Chapter XI Chapter XI

Financial Control and Audit

1. (1) The Secretary shall prepare and lay before the Panchayat at a meeting, which shall be held between the first day of February and the tenth day of March, a complete account of the actual or

expected receipts and expenditure for the financial year ending on the thirty-first day of

March next following together with a budget estimate of the income and expenditure, of the Panchayat for the financial year to commence on the first day of April next following.

1. (2) The Panchayat shall thereupon decide upon the appropriations and the ways and means contained in the budget of the year to commence on the first day of April next following. The budget as passed by the Panchayat shall be sent to the Zilla Panchayat 135[and the Block Development Officer] before such date as may be fixed by the Government.
2. (3) In such budget estimate, the Panchayat shall among other things,—
   • (a) make adequate and suitable provision for such services as may be required for the fulfillment of the several duties imposed on the Panchayat by this Act, or any other law;
   • (b) allow for a balance at the end of the year of not less than such sum or percentage of income as may from time to time be fixed by the Government either generally for all Panchayats or specially for any Panchayat;
   • (c) provide for the payment, as they fall due, of all installments of principal and interest for which the Panchayat may be liable in respect of loans contracted by it.
3. (4) If such budget estimate is not in accordance with the provisions of this Act or the rules and orders issued thereunder, the Zilla Panchayat may within two months from the date of receipt of the budget, modify the same to secure compliance with this Act, the rules or the orders: Provided that the Zilla Panchayat shall not have power to direct that total proposed expenditure shall exceed the total of the estimated income of the Panchayat for the following year and the opening balance.
4. (5) If the Panchayat fails to pass the budget estimate on or before the date mentioned in sub-section (1) the Secretary shall forward the budget estimate to the Zilla Panchayat and it shall approve it with or without modification. The budget as approved by the Zilla Panchayat shall be certified by the Chief Executive Officer and thereupon shall be deemed to have been duly approved by the Panchayat.

If, in the course of the financial year, the Panchayat finds it necessary to modify the provision made in the budget with regard to the receipts or to the distribution of the amounts to be expended on the different services it undertakes, it may make such modifications: Provided that no diversion of grants transferred by the Government out of the Consolidated Fund of the State can be made for a purpose or programme or Scheme not covered under such grants: Provided further that, without the approval of the Chief Executive Officer,—

1. (a) no reduction of over ten percent shall be made in the grants approved for any developmental functions of the Panchayat; and
2. (b) the closing balance shall not be reduced below the sum fixed under clause (b) of sub-section (3) of section 182.

1. (1) Accounts of the income and expenditure of a Panchayat shall be kept in accordance with such rules as may be prescribed.
2. (2) Expenditure from the Panchayat Fund shall, save as otherwise expressly provided for in this Act, be incurred subject to such sanctions, conditions and limitations as may be prescribed.
3. (3) A Panchayat shall, within a period not exceeding three months after the close of the financial year, pass the accounts of that year.

The Panchayat shall as soon as the annual accounts have been finally passed by it, transmit a copy thereof to the Zilla Panchayat

136[and the Block Development Officer] in the form prescribed and shall furnish such details and vouchers relating to the same as the Zilla Panchayat

137[and the Block Development

Officer] may, from time to time, direct.

Subject to such restriction as may be prescribed; a Panchayat may write off any tax, fee, rate or other amount whatsoever due to it, whether under a contract or otherwise, or any sum payable in connection therewith if, in its opinion, such tax, fee, rate or other amount or sum is irrecoverable.

