Chapter XVII FINANCIAL CONTROL AND AUDIT

241. Presentation of accounts and budget of Grama Panchayat. - (1) The 1[Panchayat Development Officer]1 shall prepare and lay before the Grama Panchayat at a meeting, which shall be held between the first day of February and the tenth day of March, a complete account of th e actual and expected receipts and expenditure for the official year ending on the thirty -first day of March next following together with a budget estimate of the income and expenditure, of the Grama panchayat for the official year to commence on the first day of April next following. (2) The Grama 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 nex t following. The budget as passed by the Grama Panchayat shall be sent to the Taluk Panchayat before such date as may be fixed by the Government. (3) In such budget estimate, the Grama 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 Grama Panchayat by this Act or any other law; (b) allow for a balance at the end of 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 Grama Panchayats or specially for any Grama Panchayat; (c) provide for the payment, as they fall due, of all installments of principal and interest for which the Grama Panchayat may be liable in respect of loans contracted by it. (4) If such budget estimate is not in accordance with the provisions of this Act or the rules and orders issued thereunder, the Taluk Panchayat may within two months from the date of receipt of the budget mo dify the same to secure compliance with this Act, the rules or the orders: Provided that the Taluk Panchayat shall not have power to direct that total proposed expenditure shall exceed the total of the estimated income of the Grama Panchayat for the following year and the opening balance. (5) If the Grama Panchayat fails to pass the budget estimate on or before the date mentioned in sub -section (1), the 1[Panchayat Development Officer ]1 shall forward the budget estimate to the Taluk Panchayat and it shall approve it with or without modification. The budget as approved by the Taluk Panchayat shall be certified by the Executive Officer and thereupon shall be deemed to have been duly approved by the Grama Panchayat.

242. Revision of budget. - If, in the course of the official year, the Grama Panchayat finds it necessary to modify the provisions made in the budget with regard to the receipts or 163 to the distribution of the amounts to be expended on the differ ent 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: Provi ded further that, without the approval of the Chief Executive Officer, - (a) no reduction of over ten percent shall be made in the grants approved for any developmental functions of the Grama Panchayat, and (b) the closing balance shall not be reduced bel ow the sum fixed under clause (b) of sub - section (3) of section 241.

243. Maintenance of accounts and restriction of expenditure. - (1) Accounts of the income and expenditure of a Grama Panchayat shall be kept in accordance with such rules as may be presc ribed. (2) Expenditure from the Grama 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) Grama Panchayat shall, within a period not excee ding three months after the close of the official year, pass the accounts of that year.

244. Transmission of accounts. - The Grama Panchayat shall, as soon as the annual accounts have finally passed by it, transmit a copy thereof to the Zilla Panchayat in the form prescribed and shall furnish such details and vouchers relating to the same as the Zilla Panchayat may, from tine to time, direct.

245. Power to write off irrecoverable amounts. - Subject to such restrictions as may be prescribed, a Grama Pancha yat 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, fees, rate or other amount or sum is irrecoverable: Provided that, n o sum exceeding one thousand rupees shall be written off except with the previous sanction of the Taluk Panchayat.

