and perform such functions
entrusted to him by the Government from time to time;
o Exercise overall supervision over the financial and executive administration of
the Taluk Panchayat and place before the Taluk Panchayat all questions
connected therewith which shall appear to him to require its orders and for
this purpose may call for records of the Taluk Panchayat; and
o Have power to accord sanction up to a total sum of twenty-five thousand
rupees in a year for the purpose of providing immediate relief to those who
are affected by natural calamities in the taluk.

Upadhyakasha:
The Upadhyaksha of the Taluk Panchayat shall
o exercise the powers and perform the duties of the Adhyaksha when he is
absent on leave or incapacitated from functioning or when the office of
Adhyaksha is vacant; and
o In the absence of the Adhyaksha or when the office of the Adhyaksha is
vacant, preside over the meeting of the Taluk Panchayat.

Standing Committees:-
The Taluk Panchayat shall have the following standing Committees, namely:
o General Standing Committee;
o Finance, Audit and Planning Committee;
o Social Justice Committee

General Standing Committee:-

The General Standing Committee shall perform functions relating to the
establishment matters, communications, building, rural housing, village
extensions, relief against natural calamities, water supply and all
miscellaneous residuary matters.

Finance, Audit and Planning Committee:-

The Committee shall perform the functions relating to the finance of Taluk
Panchayat, framing of budgets, scrutinizing proposal for increase of revenue,
examinations of receipts and expenditure statements, consideration of all
proposals affecting the finances of the Taluk Panchayat and general
supervision of the revenue expenditure of the Taluk Panchayat and co-
operation, small savings scheme and any other function relating to the
development plan of the Taluk.

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Social Justice Committee: –

The committee shall perform functions relating to:-
o Promotion of education, economic, social, cultural and other interests of the
Scheduled castes and scheduled Tribes and Backward Classes;
o Protecting them from social injustice and all other forms of exploitation;
o Amelioration of the Scheduled Castes and Scheduled Tribes and Backward
Classes;
o Securing social justice to the Scheduled Castes, Scheduled Tribes, Women
and other weaker sections of the society.

Functions of Taluk Panchayat:-

(1) The Taluk Panchayat shall perform the functions specified in Schedule II:
Provided that where the State Government or Central Government provides
funds for the performance of any function specified in Schedule II, the Taluk
Panchayat shall perform such functions in accordance with the guidelines or
norms laid down for performance of such functions.
o Construction and augmentation of water supply works to the level of not
less than forty litres per capita per day;
o Filing half yearly report regarding the activities of Grama Panchayats
within the taluk regarding:-
i. Holding of Grama Sabha;
ii. Maintenance of Water supply works;
iii. Construction of individual and community latrine;
iv. Collection and revision of taxes, rates and fees;
v. Payment of electricity charges;
vi. Enrollment in schools;
vii. Progress of immunisation.
Providing adequate number of class rooms and maintaining primary
school buildings in proper condition including water supply and sanitation;
Acquiring land for locating the manure pits away from dwelling houses in
the villages.

Gram Panchayat Role:

Grama Panchayat Political Setup:-
Adhyaksha
1. The Adhyaksha of the Grama Panchayat shall, in addition to the power
exercisable under any other provision of the Act or rules made there under :-
o convene meetings of the Grama Panchayat;
o Have access to the records of the Grama Panchayat; and

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o Exercise supervision and control over the acts of the officers and employees
of the Grama Panchayat including the Secretary.
2. The Adhyaksha may, if in his opinion the immediate execution of any work or
the doing of any act which requires the sanction of a Committee of the Grama
Panchayat, is necessary in public interest convene a meeting for the purpose
with a notice of twenty four hours.

Upadyaksha:
The Upadyaksha of the Grama Panchayat shall exercise the powers and
perform the duties of the Adhyaksha when the Adhyaksha is absent, on leave
or is incapacitated from functioning.

Standing Committees:-
(1) Every Grama Panchayat shall constitute the following Committees by
election :-
o Production Committee
o Social Justice Committee
o Amenities Committee.

Production Committee:-
This committee shall perform functions relating to agricultural production,
animal husbandry and rural industries and poverty alleviation programmes.

Social Justice Committee:-

This committee shall perform functions relating to
o Promotion of educational, economic, social, cultural and other interests of the
Scheduled Castes and Scheduled Tribes and Backward Classes;
o Protection of such castes and classes from social injustice and any form of
exploitation;
o Welfare of women and children;

Amenities Committee:
This committee shall perform functions in respect of education, public health,
public works and other functions of the Grama Panchayat.

Staff of Grama Panchayats:-

Panchayat Development Officer / G.P. Secretary
o Every Grama Panchayat shall have a whole time PDO/Secretary who shall be
an officer of the Government and shall draw his salary and allowance from the
Zilla Panchayat fund.

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o The PDO/Secretary shall perform all the duties and exercise all the powers
imposed or conferred upon him by or under this Act or any rules or bye-laws
made there under.

Staffing pattern and schedule of employees:-

1. The Government may, by order, specify the staffing pattern, the scales of pay
and mode of recruitment of staff of Grama Panchayats.
2. The Grama Panchayat shall, subject to the sub-section(1), determine and
submit for approval of the Chief Executive Officer a schedule of employees
specifying the designation and grades and the salaries and allowances
payable to its officers other than the Secretary required for carrying out the
duties imposed upon the Grama Panchayat by or under this Act.

Functions of the Grama Panchayat:-

1. The Grama Panchayat shall perform the functions specified in Schedule I:
2. Provided that where the state Government or Central Government provide
fund for the performance of any function specified in Schedule I, the Grama
Panchayat shall perform such function in accordance with the guidelines or
norm laid down for performing such function.
o Providing sanitary latrines to not less than ten percent of the households
every year and achieve full coverage as early as possible;
o Constructing adequate number of community latrines for the use of men and
women and maintaining them;
o Maintaining water supply works either on its own or by annual contract by
generating adequate resources;
o Revising and collecting taxes, rates and fees periodically which are leviable
under this Acct;
o Ensuring universal enrolment of children in primary school;
o Achieving universal immunization of children;
o Ensuring prompt registration and reporting of birth and deaths;
o Providing sanitation and proper drainage;
o Construction, repair and maintenance of public streets;
o Removing encroachments on public streets or public places;
o Providing adequate number of street lights and paying electricity charges
regularly;
o Filling-up insanitary depressions and reclaiming unhealthy localities;
o destruction of rabid and owner less dogs;
o Maintenance of all community assets vested in it;
o Maintenance of records relating to population census, crop census, cattle
census, census of unemployed persons and person below poverty line
o Earmarking places away from the dwelling houses for dumping refuse and
manure.
3. The Grama Panchayat may also make provision for carrying out within the
Panchayat area any other work or measure which is likely to promote the
health, safety, education, comfort, convenience or social or economic well
being of the inhabitants of the Panchayat area.