1. (1) The accounts of every Panchayat shall be audited each year by such officer as may be authorised by the Director of Accounts of the Government (hereinafter referred to as the ‘auditor’).
2. (2) The auditor shall, for the purpose of audit have access to all the accounts and other records of the Panchayat.
3. (3) The auditor may,—
   • (a) require in writing the production before him of such voucher, statements, returns, correspondence, notes or other documents which he may consider necessary for the proper conduct of his audit;
   • (b) require in writing any person accountable for, or having the custody or control of, any such vouchers, statements, returns, correspondence notes or documents or any person having directly or indirectly by himself or his partner, any share or interest in any contract with or under the Panchayat, to appear in person before him;
   • (c) require any person so appearing before him to make and sign a declaration with respect to such vouchers, statements, returns, correspondence, notes or documents or to answer any statements;
   • (d) in the event of an explanation being required from the Sarpanch or other member of the Panchayat, in writing invite such person to meet him and shall in writing specify the point on which explanation is required.
4. (4) Any person who wilfully neglects or refuses to comply with any requisition lawfully made under sub-section (3), shall on conviction, be punished with fine which may extend to one hundred rupees: Provided that no proceedings under this sub-section shall be instituted without the sanction of the Chief Executive Officer. [(4) Any person who wilfully neglects or refuses to comply with any requisition lawfully made under sub-section (3), shall be liable to a penalty which may extend to one thousand rupees: Provided that no proceedings for the imposition of such penalty shall be initiated without the sanction of the Chief Executive Officer.]
5. (5) The auditor shall, within one month after the completion of audit, forward a copy of the audit report to the Panchayat 139[the Chief Executive Officer and Director].
6. (6) On receipt of the audit report, the Panchayat shall either remedy any defects or irregularities which have been pointed out in the report and send to the Executive Officer within three months an intimation of its having done so, or shall within the same period furnish to the Chief Executive Officer any further explanation in regard to such defects or irregularities.
7. (7) On receipt of such intimation or explanation in respect of all or any of the matters discussed in the audit report, the Chief Executive Officer may, in consultation with the auditor,—
   • (a) accept the intimation or explanation given by the Panchayat and order the withdrawal of the objection; or
   • (b) direct that the matter be re-investigated at the next audit or at any earlier date; or
   • (c) direct that the defects or irregularities pointed out in the audit report or any of them shall be removed or remedied by the Panchayat.
8. (8) The Chief Executive Officer may, after making such enquiry as he may consider

necessary, disallow any item of expenditure which appears to him to be contrary to law and surcharge the amount thereof on the person making or authorising the illegal payment and after taking the explanations of the person concerned, the Chief Executive Officer may direct by an order in writing that such person shall pay to the Panchayat the amount surcharged along with interest at fifteen percent per annum on the amount due, from the date from which it became due and if the amount is not paid within two months from the date of such order, the Chief Executive Officer shall take steps to recover it as an arrear of land revenue and credit it to the Panchayat Fund.

1. (9) Any person aggrieved by the order of the Chief Executive Officer under sub- -section (8), may, within thirty days of the receipt by him of a copy of the decision, appeal to the Director who shall pass such orders as he may deem fit.
2. (10) The Director of Accounts shall submit a summary of observations made in the audit report and rectifications made by the Panchayats to the Government which shall be laid on the table of the House.

1. (1) The Finance, Audit and Planning Committees shall cause to be prepared and laid before the Zilla Panchayat at a meeting which shall be held between the first day of February and the tenth day of March a complete account of the actual and expected receipts and expenditure for the financial year ending on the thirty-first day of March next following together with a budget estimate of the income and expenditure of the Zilla Panchayat for the financial year to commence on the first day of April next following.
2. (2) The Zilla Panchayat shall thereupon decide upon the appropriations and the ways and means contained in the budget of the year to commence on the first day of April next following. The budget as passed by the Zilla Panchayat shall be sent to the Government before such date as may be fixed by the Government.
3. (3) In such budget estimate, the Zilla Panchayat shall among other things,—
   • (a) make adequate and suitable provision for such services as may be required for the fulfillment of the several duties imposed on the Zilla Panchayat by this Act or any other law;
   • (b) provide for the payment, as they fall due, of all instalments of principal and interest for which the Zilla Panchayat may be liable in respect of loans contracted by it;
   • (c) allow for a balance at the end of the said year of not less than such sum or percentage of income as may from time to time, be fixed by the Government either generally for all Zilla Panchayats or specially for any Zilla Panchayat.
4. (4) If such budget estimate is not in accordance with the provisions of this Act or the rules and orders issued thereunder, the Government may, within two months from the date of receipt of the budget, modify the same to secure compliance with this Act, the rules or the orders: Provided that the Government shall not have power to direct that total proposed expenditure shall exceed the total of the estimated income of the Zilla Panchayat for the following year and the opening balance.
5. (5) If the Zilla Panchayat fails to approve the budget estimate on or before the date mentioned in sub-section (1), the Chief Executive Officer shall forward the budget estimate to the Government and the Government shall approve it with or without modification. The budget as approved by the Government shall be certified by the Government and thereupon shall be deemed to have been duly approved by the Zilla Panchayat.