246. Audit of accounts. - (1) The accounts of every Grama Panchayat shall be audited each year by such officer as may be authorised by the 2[Director General, Karnataka State Accounts And Audit Department]2 (hereinafter referred to as the auditor) 1[The Comptroller and Auditor General shall provide technical guidance and supervision for audit of accounts under this section in accordance with the provisions of Comptroller and Auditor General’s (Duties, Powers and Conditions of Service) Act, 1971 (Central Act 56 of 1971) and also undertake test checks of the accounts of the Grama Panchayaths] .1 (2) The auditor shall, for the purpose of audit, have access to all the accounts and other records of the Grama Panchayat. (3) The auditor may, - (a) require in writing the production before him of such vouchers, statements, returns, correspondence, notes or other documents which he may consider necess ary 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 164 having directly or indirectly by him self or his partner, any share or interest in any contract with or under the Grama 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 question or prepare and submit any statement; (d) in the event of an explanation being required from the Adhyaksha or other member of the Grama panchayat, in writing invite such person to meet him and shall in writing specify the point on which explanation is required. (4) Any person who willfully 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. (5) The auditor shall, within one month after the completion of audit, forward a copy of the audit report to the Grama Panchayat and to the Executive Officer. (6) On receipt of the audit report, the Grama 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 inti mation of its having done so, or shall within the same period furnish to the Executive Officer any further explanation in regard to such defects or irregularities. (7) On receipt of such intimation or explanation in respect of all or any of the matters discussed in the audit report, the Executive officer may, in consultation with the auditor, - (a) accept the intimation or explanation given by the Grama Panchayat and order the withdrawal of the objection, or (b) direct that the matter be reinvestigated 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 Grama Panchayat. (8) The 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 Ex ecutive Officer may direct by an order in writing that such person shall pay to the Grama 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 pa id within two months from the date of such order, the Executive Officer shall take steps to recover it as an arrears of land revenue and credit it to the Grama Panchayat Fund. (9) Any person aggrieved by the order of the Executive Officer, under sub -section (8) may, within thirty days of the receipt by him of a copy of the decision, appeal to the Chief Executive Officer who shall pass such orders as he may deem fit. (10) Any appeal under sub -section (9) pending before the Government on the date of commenc ement of the Karnataka Panchayat Raj Act, 1993 shall stand transferred to the Chief Executive Officer and such appeal shall be decided by him as if it had been filed before him. 165 (11) The 2[Director General, Karnataka State Accounts And Audit Department]2 Department shall submit a summary of observations made in the audit report and rectifications made by the Grama Panchayats to the Government. 1[(12) The 2[Director General, Karnataka State Accounts And Audit Department]2 Department shall submit to the Government a consolidated Annual Report in respect of all the Grama Panchayats of the State and the State Government shall lay such report before both the houses of the State Legislature.]1

247. Presentation of accounts and budget of Taluk Panchayat. - (1) The Finance, Audit and Planning Committee shall cause to be prepared and laid before the Taluk Panchayat at a meeting, which shall be held between the first day of February and the tenth day of March, a complete accounts of the actual and expected receipts and expenditure for the official year ending on the thirty -first day of March next following together with a budget estimate of the income and expenditure, of the Taluk Panchayat for the official year to commence on the first day of April next following. (2) The Taluk Panchayat shall thereupon decide upon the appropriations and the ways and means contained in the budget of the year to commence on the first d ay of April next following. The budget as passed by the Taluk Panchayat shall be sent to the Zilla Panchayat before such date as may be fixed by the Government. (3) In such budget estimate, the Taluk Panchayat shall among other things, - (a) make adequ ate and suitable provision for such services as may be required for the fulfillment of the several duties imposed on the Taluk Panchayat by this Act or any other law; (b) provide for the payment, as they fall due, of all installments of principal and interest for which the Taluk Panchayat may be liable in respect of loans contracted by it; time be fixed by the Government either generally or for any Taluk Panchayat; (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 the Act, the rules or the orders: Provided that the Zilla Panchayat shall not have power to direc t that total proposed expenditure shall exceed the total of the estimated income of the Taluk Panchayat for the following year and the opening balance. (5) If the Taluk Panchayat fails to approve the budget estimate on or before the date mentioned in sub -section (1), the Executive Officer shall forward the budget estimate to the Zilla Panchayat and the Zilla Panchayat shall approve it with or without modification. The budget so approved by the Zilla Panchayat shall be certified by the Chief Executive Offic er and thereupon shall be deemed to have been duly approved by the Taluk Panchayat.

248. Revision of budget. - If, in the course of the official year, the Taluk Panchayat finds it necessary to modify the provisions made in the budget with regard to the re ceipts or to the distribution of the amounts to be expended on the different services it undertakes, it may make such modifications: 166 Provided that no diversion of grants transferred by the Government out of the Consolidated Fund of the State can be made f or a purpose or programme or schemes not covered under such grants: Provided further that, without the approval of the Commissioner; - (a) no reduction of over ten percent shall be made in the grants approved for any developmental functions of the Taluk P anchayat, and (b) the closing balance shall not be reduced below the sum fixed under clause (c) of sub - section (3) of section 247.

249. Supplementary budget. - Supplementary budget may be prepared and submitted when necessary. The Taluk 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 submi tted to the Government for approval.

250. Maintenance of accounts and restriction of expenditure. - (1) Accounts of the income and expenditure of a Taluk Panchayat shall be kept in accordance with such rules as may be prescribed. (2) Expenditure from th e Taluk 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) The Taluk Panchayat shall, within a period not exceeding three months after the close of the official year, pass the accounts of that year.

251. Transmission of accounts. - The Taluk Panchayat shall, as soon as the annual account have been finally passed by it, transmit a copy thereof to the Zilla Panchayat in the form prescribed i n this behalf and shall furnish such details and vouchers relating to the same as the Zilla Panchayat may, from tine to time, direct.