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4. The Grama Panchayat may, by a resolution, passed at its meeting and

supported by two-thirds of its total number of members and with the prior
approval of the Taluk Panchayat :-
o Make provision for or make contribution towards, any exhibition, conference
or seminar within or outside the Panchayat area but within the district; or
o Make contribution to any medical, educational or charitable institutions or any
other institutions of public utility, within the Panchayat area which are
registered under the Karnataka Societies Registration Act, 1961, Karnataka
Co-operative Societies Act, 1959 or under any other law for the time being in
force.

Sources of funds for Gram Panchayat:

Own Resource Generation:
However, in outright terms, the quantum of assets the Union/State
Government moves to a Panchayat shapes a significant part of its receipt;
the PRI’s own asset age is the spirit behind its monetary standing. It isn’t as
if it were an issue of assets; it is the presence of a nearby tax collection
framework that guarantees individuals’ association in the undertakings of a
chosen body. It additionally makes the organization responsible to its
residents. As far as own asset assortment, the Gram Panchayats are,
similarly in a superior position since they have their very own expense
space, while the other two levels are reliant just on costs, charges, and non-
charge income for creating inside assets. Charges which might be imposed
by the Gram Panchayat:
 Charge of vehicle payable by proprietors of vehicles appropriate for use on
streets or kept or utilized inside the Gram Panchayat.
 A toilet or conservancy charge payable by the occupiers or proprietors of
structures in regard to private toilets or premises of mixtures clean by the
Panchayat.
 Where drinking water is provided by the Panchayat will be still up in the
air according to the expense of supply and support of water supply plans.
 The lighting charge will be gathered for public roads, spots, or structures
where such lighting is attempted by the Panchayats.
 It is payable by the proprietor of land and structures if and where a waste
framework has been worked in a Panchayat.
 A charge on the confidential markets, truck stands, and butcher houses
will be charged by the Gram Panchayat.
 An expense on creatures brought available to be purchased into or sold in
a public market arranged inside the restrictions of Gram Panchayat will be
charged by the Gram Panchayat.
 This is for the insurance of yields raised inside the restrictions of Gram
Panchayat will be charged by the Gram Panchayat.
 The GP might Charge expenses for utilization of any structure, structure,
shop, slow down or stand in the public business sectors.
 The Gram Panchayat might charge lease from the sellers who may briefly
possess open grounds, and structures for structures having a place with or
kept up with by the Gram Panchayat.

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 The GP might charge permit expenses on dealers, commission specialists,

and weigh man rehearsing their business inside the Gram Panchayat.

Evolution of Panchayati Raj:

Balwant Rai Mehta Committee (1957) was the first committee that
recommended the establishment of the scheme of ‘democratic
decentralization’ which ultimately came to be known as Panchayati Raj. Some
of the major recommendations made by the committee are:

1. Establishment of a three-tier panchayati raj system

2. The village panchayats should be constituted with directly elected
representatives
3. Planning and development should be entrusted to them
4. Adequate resources should be transferred to these bodies
5. Proper system should be put place in to realize the devolution of
powers

Rajasthan was the first state to establish Panchayati Raj. It was inaugurated
in 1959 in Nagaur district. Most of the states created the system in their
states. However, there were wide-ranging differences between them. Some
states had adopted two-tier system, others three-tier and four-tier. The
manner of devolution of power was also varying across the country.
Ashok Mehta Committee (1977)
Was appointed by the Janata government to make recommendations to
strengthen and revive these institutions which were becoming weak. Some
of its main recommendations were:

1. Three-tier system should be replaced with two-tier system

2. A district should be the first point for decentralization
3. ZP should be executive body
4. There should be official participation of the political parties
5. They should have compulsory powers of taxation
6. Regular social audit
7. Elections should be held within six months if Panchayati institutions
are superseded
8. A minister for Panchayati raj should be appointed at the state
9. Reservation of seats for SC and ST
10. Constitutional recognition to these institutions

GVK Rao Committee (1985)

It was appointed by the Planning Commission. The committee observed that
bureaucratization of these institutions as the major reason behind the
lackadaisical performance of panchayati institutions. Some of the important
recommendations made by the committee are:

1. ZP should be unit for democratic decentralization

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2. PRI at the district and lower levels should be assigned an important role
with respect to planning, implementation and monitoring
3. A post of district development commissioner should be created. He
should be in-charge of the development departments at district level
4. Elections to PRI should be conducted regularly

LM Singhvi Committee (1986)

It was appointed by the Rajiv Gandhi government. Some of the
recommendations made by this committee vis-à-vis PRI include:

1. It should be constitutionally recognized

2. Nyaya panchayats should be established for a cluster of villages
3. Placed emphasis on Gram Sabha as the centre for democratic
decentralization
4. Village panchayats should have more resources
5. Judicial tribunals should be established to adjudicate judicial matters
related to PRI.

74th Constitutional Amendment:

This act added a new part IX-A to the Constitution entitled as ‘The
Municipalities’ and a new Twelfth Schedule containing 18 functional items for
municipalities. The main provisions of this Act can be grouped under two
categories–compulsory and voluntary. Some of the compulsory provisions
which are binding on all States are:
1. Constitution of Nagar panchayats, municipal councils and municipal
corporations in transitional areas (areas in transition from a rural area to
urban area), smaller urban areas and larger urban areas respectively;
2. Reservation of seats in urban local bodies for Scheduled Castes /
Scheduled Tribes roughly in proportion to their population;
3. Reservation of seats for women up to one-third seats;
4. The State Election Commission, constituted in order to conduct elections
in the panchayati raj bodies (see 73rd Amendment) will also conduct
elections to the urban local self- governing bodies;
5. The State Finance Commission, constituted to deal with financial affairs
of the Panchayati Raj bodies will also look into the financial affairs of the
local urban self governing bodies;

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6. Tenure of urban local self-governing bodies is fixed at five years and

in case of earlier dissolution fresh elections are to be held within six months;

Some of the voluntary provisions which are not binding, but are
expected to be observed by the States are:
1. Giving representation to members of the Union and State Legislatures in
these bodies;
2. Providing reservation for backward classes;
3. Giving financial powers in relation to taxes, duties, tolls and fees etc;
4. Making the municipal bodies autonomous and devolution of powers to these
bodies to perform some or all of the functions enumerated in the Twelfth
Schedule added to the Constitution through this Act and/or to prepare plans
for economic development.

PART-B ACCOUNTING FOR URBAN LOCALGOVERNMENTS

UNIT-4 INTRODUCTION TO URBAN LOCAL GOVERNMENTS

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Type of Urban Governments:

There are Eight Types of urban governments in India.