If in the course of the financial year, the Zilla Panchayat finds it necessary to modify the provisions made in the budget with regard to the receipts or to the distribution of the amounts to be expended of the different services it undertakes, it may make such modification: Provided that no diversion of grants transferred by the Government out of the consolidated funds of the State may be made for a purpose, programmes or Scheme not covered under such grants: Provided also that, without the approval of the Government,—

1. (a) no reduction of over ten percent is made in the grants approved for any developments, functions of the Zilla Panchayat;
2. (b) the closing balance shall not be reduced below the sum fixed under clause (c) of sub-section (3) of section 188.

Supplementary budget may be prepared and submitted whenever necessary. The Zilla Panchayat may at any time during the year for which a budget has been sanctioned by the Government, cause a supplementary budget to be prepared and submitted to the Government. Every such supplementary budget shall be considered and approved by the Zilla Panchayat and submitted to the Government for approval.

1. (1) Accounts of the income and expenditure of the Zilla Panchayat Fund shall be kept in accordance with such rules as may be prescribed.
2. (2) Expenditure from the Zilla Panchayat Fund shall, save as otherwise expressly provided for in this Act be incurred subject to such sanctions, conditions and limitations as may be prescribed.
3. (3) The Zilla Panchayat shall within a period not exceeding three months after the close of the financial year, pass the accounts of that year.

The Zilla Panchayat shall as soon as the annual accounts have been finally passed by it, transmit to the Government an account in the form prescribed in this behalf and shall furnish such details and vouchers relating to the same as the Government may, from time to time direct.

Subject to such restrictions as may be prescribed a Zilla Panchayat may write off any sum due to it, whether any sum payable in connection therewith, if in its opinion, is irrecoverable.

1. (1) The accounts of the Zilla Panchayat Fund shall be audited by the Comptroller and Auditor-General of India (hereinafter referred to as auditor), in accordance with the provisions of the Comptroller and Auditor-General’s (Duties, Powers and Conditions of Services) Act, 1971 (Central Act 56 of 1971).
2. (2) The auditor shall, for the purpose of audit, have access to all the accounts and other records of the Zilla Panchayat.
3. (3) The Government shall on receipt of the audit report of the Zilla Panchayats lay them before the State Legislature.

1. (1) The Zilla Panchayat shall on the report of the auditor or may on its own motion and after taking the explanation of the person concerned or making such further enquiry as it may consider necessary charge any

person responsible for irregular expenditure pointed out by the auditor or the amount of any deficiency or loss caused by the negligence or misconduct of such person or any sum received which ought to have been, but is not brought into account by such person, and shall in every such case, certify the amount due from such person.

1. (2) The Zilla Panchayat shall in writing state the reasons for its decision in respect of every charge and send a copy thereof to the person against whom it is made.

1. (1) Every sum certified by Zilla Panchayat, to be due from any person under sub-section (1) of section 196 shall be paid by such person to the Zilla Panchayat within thirty days from the date of the receipt by him of a copy of the decision.
2. (2) Such sum, if not duly paid alongwith interest at fifteen percent per annum on the amount due from the date from which it became due, shall be recoverable as an arrear of land revenue alongwith the necessary expenses of such recovery and shall be credited to the Zilla Panchayat Fund.

1. (1) when any sum payable on demand,-
   • (a) which by or under the provisions of this Act, is declared to be recoverable in the manner provided by this Chapter; or
   • (b) which is claimable as a fee, tax or other amount due to the Zilla Panchayat under this Act, or under any rules or regulations made thereunder, shall have become payable and remains unpaid for fifteen days after the same is due the Chief Executive Officer or an officer duly authorised by him in writing in this behalf (hereinafter referred to as the authorised officer), may serve upon the person or persons liable to pay such sum, a notice in writing in the prescribed form.
2. (2) If such person does not, within fifteen days, from the service of such notice of demand upon him, pay the sum due, or show cause to the satisfaction of the Chief Executive Officer as to why the same should not be paid, the Chief Executive Officer or the Executive Officer may recover such sum, with all costs, by distraint and sale of the movable property of the defaulter.
3. (3) In order to effect the distraint and sale of property under sub-section (2), the Chief Executive Officer or the authorised officer concerned, shall issue a warrant in the prescribed form and a warrant fee of one rupee shall be leviable for each such warrant.
4. (4) The Chief Executive Officer or the authorised officer concerned shall make an inventory of the property distrained, a copy of which shall on demand be delivered to the defaulter or any person on his behalf, and if the amount due is not paid within fifteen days after distraint, the property may be sold.
5. (5) The Chief Executive Officer or the authorised officer concerned shall give or cause to be given to every person making payment of the amount due, a receipt thereof signed by him. Such receipt shall specify,—
   • (a) the date of the payment thereof;
   • (b) the name of the person by whom it is paid;
   • (c) the amount due in respect of which the payment has been made;
   • (d) the period for which the payment has been made; and
   • (e) the amount in respect of which it is granted.
6. (6) Any sum due to Zilla Panchayat under this Act, shall without prejudice to any other mode of collection, be recoverable as an arrear of land revenue.