252. Power to write off irrecoverable sums. - Subject to such restrictions as may be prescribed, a Taluk Panchayat may wr ite off any sum due to it, whether under a contract or otherwise, or any sum payable in connection therewith if, in its opinion, such sum is irrecoverable: Provided that, no sum exceeding one thousand rupees shall be written off except with the previous sanction of the Zilla Panchayat.

253. Audit of accounts. - (1) The accounts of the Taluk 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 Comptrol ler and Auditor General (Duties, Powers and Conditions of Service) Act, 1971. (2) The auditor shall, for the purpose of audit, have access to all the accounts and other records of the Taluk Panchayat. (3) The auditor shall send every year to the Government a consolidated audit report in respect of the Taluk Panchayats in the State and the Government shall lay the consolidated report before both the Houses of the State Legislature.

254. Action by Taluk Panchayat on audit report. - The Taluk Panchayat sh all 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 concerned or making such further enquiry as it may consider ne cessary charge any person responsible for irregular expenditure pointed out by the auditor or the amount of any 167 deficiency or loss caused by negligence or misconduct of such person or any sum received which ought to have been, but is not brought into accou nt by such person, and shall , in every such case, certify the amount due from such person. (2) The Taluk 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 mad e.

255. Recovery of amounts disallowed. - (1) Every sum certified by the Taluk Panchayat to be due from any person under sub -section (1) of section 254, shall be paid by such person to the Taluk Panchayat within thirty days from the date of the receipt by him of a copy of the decision. (2) Such sum, if not duly paid along with interest at fifteen percent per annum on the amount due, from the date from which it became due shall be recoverable as an arrears of land revenue along with the necessary expenses of such recovery and shall be credited to the Taluk Panchayat Fund.

256. Presentation of accounts and budget of Zilla Panchayat. - (1) The Finance, Audit and Planning Committee 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 official year ending on the thirty -first day of March next following together with a budget est imate of the income and expenditure, of the Zilla Panchayat for the official year to commence on the first day of April next following. (2) The Zilla Panchayat shall thereupon decide upon the appropriations and the ways and means contained in the budget o f 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) 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 in stallments 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 said year of not less than such sum or percentage of income as may from time to time, be fixed b y the Government either generally for all Zilla Panchayats or specially for any Zilla Panchayat. (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 mon ths from the date of receipt of the budget modify the same to secure compliance with the 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 inco me of the Zilla Panchayat for the following year and the opening balance. (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 so approved by the Government shall be certified by the Government and thereupon shall be deemed to have been duly approved by the Zilla Panchayat. 168

257. Revision of budget. - If, in the course of the official 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 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 also that, without the approval of the Government, - (a) no reduction of over ten percent shall be made in the grants approved for any developmental functions of the Zilla Panchayat, and (b) the closing balance shall not be reduced below the sum fixed under clause (c) of sub - section (3) of section 256.

258. Supplementary budget. - Supplementary budget may be prepared and submitted when necessary. The Zilla Panchayat may at any time during the year for which a budget has been sanctioned by the Government cause a supplementary b udget 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.

259. Maintenance of accounts and restriction of expenditure. - (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) Expenditure from the Zilla Panchayat Fund shall, save as otherwise expressly provided for in this Act, be incurred su bject to such sanctions, conditions and limitations as may be prescribed. (3) The Zilla Panchayat shall, within a period not exceeding three months after the close of the official year, pass the accounts of that year.

260. Transmission of accounts. - 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.

261. Power to write off irrecoverable sums. - Subject to such restrictions as may be prescribed, a Zilla Panchayat may write off any sum due to it, whether under a contract or otherwise, or any sum payable in connection therewith if, in its opinion, such sum is irrecoverable: Provided that, no sum exceeding one thousand rupees shall be written off except with the previous sanction of the Government.

262. Audit of accounts. - (1) The accounts of the Zilla Panchayat fund shall be aud ited by the Comptroller and Auditor General of India (hereinafter referred to as the auditor) in accordance with the provisions of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971. (2) The auditor shall, for the pur pose of audit, have access to all the accounts and other records of the Zilla Panchayat. (3) The Government shall on receipt of the audit report of the Zilla Panchayats lay them before both the Houses of the State Legislature.

263. Action by Zilla P anchayat on audit report. - The Zilla Panchayat shall on the report of the auditor or may on its own motion and after taking the explanation of the person 169 concerned or making such further enquiry as it may consider necessary, charge any person responsible f or 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 ev ery such case, certify the amount due from such person. (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.