1. Municipal Corporation: Municipal corporations are created for the

administration of big cities like Delhi, Mumbai, Hyderabad and others. A
Municipal Corporation has three authorities namely, the council (legislative
wing of the corporation), the standing committee (to facilitate the working of
the council) and the commissioner (chief executive authority of the
corporation).The council consist of councillors directly elected by people and
is headed by a Mayor while the Commissioner is appointed by state
government and is generally an IAS officer.
2. Municipality: The municipalities are established for the administration of
towns and smaller cities. They are known by various other names like
municipal council, municipal committee, municipal board, borough
municipality, city municipality and others. In composition they are quite
similar to municipal corporations except that head of council is called
President /chairman and in place of commissioner they have a chief executive
officer/chief municipal officer.
3. Notified Area Committee: A notified area committee is created for the
administration of two types of areas- a fast developing town due to
industrialisation, and a town which does not yet fulfill all the conditions
necessary for the constitution of a municipality, but which otherwise is
considered important by the state government. It is called so because it is
created by a notification and unlike the municipality it is an entirely
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nominated body, i.e. all members, including the Chairman, are nominated by
the state government. Thus, it is neither a statutory body (created by law) nor
an elected body.
4. Town Area Committee: It is set up by a separate act of state legislature for
the administration of a small town. It is a semi-municipal authority entrusted
with limited number of civic functions. It may be wholly elected or wholly
nominated or partly elected and partly nominated as provided by state
government.
5. Cantonment Board: It is established for municipal administration for civilian
population in the cantonment areas (area where military forces and troops
are permanently stationed). It is set up under the provisions of the
Cantonment Act, 2006 by central government and works under Defence
ministry of central government. It is partly elected and partly nominated body
having the Military officer commanding the station as its ex-officio President.
Vice president is elected amongst by the elected members of board. The
executive officer of the cantonment board is appointed by the President of
India.,
6. Township: It is established by large public enterprises to provide civic
amenities to its staff and workers, who live in the housing colonies built near
the plant. It is not an elected body and all members, including the town
administrator, is appointed by the enterprise itself.
7. Port Trust: The port trusts are established in the port areas like Mumbai,
Kolkata, Chennai and so on for two purposes: (a) to manage and protect the
ports; (b) to provide civic amenities. It is created by an Act of Parliament and
it consists of both elected and nominated members.
8. Special Purpose Agency: The states have set up certain agencies to
undertake designated activities or specific functions that legitimately belong
to the domain of municipal corporations, municipalities or other local urban
governments. In other words, these are function based, not area based. They
are known as ‘single purpose’, ‘uni-purpose’ or ‘special purpose’ or ‘functional
local bodies’ like town improvement trust, housing boards, pollution control
boars etc. They are established as statutory bodies by an act of state
legislature or as departments by an executive resolution. They function as an
autonomous body and are not subordinate agencies to local municipal bodies.

Problem Areas of Municipal Bodies:

1. Disqualifications of Members of Municipal Bodies follow in principle the

practice followed in state legislature disqualifications. But since it is governed
by the state legislature who can make laws regarding the same, it is not
consistent in all states and that leads to a lot of disparity and non – security
among members.

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2. Election expenses and code of conduct to be better regulated and

more powers should be given to the State election commission to do the
same.
3. The Municipal Councils/ Municipalities have restricted local autonomy as
compared to the Municipal Corporations; with more pervasive state control
that often climax in dissolution of the former.
4. Lack of Finance due to reluctance of the state and central legislators not
wanting to divest further taxation and grants powers to them more than what
they already have for fear of loss of power. And the municipal bodies fear
increasing tax or asking for new tax collection options for loss of popularity
among people.
5. Local bodies are created by state governments and therefore can be
dissolved by them as well if not dancing as per their tunes.
6. In addition to the above is the drawing of rural people and other city
people to a place where there is rapid urbanization through
industrialization. Law and order becomes difficult to maintain, slums develop
etc. leading to additional problems for these already stressed out urban local
governance bodies.
7. In spite of many central and state committees sitting and recommending
better financial and administrative autonomy for the Municipal bodies, there
has been no concrete effort from the legislator’s side to implement the
same.
8. The power now seems to have shifted from the state governments to
the financial institutions, international donors and credit rating
agencies. Finally, the capacity of the government to generate employment
directly through anti-poverty programs would remain limited. Thus anti-
poverty programs should primarily be focused on provision of basic amenities.
9. Lack of consistent and coherent urban development policy, faulty and
improper urban planning coupled with poor implementation and regulation
are big challenges for municipalities.
10. Lack of proper monitoring system in place results in inefficient and
improper functioning of Local Urban Bodies.

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Types of Urban Governments in India:

1. Municipal Corporation
 It is created for the administration of big cities
 They are established by an act of state legislatures and in the case of
UTs, it is by an act of Parliament
 The corporation has three organs- council, standing committees and
commissioner
 The council is the deliberative body consisting of elected and few
nominated representatives. They enact laws and policies. The council is
headed by a mayor who is to preside over the council meetings. He is
elected by the members amongst themselves. He has a renewable one-
year term
 Standing committees are created to simplify the working of the council.
They take decision in their respective fields for which they have been
made responsible. Ex: Health, education, public works etc
 Municipal commissioner is responsible for implementing the policies
and decisions taken by the council and the committees.
2. Municipality
 It is established for administration of smaller towns and cities
 They are established by an act of state legislatures and in the case of
UTs, it is by an act of Parliament
 It also has three authorities- council, standing committees and chief
executive officer
 The council is the deliberative and legislative body. It is headed by a
chairperson.
 Unlike the mayor in a municipal corporation, chairperson here has
executive powers
 The CEO is responsible for day-to-day administration.

3. Notified Area Committee

 It is created for fast-developing areas that have not yet achieved the
numbers to become a municipality
 It is notified by state government gazette

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 Only those provisions which are specified in the gazette apply to this
area
 It is entirely a nominated body.

4. Town Area Committee

 It is setup for the administration of a small town
 It is created by a separate act of the state legislature
 It may be a wholly elected, wholly nominated or party elected and
nominated as specified by the state government.

5. Cantonment Board
 It is setup for the civic administration for civilian population living in
cantonment areas
 It is setup under the provisions of the cantonment act, 2006
 It works under the administrative control of the Union defence ministry
 It consists of partly elected and partly nominated representatives
 The commanding officer of the station is the ex-officio chairperson
 The board will also consists of an executive engineer, health officer,
first class magistrate, chief executive officer
 The nominated members hold office as long as they are part of the
station
 Elected members have tenure of 5 years.

6. Township
 It is established by a public sector enterprise to ensure civic
administration of their workers in the region
 The township has no elected members
 It is an extension of bureaucratic structure of the PSE.

7. Port Trust
 It is established in port areas
 Functions of these bodies: to manage ports and to provide civic
amenities
 It consists of both elected and nominated members.

8. Special Purpose Agency

 These are setup to address specific issues which are usually the
domain of municipalities
 They are also known as single-purpose or uni-purpose because of the
singular role based on which they are created for

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 They are established by an act of state legislature or as departments

by an executive resolution
 They function as autonomous bodies.

