preparation of guidelines panchayat budgeting, accounting and … · · 2015-09-16terms of...

Preparation of Guidelines Panchayat Budgeting, Accounting

and Auditing – Plan of Action An IPAI collaboration

with the

Ministry of Panchayati Raj,

Government of India

Institute of Public Auditors of India

Terms of Reference

• Review existing Rules, Manuals and Guidelines for preparation of budget, maintenance and audit of accounts in the Panchayat

• Assist in preparation of State/UT specific Budget, Accounts and Audit Manuals and related Rules and Guidelines for Panchayats in close consultation with the States/ UTs;

• To study the historical rules existing in each State and analyse their usefulness in the present context;

• These Manuals, Rules and Regulations will be used to maintain accounts in a simple manner so that all the finances available with the Panchayats (receipts from various sources as well as own source revenue) are utilized properly to comply with the TGS requirements of the CAG and recommendations of the Fourteenth Finance Commission;

• The Manuals, Rules and Regulations are intended to bring about standardization and qualitative improvement in basic accounts keeping and audit in the country;

• The objective is also to facilititate the Gram Panchayats comply with the conditions for availing Performance Grant from the year it is due to them;

• The Manuals will also be used to train the Panchayat functionaries and elected representatives.


Deliverables of the Project

State specific Budget Manuals, Accounting Manuals, and Audit Manuals

towards

Standardization and qualitative improvement in basic accounts keeping and audit in the country;

To facilitate Panchayats comply with the conditions for availing Performance Grant from the year it is due to them;

To train the Panchayat functionaries and elected representatives.


Guiding words are

• Simple manner

• Fulfilling accountability requirements

• In line with 14th FC recommendations

• standardization and qualitative improvement in basic accounts keeping and audit

• facilititate the Gram Panchayats comply with the conditions for availing Performance Grant

• Identify gaps, differing practices and State specific practices

• Training


Objective of the Presentation

This presentation is with particular reference to PRIASoft.

We are here to learn and seek clarifications on certain issues from an accounting point of view.


Methodology

• Teams established • Project Monitoring Team • A Central Team • Teams in each State/UT

• The Central team will review the existing system, coordinates with the State teams and prepare the manuals

• State Teams will coordinate with the nodal officers, visit a sample of Panchayats and will feed the Central team

• Workshops will be held in various places towards gaining synergy.


A few observations and thoughts

• Model Accounting System not being followed in toto in virtually all the states?

• Accounting and information requirements of the PRIs are different from what we expect from Central/State Government accounts.

• The PRI accounts are stand alone accounts and are not consolidated into any bigger entity. This should work as an advantage.

• The Village level Panchayats in many of the states do not have any staff for financial management. This is a major factor for further simplification.

• The Panchayat accounts are maintained on cash basis. This should continue.


14th Finance Commission

• Need for accountability

• Quality of the data that was supplied varied across States and was not in a useable form

• grants to the local bodies, should go towards supporting and strengthening the delivery of basic services - water supply, sanitation including seapage management, sewerage, storm water drainage and solid waste management, street lighting, local body roads and footpaths, parks, playgrounds, burial and cremation grounds

• Performance grant to panchayats


The issue is Accountability

A few concepts of Accounts:

• Books of Accounts

• Chart of Accounts

• Formal procedures : Recording, Classifying and Summarizing

• Aggregation and analysis (vertical and horizontal uniformity)

• Simplified Annual Financial Statements

• Increasingly, in the sphere of accounting, the line of distinction between accounting and data processing is getting thinner and thinner.

• IT Systems – are these part of the accounting procedures.


Simplicity and information requirement

• Simple accounting procedures can be handled at the Gram Panchayat level to District level

• Can be given legality through recognition in rules and manuals

• Can take into account the IT systems.

• Yet, such a simple system can be robust and fulfil all information requirements


Responsibility Centres

• We noted that the “village panchayats”, referred to in Article 40, and the “local authorities” referred to in List II, are described as “units” of “self-government” not “self-governance”. These constitute the origins of Article 243G of Part IX of the Constitution which refers to the three-tier Panchayat Raj system as “institutions of self-government”, not self-governance.

(Towards Holistic Panchayat Raj vol 1 P.19)

• Panchayats as “Responsibility Centres” with transparency and accountability to the people they represent.


Budgets and Accounts

Budget and accounting system must be able to answer two questions: On what the money was spent (account codes) and was it approved? (Budget).

The accountability structure based on the budgetary and accounting system must address the two issues:

• What is to be accounted for

• Accounts must be able to reflect whether budgeted items were implemented and thus provide an accountability mechanism enabling a meaningful Social Audit as well as audit by various institutions set up by the Government.


The disconnect

• Budgets are based on works; expenditure being accounted for under heads of accounts. (In fact in PRIASoft, budget is universally a null value.)

• This linkage is important as Panchayats spend Public money and are accountable to the people. That is the fiduciary principle. We need to enforce the fiduciary principle in the PRI Accounts and that can only be done through budget.

• Budgeting which include approval of the people, cannot be seen as separate from the accounting system. The way we are spending money must reflect the wishes of the people these institutions serve.

• Accountants and Auditors that we are, need to recognize that there has to be strong linkages between budgeting and accounting. Accounting is about Accountability and Accountability is to the people. Any accounting system that we devise must not be restricted to recording, classifying and summarizing the receipt and expenditure but also should be able to reflect the provide the basic information as to whether the expenditure reflected the approval of the people.


The Challenge!

• How we can do it without being disruptive.

• The Chart of accounts


Thank You


preparation of guidelines panchayat budgeting, accounting and … · · 2015-09-16terms of...

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