264. Recovery of amounts disall owed. - (1) Every sum certified by Zilla Panchayat to be due from any person under sub -section (1) of section 263, 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) Such sum, if not duly paid along with interest at fifteen percent per annum on the amount due, from the date from which it became due shall be recoverable as an arrears of land revenue along with the necessary expenses of such recovery and shall be credited to the Zilla Panchayat Fund.

265. Procedure for recovery of dues of Zilla Panchayat and Taluk Panchayat. - (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 thi s Chapter; or (b) which is claimable as a fee or other amount due to the Zilla Panchayat or Taluk Panchayat under this Act, or under any rules or regulation made thereunder, shall have become payable and remains unpaid for fifteen days after the same is due, the Chief Executive Officer, or the Executive Officer, as the case may be, 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) 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 or the Executive Officer w hy 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) In order to effect the distraint and sale of property under sub -section (2), the Chief Executive Officer or the Executive Officer, as the case may be, or the authorised officer shall issue a warrant in the prescribed form and a warrant fee of one rupee shall be leviable for each such warrant. (4) The Chief Executive O fficer or the Executive Officer, as the case may be, or the authorised officer 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) The Chief Executive Officer or the Executive Officer, as the case may be, or the authorised officer shall give or cause to be given to every person making payment of the amount due, a rece ipt therefor 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, 170 (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) Any sum due to a Zilla Panchayat or Taluk Panchayat under this Act, shall without prejudice to any other mode of collection, be recoverable as an arrears of land revenue.

266. Condit ions of distraint and sale. - (1) Whenever, under section 265 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). (2) All such property as is, by the Code of Civil Procedure 1908, exempt from attachment or sale in execution of the decree shall be exempt from distraint or sale unde r this section. (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 other amount due, and the distraint fee and the probable expenses incidental to the detention and sale of the said property. (4) When the property seized is subject to speedy and natural decay, or if in the opinion of the person seizing the property, the expenses of keeping it in custody together with amount due, exceed s 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. (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. (6) If any claim be set up by a third person to movable proper ty distrained under section 265 the Chief Executive Officer or the Executive officer as the case may be shall after a summary enquiry held after giving reasonable notice to the claimant admit or reject the claim. If the claim be admitted wholly or partly t he property shall be dealt with accordingly. Except in so far as it is admitted, the property shall be sold and the title of the purchaser shall be good for all purposes, and the proceeds shall be disposed of as hereinbefore directed: Provided that nothin g 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.

267. Finance Commission. - (1) 1[The Governor shall]1 as soon as may be withi n 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 Zilla Panchayats, Taluk Panchayats and Grama Panchayats and to make recommenda tion to the Government as to, - (a) the principles which should govern, - (i) the distribution between the State and the Zilla Panchayats, Taluk Panchayats and Grama Panchayats and the net proceeds of the taxes, duties, tolls and fees leviable by the Go vernment which may be divided between them and allocation between the Zilla Panchayats, Taluk Panchayats and Grama Panchayats of their respective shares of such proceeds; 171 (ii) the determination of the taxes, duties, tolls and fees which may be assigned to or appropriated by the Zilla Panchayats , Taluk Panchayats and Grama Panchayats; (iii) the grants -in-aid to the Zilla Panchayats, Taluk Panchayats and Grama Panchayats from the Consolidated Fund of the State; (b) the measures needed to improve the financial position of the Zilla Panchayats, Taluk Panchayats and Grama Panchayats; (c) any other matter referred to the Finance Commission by the Governor in the interest of sound finance of the Zilla Panchayats, Taluk Panchayats and Grama Panchayats. (2) Finance Commission shall consist of a Chairman and two other members. (3) The Chairman and members of Finance Commission shall possess such qualification and shall be appointed in such manner as may be prescribed. (4) The Finance Commission shall dete rmine its procedure. (5) The Chairman or a member of the Finance Commission may resign his office by writing under his hand and addressed to the Finance Secretary to the Government, but he shall continue in office until his resignation is accepted by the Government. (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 w hich the member or Chairman in whose place he was appointed would have held office. (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; and (c) such other power as may be prescribed. (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 thereon to be laid before both the Houses of the State Legislature 2[within a period of six months ]2. 2. Inser ted by Act 44 of 2015 w.e.f. 25.02.2016. CHAPTER XVIII MISCELLANEOUS