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Municipalities
Salient features of the Constitution (74th Amendment) Act, 1992
The salient features of the Act are the following:
i) It gives constitutional status to urban local bodies.

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ii) It provides for direct election to all the local self-government bodies.
iii) A fixed tenure of 5 years for the municipalities has been prescribed.
iv) 33% of the seats should be reserved for women under each category of
SC/ST/ Backward Classes.
v) District Planning Committee to be constituted by the State Government.

Introduction to urban self-governing bodies

The 74th Amendment Act provides for three-tier local bodies for urban areas:
i) Municipal Corporations for larger urban areas.
ii) Municipal Councils for smaller urban areas.
iii) Nagar Panchayats for areas in transition from a rural area to urban area.

Introduction to Municipal Coporation

It is a local self-government unit in big cities.
It carries out its functions through well-organised divisions or departments.
For example, Housing Board Authority, Education Department, etc. Each of
these departments are looked after by experienced and qualified persons.

Election, term and composition of the Municipal Corporation:

Election: The members of the Corporation are elected in the same way as
members of the Legislative Assembly. Municipal areas are known
as Wards. Elections are held on the basis of Univeral Adult Franchise through
secret ballot.
Term: A fixed tenure of five years has been provided in the Constitution.
Composition: A Municipal Corporation comprises the following:
a) General Council b) The Mayor c) The Standing Committee d) A Municipal
Commissioner.

Functions of the Municipal Corporation:

The functions are generally divided into two categories- the compulsory and
optional functions depending on the availability of funds.
Compulsory Functions:
Provision of electricity, water, sewage disposal, public health services like
hospitals, dispensaries, family welfare centres, public conveniences and
utilities like roads, buildings, bus-shelters, toilets, educational institutions,
maintenance of birth and death records, etc.
Optional Functions:
i) Public housing through housing boards.
ii) Construction and maintenance of public parks, libraries, museums, etc.
iii) Undertaking welfare schemes, organising fares, functions, melas.
iv) Beautification of city.

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Municipal Committee
A Municipal Committee is set up for smaller towns with a population between
20,000 to 3 lakhs. Such bodies are also called Municipal Boards or
Municipalities. Their organisation is more or less similar to Municipal
Corporation. They have three wings- General Body, Chairman/President, Chief
Executive Officer or the Secretary.

Introduction to the District Administration:

The District administration is headed by the District Collector/Deputy
Commissioner,drawn from IAS and he is responsible among others for the
general control and direction of the police which is headed by the
Superintendent of Police. The District is split up into a number of sub divisions
called 'Talukas' for the purpose of Administrative convenience.

Appointment of the Deputy Commissioner:

He belongs to the IAS and is appointed by the State government. He is a
highly trained officer in all aspects of administration and management of local
affairs. A number of officers work with with him in which some are exclusively
deputed to rural areas such as Tehsildars, Lekhpal Kanungos, etc. At the
district level law and order is looked after by the Superintendent of Police.

Functions of the Deputy Commissioner:

The Deputy Commissioner is the chief executive officer of the district. His
functions include:
i) Collection of revenue.
ii) Maintenance and updating of land-record.
iii) Law and order.
iv) Supervision and execution of all plans of the State and Union
Governments.
v) Provision of civic amenities and execution of public works.

Differentiate between Municipal Corporation and Municipal Committee

Municipal Corporation Municipal Committee

1. Meant for big cities. Meant for smaller cities.
2. Head of the Corporation is Head of the Committee is known as
known as Mayor. Chairperson/ President.
3. Has more power and sources
Lesser powers and sources of revenue.
of revenue.
4. Deals with the State Deals with the State government through the
government directly. District Administration.

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UNIT-5 RECEIPTS & PAYMENTS AND PREPARATION OF ULB ACCOUNTS

Functions of the CAG of India:

The Constitution in Article 149 provides the legal basis for the Parliament to
prescribe the duties and powers of the CAG in relation to the accounts of the
Union and of the States and of any other authority or body. The CAG Duties,
Powers and Conditions of Service (DPC) Act, was passed in the parliament in
1971. The DPC Act was amended in 1976 to separate accounts from audit in
the Government of India. The duties and functions of the CAG as laid
down by the Constitution are:

 Auditing the accounts related to all expenditure drawn from the

Consolidated Fund of India, consolidated fund of every state and
consolidated fund of every union territory having a Legislative Assembly.
 Audit of all expenditure from the Contingency Fund of India and the Public
Account of India as well as the contingency funds and the public accounts
of states.
 Audit of all trading, manufacturing, profit and loss accounts, balance
sheets and other subsidiary accounts of any department of the Central
Government and state governments.
 Auditing the receipts and expenditure of the Government of India and each
state to ensure that the rules and procedures in that regard are designed
to secure an effective check on the assessment, collection and proper
allocation of revenue.
 Auditing the receipts and expenditure of the following: All bodies and
authorities substantially financed from the Central or state revenues;
Government companies; and other corporations and bodies when so
required by related laws.
 Auditing all transactions of the Central and state governments related to
debt, sinking funds, deposits, advances, suspense accounts and
remittance business. He also audits receipts, stock accounts and others,
with approval of the President, or when required by the President.
 Auditing the accounts of any other authority when requested by the
President or Governor. For example, the audit of local bodies.
 Advising the President with regard to prescription of the form in which the
accounts of the Centre and the states shall be kept (Article 150).
 Submitting audit reports relating to the accounts of the Central
Government to the President, who shall, in turn, place them before both
the Houses of Parliament (Article 151).
 Submitting audit reports relating to the accounts of a state government to
the Governor, who shall, in turn, place them before the state legislature
(Article 151).
 Ascertaining and certifying the net proceeds of any tax or duty (Article
279). The certificate is final. The ‘net proceeds’ means the proceeds of a
tax or a duty minus the cost of collection.

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 Acting as a guide of the Public Accounts Committee of the Parliament. He

compiles and maintains the accounts of state governments. In 1976, he
was relieved of the responsibilities regarding the compilation and
maintenance of accounts of the Government of India due to the separation
of accounts from audit, through departmentalization of accounts. The CAG
submits three audit reports to the President:

 Audit Report on Appropriation Accounts

 Audit Report on Finance Accounts
 Audit Report on Public Undertakings.

Who is the CAG?

 CAG is an independent authority under the Constitution of India.
 He is the head of the Indian audit & account department and chief
Guardian of Public purse.
 It is the institution through which the accountability of the government
and other public authorities (all those who spend public funds) to
Parliament and State Legislatures and through them to the people is
ensured.
 Shri Girish Chandra Murmu is the incumbent CAG of India (2020 till Date).