1. (1) Whenever, under section 197 any

property is distrained, seized or sold in consequence of the non-payment of any amount due, such distraint, seizure and sale shall be effected subject to the provisions of the following sub-sections and of section 62 of the Code of Civil Procedure, 1908 (Central

Act 5 of 1908).

1. (2) All such property as is by the Code of Civil Procedure, 1908 (Central Act 5 of

1908), exempt from attachment or sale in execution of the decree shall be exempt from distraint or sale under this section.

1. (3) The distress shall not be excessive. The value of the property distrained shall be, as nearly as possible, proportionate to the amount due on account of the fee, rent or the other amount due, and the distraint fee and the probable expenses incidental to the detention and sale of the said property.
2. (4) When the property seized is subject to speedy and/or natural decay, or if in the opinion of the person seizing the property, the expenses of keeping it in custody together with amount due, exceeds the value of the property, the said person shall immediately after seizure of such property, give notice to the person from whose possession it was seized, to the effect that it will be sold at once and shall sell it accordingly unless the amount due is paid forthwith.
3. (5) Any surplus amount that may remain after deducting the amount due and of the said expenses, including the expenses of the sale, shall be paid to the owner of the property.
4. (6) If any claim be set up by a third person to movable property distrained under section 197, the Chief Executive Officer shall after a summary enquiry held, after giving reasonable notice to the claimant admit or reject the claim. If the claim is admitted

wholly or partly, the property shall be disposed of/dealt with accordingly. Except in so far as it is admitted, the property shall be sold and the title of the purchaser shall hold good for all purposes, and the proceeds shall be disposed as hereinbefore directed.

Provided that nothing in this sub-section shall be deemed to bar the claimant or any person having any interest in the property distrained from seeking relief in a Civil Court having jurisdiction.

1. (1) The Government shall as soon as may be, within

one year from the date of commencement of this Act and thereafter at the expiration of every fifth year, constitute a Finance Commission to review the financial position of the

140[Zilla Panchayats, Taluka Panchayats and Panchayats] and to make recommendation to the Government as to,—

1. (a) the principles which should govern,—
   • (i) the distribution between the State and the Zilla Panchayats, and Panchayats and the net proceeds of the tax, duties, tolls and fees leviable by the Government which may be divided between them and allocation between the 141[Zilla Panchayats, Taluka Panchayats and Panchayats] of their respective shares of such proceeds;
   • (ii) the determination of the taxes, duties, tolls and fees which may be assigned to or appropriated by the 142[Zilla Panchayats, Taluka Panchayats and Panchayats];
   • (iii) the grants-in-aid to the 143[Zilla Panchayats, Taluka Panchayats and Panchayats] from the consolidated fund of the State.
2. (b) the measures needed to improve the financial position of the 144[Zilla Panchayats, Taluka Panchayats and Panchayats];
3. (c) any other matter referred to the Finance Commission by the Governor in the interest of sound finance of the 145[Zilla Panchayats, Taluka Panchayats and Panchayats].

1. (2) The Finance Commission shall consist of a Chairman and two other members.
2. (3) The Chairman and members of Finance Commission shall possess such qualification and shall be appointed in such manner as may be prescribed.
3. (4) The Finance Commission shall determine its procedure.
4. (5) The Chairman or a member of the Finance Commission may resign his office by writing under his hand and addressing to the Finance Secretary to the Government, but he shall continue in office until his resignation is accepted by the Government.
5. (6) The casual vacancy created by the resignation of the member or Chairman under sub-section (5) or for any other reason, may be filled by fresh appointment and a member or Chairman so appointed shall hold office for the remaining period for which the member or Chairman in whose place he was appointed would have held office.
6. (7) The Commission shall have the following powers in the performance of its functions, namely:—
   • (a) to call for any record from any officer or authority;
   • (b) to summon any person to give evidence or produce records;
   • (c) such other power as may be prescribed.
7. (8) The Governor shall cause every recommendation made by the Finance Commission under this section together with an explanatory memorandum as to the action taken thereof to be laid before the State Legislature.