DUTIES AND POWERS OF CAG:

According to Article 149, the CAG shall perform the duties related to the
accounts of the Centre and the States as specified by the Parliament.
Accordingly, the Parliament enacted the CAG Duties, Powers and Conditions
of Service Act 1971 which listed the following duties of CAG –
All receipts into and spending from the Consolidated Fund of India and the
States. In other words, CAG audits the accounts of both the Central and
the State Governments.
All transactions relating to the Contingency Funds and Public Accounts of
both the Centre as well as States.
Accounts of all Government companies and Corporations e.g. ONGC, SAIL
etc.
Accounts of all autonomous bodies and authorities receiving Government
money e.g. municipal bodies, IIMs, IITs, State Health societies.
Accounts of anybody or authority on request of the President/Governor or
on his own initiative.
Power to inspect any office or organisation subject to his audit.
Power to examine all transactions and question the executive.
Power to call for any records, papers, documents from any audited entity.
Power to decide the extent and manner of audit.
Types of Audit Paras:
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There are three types of audit paras:

 Suggestive Paras: This includes the suggestions made by the auditor in

respect of the organization he has audited. Whatever points he wants to
suggest may be included in this para. Normally, measures to improve the
efficiency or achieve accounting perfection are included in this para but no
restrictions are there to make any other suggestions.
 Recovery Paras: In this para the auditor may make recommendations to
collect any amount due to the govt department over the allowed period or
reasonable period. It may also be to recover the unauthorized amounts
paid or amount paid without or beyond sanctions by any of the officials of
any govt department.
The Recovery paras are useful to identify the long due or overdue amount
or any amount to be received by an organization.
 Analytical Paras: Analytical para include the analysis made by the
auditor regarding certain issues which he may find fit. Such an analysis is
useful for the concerned govt department to improve its performance in
future.
Types of audit conducted for the Panchayat Raj Institutions or
Local bodies:

 Special Audit or Other Audits: This type of audit is taken up at the

discretion of the authorities under special situations or specific situations
they are not regular audits. For ex: A Corona fund utilization audit may be
conducted as a special audit.
 Financial Statement Audit: In financial statement audit the auditor
peruse the financial statement prepared by local bodies may be receipts
and payments, income and expenditure accounts and statements of assets
and liabilities and compares the various items included there in the
comparison of the statements of a few years is also done to identify wide
deviations of increase or decrease and to get the explanations for such
deviations such a comparison would bring into light any accounting or
other manipulations done by the department under audit this type of audit
is normally a regular or annual audit.
 Statutory Audit: A statute is a legislation or enactment in India if any
audit of a local body is conducted under the provisions of a legislation, it is
known as statutory audit.
The audit of panchayat Raj Institutions or local bodies are normally
conducted under the provisions of CAG Act and the rules under there may
be audits conducted using any other legislations requiring such an audit
brought under statutory audit. For ex: When a local bodies receives a
contributions in a foreign exchange from NRI village or local area a FEMA
audit may be conducted.
 Employee Benefit Audit: Under this audit the auditor would ensure that
the employee benefit plans are properly implemented and the benefit has
passed on to the employees. For example: A post pregnancy leave of 6
months is available for women employees it should be seen that it is
implemented.
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 Performance Audit: Performance audit is an audit conducted to ensure

that the various jobs are performed with efficiency in addition to efficiency,
the effectiveness should also be ensured efficiency ensures the speed of
performance and effectiveness ensures the quality of performance.
 Operation Audit: An operation audit is a task assigned at the levels of
local bodies, the auditor should ensure that these tasks or operations are
carried out properly with transparency, i.e. any kind of favoritism or biases
do not exist and things are in black and white.
 Compliance Audit: In compliance audit, the auditor should ensure that
the local bodies have followed policies, rules and regulations or procedures
laid down in respect of certain activity the employees in question have no
power to make any deviations unless a prior permission or provisions for
such deviation are allowed. For ex: In case of any appointments to the
reserved category the appointments must be made as per Roaster only.
 Information System Audit: Under this audit, the auditor should ensure
that an efficient information or information technology system is acquired
and installed there should be proper infrastructure upgradation such
upgradation improves efficiency and effectiveness.
 Forensic Audit: A forensic audit is an audit conducted to identify, unearth
and analyze the causes and effects of an illegal activity which may be
financial activity or a non-financial activity.

Types of Audit Performed by CAG

1. Regulatory Audit: It is an audit to ascertain whether the moneys spent were
authorised for the purpose for which they were spent and also that the
expenditure incurred was in conformity with the laws, rules and regulations.
2. Supplementary Audit: CAG takes up supplementary audits in PSUs, even
after the commercial audits are done by the auditors appointed by the CAG,
for detection of leakages.
3. Propriety Audit: It focuses on whether the expenditure made is in public
interest or not i.e. it moves beyond mere scrutiny of expenditure to question
its wisdom and economy in order to identify cases of improper expenditure
and waste of public money.
4. Efficiency Audit: Efficiency audit as the name suggests answers the
question whether the money invested yields optimum results. The main
purpose of the efficiency audit is to ensure that the investment is prioritized
and channeled into its most profitable utilization.
5. Performance Audit: Performance audit answers whether the government
programmes such as NREGA have achieved the desired objectives at the
lowest cost and given the intended benefits. It generally does not get into the
merits-demerits of a particular policy/scheme rather looks into the
effectiveness with which the scheme is implemented and any deficiencies
thereof.
6. Environmental Audit: This is a relatively new area of concern for the CAG
keeping in mind the challenges facing India with respect to conservation and
management of the environment. More than 100 audits on environmental
issues like bio-diversity, pollution of rivers, waste management have been

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conducted by the CAG to identify critical issues and suggest possible solutions
by involving all stakeholders.

Committees: A committee is a group of people who are assigned certain

tasks or activities.

Types of committees in the local bodies: There are 2 types of committee

in the local bodies:

 Standing Committee: A standing committee is a committee which is

assigned with particular task permanently or with no time boundedness.
For ex: Sanitation committee, garbage committee, health committee,
planning committee and so on.
 Adhoc Committee: It is a temporary committee assigned with a specific
task with a specific time limit. For ex: Corona relief committee, flood relief
committee and so on.
Difference b/w Standing and Adhoc Committee:

Sl no. Standing Committee Adhoc Committee

1. This is a permanent committee It is temporary committee.
with no time limitations.
2 The task is standardized well No specific task is pre-defined, but
defined task. based on situations and
circumstances.

Duties and Responsibilities of Adhoc Committee of Local Bodies:

 To define limits or boundaries for the specific duty assigned for Adhoc
committee.
 To plan execution of the specific duty or task to prepare a budget in
respect of the task and get the approval from the concerned officials.
 To execute the task in the best interest of the public.
 To conduct a review of the work done.
 To maintain proper accounts and documents to be submitted to the audit
or any other purpose.
Functions of a Govt Auditor of Urban Local Bodies:

 He would ensure that the local body has followed the applicable state laws.
 To ensure that the local body has followed its own policies.
 The procedures laid down by the local bodies should be followed.
 The receipts and payments of local bodies should be properly appropriated
and recorded and the auditor should ensure the presence of such
documents.
 In respect of grants the auditor should confirm that they are properly
accounted and spent for the general purpose or emergency depending
upon whether they are general grants or special grants.

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 The auditor physically check the presence of various asset and ensure that
they are in working conditions.
 They should check stocks and stores by comparing the physical balance
with book balance and the method of their valuation.
Karnataka Panchayat Raj:
The Panchayats are among the oldest institutions for local governance in rural
Karnataka. This long standing system of local governance is also known as
Panchayat Raj (which means rule of village committee). Panchayat Raj
ensures proper execution of rural development programmes. It encourages
participation of general people in the development programmes.

Structural Constitution of Karnataka Panchayat Raj:

Panchayat Raj in Karnataka follows a three tier structural constitution. It has
elected bodies at each level. Panchayat Raj constitutes of:
 The Gram Panchayats at the village level
 The Taluk Panchayats at the sub-district (taluk) level
 The Zilla Panchayats at the district level
Karnataka has 30 Zilla Panchayats, 176 Taluk Panchayats, and 5,659 Grama
Panchayats. All the three units of the Panchayat Raj have members directly
elected by the people. The government does not have any provision to
nominate representatives to any of these institutions.

Karnataka Panchayat Raj Act, 1993:

The Karnataka Panchayat Raj Act, 1993 aims to achieve democratic
decentralization especially for the rural areas. Karnataka enacted the new
Panchayat Raj Act incorporating all the mandatory provisions of 73rd
Amendment to the Indian Constitution.
The objectives of the Karnataka Panchayat Raj Act, 1993 are:
 Establish a three-tier structure for panchayat system at village, sub-district

and district levels.

 Elect members to the three tiers through direct election at all levels.
 Elect Chairpersons and Vice Chairpersons through indirect elections.
 Reserve seats for scheduled castes, scheduled tribes and women at all the
three levels.
 Conduct elections to all the three levels under the State Election
Commission.
 Empower State Finance Commission to determine the sharing of funds
between the State Government and the Panchayat Raj bodies.

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 Maintain accounts and conduct audits at all the three tiers of the panchayat
system.
There have been several amendments to the Karnataka Panchayat Raj Act,
1993 since its inception.
Gram Panchayat:
The Gram Panchayat is the basic or lowest level of Panchayat Raj in
Karnataka. It has jurisdiction over a group of villages. Gram panchayat
represents an assembly of the village elders who are directly elected by the
citizens of the village. This panchayat unit is headed by a chairperson who is
known as Sarpanch.
The representatives of the Gram Panchayats are elected for five years. While
the members are directly elected from wards, the Sarpanch is elected by the
members. There are seats reserved for women, scheduled castes and
scheduled tribes in Gram Panchayats.
Functions of Gram Panchayat:
The Gram Panchayat has to perform the following functions:
 Provide sanitary latrines to at least one-tenth of the households every year
 Construct and maintain sufficient community latrines for use by men and
women
 Maintain water supply works on its own or through annual contract
 Revise and collect taxes, rates and fees at fixed periods
 Ensure enrolment of children in primary school
 Ensure immunisation of children
 Confirm swift registration and report of births and deaths
 Provide sanction for proper drainage
 Construct, repair and maintain public streets
 Remove encroachments on public streets or public places
 Provide sufficient number of street lights
 Make payments for electricity charges on a regular basis
 Fill up sanitary depressions and reclaim unhealthy localities
 Capture and destroy rabid and ownerless dogs
 Maintain all community properties vested in it
 Maintain records related to population census, cattle census, crop census,
census of unemployed people and people below poverty line
 Assign places away from the village dwelling areas for dumping manure
and refuse
Taluk Panchayat
The Taluk Panchayat is the intermediate level of Panchayat Raj in Karnataka.
The Taluk Panchayat is constituted for each taluk. The representatives of the
Taluk Panchayat Samiti are directly elected by the residents of the non-urban

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areas of the taluk. The president and the vice-president of the Taluk
Panchayat Samiti are elected from among members.
The tenure of Taluk Panchayat members is five years. The Taluk Panchayat
has provision for reservation of seats for scheduled castes on the basis of
their population. Two seats are reserved for women in the Taluk Panchayat
Samiti.

Functions of Taluk Panchayat:

The Taluk Panchayat has to perform the following functions:
 Construct and expand water supply works to get at least forty litres per
capita per day
 File reports of Gram Panchayat activities within the taluk regarding :
 Meeting of Gram Sabha
 Progress of water supply works
 Construction of community latrines
 Collection and revision of rates, taxes and fees
 Payment of electricity bills
 Enrolment of children in schools
 Progress of immunisation
 Maintain primary school buildings and provide sanction for sufficient class
rooms and water supply in schools
 Obtain land to create manure pits away from the village dwelling area

Zilla Panchayat
The Zilla Panchayat is the apex level of Panchayat Raj in Karnataka. The Zilla
Panchayat is constituted for each district of the state. It has jurisdiction over
the entire district except those portions that are included in smaller urban
areas or are under the authority of Municipal Corporations, Town Panchayat
or Industrial Township. Members of the Zila Parishad are elected from the
district.
The representatives of the Zilla Panchayats are elected for a tenure of five
years. Every Zilla Panchayat has seats reserved for scheduled castes,
scheduled tribes, backward classes and women.
Functions of Zilla Panchayat:
The Zilla Panchayat has to perform the following functions:
 Establish health centres and maternity centres as per the government rules
 Construct underground structures for water recharge to make water
available in the drinking water wells
 Prevent drilling of irrigation bore wells near drinking water wells to ensure
adequate drinking water
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 Create a plan for social forestry development in each taluk.

1. About PRIA Soft – Functions, Inputs, Outputs:

About PRIA Soft
PRIA Soft stands for – Panchayati Raj Institutions Accounting Software
It a secure and role based authentication Accounting Software with
Centralized database of all the in-flow (Receipts) and out- flow
(Expenditure) of the PRIs accounts.
The Software has been developed by National Informatics Centre, Ministry
of Communication and Information Technology, Govt. of India in
consultation with Ministry of Panchayati Raj (MoPR) to develop a
Centralized Accounting Software intended for use by all the three levels of
Panchayati Raj - District Panchayat, Panchayat Union and Village
Panchayat. It also facilitates the adoption of revised Eight (8) Model
Accounting Formats as prescribed by Comptroller and Auditor
General (C&AG). The Software, apart from making the process of
accounting simple and easy is needed to ensure better financial
management, transparency and accountability at the Panchayat level
which has a twofold advantage:

1. Enhanced credibility of Panchayats which would induce greater

devolution of funds to Panchayati Raj Institutions.

2. Enhanced ability to higher authorities to track the flow and usage of

funds and accordingly decide on the subsequent releases.

 PRIASoft follows the Cash-based Double-Entry System of book-

keeping done in an intuitive, use-friendly manner, without unduly
burdening the end-user with the knowledge of accounting. The back-
end system itself would take care of the both the credits and debits
for a transaction thereby substantially reducing the load on the end-
user.
 Simplicity and User Friendliness: PRIA Soft makes accounting very
simple for the Panchayat-level user by requiring the recording of only
transaction vouchers (Receipt, Payment, Contra and Journal Vouchers)
under various account heads and schemes as under Model
Accounting System (MAS) prescribed by C & AG.
 PRIASoft is web-enabled software and facilitates proactive disclosure of
accounts of the Panchayats, up to voucher level in public domain for
view by all stakeholders including citizens, thereby leading to the
highest order of transparency in the Governance scenario.
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 The software is web based and is available on 24×7 basis with proper
login authentication.
 PRIASoft has a built in system of alerts/ notifications via SMS/EMAIL on
important transactions to affected users.
 The software has been designed to support UNICODE. Entries can be
made in Tamil also. The PRIA Soft Website has been translated into
Tamil language to enable the functionaries easily understand and
operate the Software.
 Target Users:
Comptroller &Auditor General (C&AG)
State Accountant General (State AG)
District Panchayat
Panchayat Union
Village Panchayat

Citizens – Reports would be available online for public to see some of the
features of PRIA Soft:

1. The Proposed System shall maintain the accounts of Rural Local Bodies
as per the Model Accounting Format specified by Comptroller
and Auditor General of India.

2. It shall use the unique codes of Rural Government Bodies as specified

in the Local Government Directory to form the basis of interoperability
with other software applications used under e-Panchayat

3. The system shall follow 4 tier accounting structure as proposed by

Comptroller and Auditor General of India to simplify the
accounting procedure with the schemes (Centre/State Government)
getting mapped at the sub-head level.

4. The System shall allow collaborative management of Head of Accounts

specified by CAG and respective State AG.

5. The system shall enable each state to manage its local object head
(head of expenditure) setup by allowing it to define the local head of
expenditure under any major/minor/sub head level.
6. The system shall allow for Central/State Government Scheme Definition to
be defined.
7. The system shall allow for managing the following master data
 Banks

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 Employee / Agency / Citizen Database

 Stock /Inventory
• Receipt Voucher (Both Receipt and Transfer),
• Payment Voucher (Both Expenditure and Transfer),
• Contra Entry (Both Deposit and Withdrawal),
• Journal Entry (Rectification Entry),
• Monthly Bank Reconciliation,
• Record the Receivables and Payables,
• Record Stock Received / Issue and Sale Details
8. The system shall follow the closing account principle and close the book
of accounts as per the prescribed procedure.
9. The system shall record each transaction with user id /data and time
stamp for Audit trail purpose.
10. The system shall bring about transparency in PRIs account and
allow for reports to be available in public domain.
11. The system shall generate a number of reports; few of them are listed
below:
 Annual Receipts & Payments Accounts
 Consolidated Abstract Register
 Cash Book (Daily, Monthly & Scheme Wise)
 Ledger Book, Journal book
 Scheme-wise Cash book
 Register of Advances
 Register of Receivables and Payables
 Opening Balance report
 Subsidiary Cash book
 Scheme-wise Trial balance report
 Trial Balance report
 Monthly Reconciliation
 Stock Register
 Register of Movable Properties, Immovable Properties
 Register of Demand, Collection
 Tax and Non Tax Receipts

Inputs to PRIA Soft:

PRIA Soft is a user friendly system. PRIA Soft requires the same inputs as
is currently captured by TN Panchayat Accounts registers for all the 3 tiers.
There are no additional inputs. The following are the inputs required by PRIA
Soft:

1. Bank Account details

2. Cheque book details for the various bank accounts
3. Opening Balance entry as of 1st April 2012
4. Stock opening Balance as of 1st April 2012

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5. Receipt Details, like – amount of receipt, received from where, date of

receipt, received through Cash / cheque, received in which bank account,
etc
6. Expenditure details – expenditure for which work / administrative
expense, payment to contractor, date of payment, payment through
which cheque Number, etc.

The details of the inputs required are explained in the section–

Components of PRIA Soft
Output of PRIA Soft:
Based on the various inputs entered in PRIA Soft, it generates various
reports /cash books/registers, etc. These reports or cash books can be
generated and checked for any errors or mistakes made during entry. The
mistakes can then be modified and rectified Cash book can again be
generated.
The details of the various possible reports that can be generated is
mentioned in the section – Components of PRIA Soft
Basis of Accounting in PRIA Soft:
The accounting process in PRIA Soft is based on the Principle of Model
Accounting System (MAS). In MAS, there is 4-tier Accounting system, thus
there are 4 Heads –
1. Major Head
2. Minor Head
3. Sub-head
4. Object Head

Major Head:
It is a 4 digit classification in the simplified system and represents function
enumerated in the 11th Schedule of the Constitution. Any of the Receipts or
Expenditure of any Panchayat Account (VP Account 1, 2, 3, 4, 5 or 6 or
Panchayat Union Account – Regular or Scheme or District Panchayat
Account –SFC, SFC-Administration) would come under any of the Major
heads. The list of all the Major heads is already there in PRIA Soft and there
is no need to memorize the Major heads. All the 29 Subjects listed in the
11th Schedule of the Constitution are classified under 23 Major Heads. CAG
may introduce more Major Heads in case of requirement by any State. The
broad classification of the Major Heads into Revenue / Capital Receipts and
Revenue/Capital Expenditure is as under:
Revenue Receipt: 0000 to 1999
Capital Receipt: 4000
Revenue Expenditure: 2000 to 3999
Capital Expenditure: 4000 to 5999

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Loans & Advances: 6000 to 7999

Contingency fund and public fund which includes Pension and

Provident fund Deposits & Advance and Suspense Accounts: 8000 to
8999
So, when there is any entry in PRIA Soft, it would fit into any of the Major
Heads. E.g.: For the House Tax collected by Village Panchayats, the Major
than Agriculture Land Head to be used is 0035 -Taxes on Property other.

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Different Schemes of ULB’S

Smart Cities Mission:

Launched on June 25, 2015, the Smart Cities Mission is a flagship scheme under the
Ministry of Housing and Urban Affairs. This ambitious programme by the Indian
Government aims at building 100 Smart Cities across India with focus on planned
urbanisation and sustainable development as a support system for the neighbouring
cities. It also involves the development of high-quality infrastructure with provision of
basic amenities, education, health services, IT accessibility, digitisation, e-governance,
sustainable development, safety and security. Global cities such as Singapore, Japan, and
the USA are offering valuable support to India’s mission, which also emphasises on
economic development of urban centres by creating more jobs and enhancement in
income.

Pradhan Mantri Awas Yojana (PMAY) (Urban) or Housing for All

The scheme was launched on June 25, 2015 for providing 20 million affordable homes for
the urban poor including slum dwellers by March 2022. The beneficiaries include
Economically Weaker Section (EWS), low-income groups (LIGs) and Middle-Income Groups
(MIGs). Implemented as Centrally Sponsored Scheme with two components - PMAY
(Urban) and PMAY (Rural), the mission involves providing central assistance to
implementing agencies through States and UTs.

Swachh Bharat Mission - Urban (SBM - U)

Launched on October 2, 2014, The Swachh Bharat Mission is the government’s nationwide
flagship programme with the objective of universal sanitation coverage in urban areas
with a budget allocation of Rs 41,765 crore for 2018-19. It is a comprehensive sanitation
scheme which aims to make the country open defecation free by 2019, promote 100 per
cent collection and scientific processing of municipal solid waste, encourage healthy
sanitation practices and equip the urban local bodies (ULBs) to design, execute and
operate systems. The overall estimated cost for the SBM is Rs 62,009 crore of which Rs
14,787 crore is the centre’s share.

Jawaharlal Nehru National Urban Renewal Mission (JNNRUM)

Launched in 2005, Jawaharlal Nehru National Urban Renewal Mission was a city-
modernisation scheme with an investment of over $20 billion over seven years. It covers
two components viz. provision of basic services for urban poor (BSUP) and an Integrated
Housing and Slum Development Programme (IHSDP). The scheme was designed to raise
investment in urban infrastructure, build better civic amenities, ensure universal access
to basic utilities as well as create affordable homes for the urban poor, slum dwellers and
people of economically weaker sections.

AMRUT (Atal Mission for Rejuvenation and Urban Transformation)

Launched in 2015, the focus of the AMRUT scheme was on infrastructure creation that has
a direct link to provision of better services to the citizens. Closely connected to the

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Swachh Bharat Mission, the scheme includes provision of water supply facilities, sewerage
networks, stormwater drains, urban transport, and open and green spaces, across the
selected 500 Indian cities. The allocated budget under the scheme is around Rs 50,000
crore for the period 2016 - 2021.

Other Urban Development Schemes:

 National Urban Sanitation Policy (NUSP): The National Urban Sanitation Policy was
formulated in 2008 which laid out the government’s vision to provide hygienic and
affordable sanitation facilities for the urban poor especially women as well as addressing
the challenges with effective city sanitation plans.

 Heritage City Development and Augmentation Yojana (HRIDAY): The scheme was
introduced on 21st January 2015 for the holistic development of heritage cities. It deals
with preserving and reviving the soul of the heritage city, as well as the development of
core heritage infrastructure projects and revitalization of urban infrastructure for areas
around heritage assets.

 National Urban Livelihoods Mission (NULM): Launched on 24th September 2013 by

the Ministry of Housing and Urban Poverty Alleviation (MHUPA), the scheme is a livelihood
promotion programme to reduce poverty and vulnerability of the urban poor households
by enabling them to access gainful self-employment and skilled wage employment
opportunities thereby enhancing their livelihood. It also addresses the livelihood concerns
of urban street vendors. It has been implemented across 790 cities.

 National Urban Transport Policy, 2006: The National Urban Transport Policy involves
incorporating urban transportation as an important parameter at the urban planning
stage. It also focuses on the introduction of intelligent transport systems, reduction of
pollution levels and encouraging greater use of public transport and nonmotorized modes
through central financial assistance.

What are the Sources of Funds for ULBs?

Section titled What are the Sources of Funds for ULBs

The ULBs, depending on the area they govern, are pretty heterogeneous. As a result,
their sources of receipts are also quite different. Nonetheless, there are some
common sources which are applicable for all ULBs.
This section first discusses the common sources and then uses the examples from two
municipalities – South Delhi Municipal Corporation (SDMC) and Bhubaneswar
Municipal Corporation (BMC).
The examples have been chosen with the aim of having snippets from two very
different municipalities, in terms of area, the scale of resource, etc.

Own Tax Revenue

MCs have the power to levy following taxes –

• Property Tax – it is generally levied on non-movable property like land and
building. The rate of tax is defined for a particular area. It is the largest sources of

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revenue for most municipal corporations in India.

• Tax on Transfer of Property – It is levied when the immovable property in area
under MC changes the ownership. In other words, it is levied on the sale of land and/or
building.
• Taxes on Vehicles – it is levied on the sale/use of vehicle within an MC. The rate is
generally decided as the percent of price of vehicle.
• Advertisement Tax – It is levied on the advertisement put on the property within a
MC, but doesn’t include advertise on newspaper, TV or radio. Primarily, it targets the
banners / hoardings for advertisement.
• Toll Tax – also known as entry tax, is levied on certain vehicles when they enter the
MC area. Which vehicle to be taxed and at what rate is decided by the respective
municipal corporation.
• Entertainment Tax – it is levied on the various forms of commercial
entertainments, like – movie theatre, sports events, art exhibitions, amusement parks,
etc. It is generally levied as a per cent of the ticket price.

Own Non-Tax Revenue

Major sources of non-tax revenues for ULBs are –

• License Fee: Earned by issuing trade licenses to private markets, cinema houses,
slaughterhouses, burial grounds, commercial animal stalls etc.
• Gate Fees: Entry fees obtained from the highest bidder, who, in turn, regulates
entry based on certain fees. Major sources of gate fees are public markets, public
parking and halting places, public slaughterhouses etc.
• Income From Property (Rent): Rent from buildings, lands, cloakrooms, comfort
stations etc.
• Income From Property Other Than Rent: Proceeds from sale of rights to collect
river sand, sale of rights to fish, sale of usufructs etc.
• Permit Fees: These are of two kinds – fee for building permits and fee for permits
for the construction, establishment or installation of factories, workshops or
workplaces where electricity is used.
• Registration Fees: Registration of hospitals and paramedical institutions, tutorials,
births and deaths, contractors (only in Urban Local Governments), etc.
• Service Charges: Charges collected for the use of utilities and amenities provided
by Local Governments. Charges are levied on the direct recipient of a service.

Transfers from State Government:

Among the many provisions, the 74th Constitutional Amendment Act, one was about
the sharing of resources of States Governments with their respective local
governments. Broadly, all transfers from state governments to the municipalities can
be of two types –
• Mandatory Shared Resources – based on the recommendations of the state
finance commissions. It is generally the share in the divisible pool of resources raised
by the respective states, where the divisible pool can be defined as per the state
laws.
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• Discretionary Transfers/Grants-in-Aid: local bodies receive such aid from State

Governments. There is no specific system of grants-in-aid, and these depend on the
policies of the government of the day. The grants can also be given either to
incentivise tax efforts or to match the effort in the maintenance of services.

Borrowing:

Similar to Centre and State Governments, Municipal Corporations can raise resources
by selling bonds in the open market. This is still a relatively underdeveloped area, as
out of all MCs, only those having reasonably good amount of resources from own
sources and credentials can raise resources through borrowing by selling bonds. In
other words, the ability to sell bonds depends on the trustworthiness of MC that it will
be able to repay in future.

Currently, only a few MCs raise money through borrowing. Nonetheless, there has
been some development on this front, where MCs are encouraged to raise resources
through this channel.

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