Chapter XIV FINANCE, ACCOUNTS AND AUDIT

(1) There shall be a fund, called the Corporation Fund, which shall be held by the Corporation in trust for the purposes of this Act, and all monies realized or realisable under this Act and all monies otherwise received by the Corporation shall be credited thereto. (2) All moneys received by or on behalf of the corporation by or under this Act or any other law, all taxes, tolls and other imposts, fines, fees, penalties paid to or levied by it under this Act, all proceeds of land or other property sold by the corporation and all rents accruing from its land or property and all interests, profits and other moneys accruing by gifts or transfers from the Government or private individuals or otherwise shall constitute the corporation fund and shall be held, applied and disposed of in accordance with the provisions of this Act, the rules and the regulations made thereunder or any other law for the time being in force. (3) The receipts and expenditures of the Corporation shall be kept under such heads of accounts, in such manner and in such form, as may be prescribed. (4) Every head of account specified under sub section (2) shall be split into a revenue account and a capital account and all items of receipts and expenditures shall be kept appropriately under such revenue account or capital account, as the case may be. (5) The Corporation shall prepare and maintain books of accounts using the double entry accrual system of book keeping, in accordance with the accounting standards recommended by the Institute of Chartered Accountants of India, and in such manner as may be prescribed.

(1) The moneys credited to the Corporation fund from time to time shall be applied for payment of all sums, charges and costs necessary for carrying out the purposes of this Act and the rules and the bye-laws made thereunder and for payment of all sums payable out of the Corporation Fund in accordance with the Karnataka Local Fund Authorities Fiscal Responsibility Act, 2003 (Karnataka Act 41 of 2003) or any other law for the time being in force in the manner prescribed. (2) The Government shall prescribe the procedure for the application of Corporation fund, accounting practices, publication of the financial documents and such other processes for efficient financial management. (g) penalty imposed at the time of issuance of occupancy certificate for not obtaining commencement certificate at the commencement of the construction, at such rate not exceeding 0.25 percent of guidance value of the vacant site under section 45B of the Karnataka Stamp Act, 1957 (Karnataka Act 34 of 1957) multiplied by constructed built up area; (h) penalty for regularization up to 5 percent of violation or deviation in the construction with respect to the sanctioned plan or Zonal regulations limit specified at such rate not exceeding 35 percent of guidance value of the vacant site under section 45B of the Karnataka Stamp Act, 1957 (Karnataka Act 34 of 1957) multiplied by the violated portion; and (i) such other fee as specified by the Government from time to time under this Act and the Karnataka Town and Country Planning Act, 1961 (Karnataka Act 11 of 1963) and the rules made there under.

(1) There shall be constituted a Fund called the Urban Transport Fund which shall consist of,- (a) Urban Transport Cess collected under section 143 of this Act; (b) all grants received from the State Government and Central Government, if any; and (c) any other receipts, interest or any other form of income to this fund. (2) The Urban Transport Fund shall be utilized for,- (a) co-ordinated planning, projects formulation and implementation relating to urban transport and their integrated management; (b) conducting studies, research, promotion and compaign to encourage for use of public transport; (c) capacity building in the urban local bodies, parastatal agencies and in the State Government; and (d) any other purpose as may be prescribed by the State Government. (3) The Directorate of Urban Land Transport shall be the Secretariat to administer the fund constituted under sub-section (1). (4) The accounts of all receipts and expenditure arising out of the Urban Transport Fund shall be kept in such manner and in such form as may be prescribed. (5) The Government shall appoint one of its officers as the auditor who shall subject to supervision and control of the Principal Controller of State Audit and Accounts conduct audit of the Urban Transport Fund and he shall have access to all books of Accounts and to all receipts and expenditure relating to the Urban Transport Fund and the Director of Urban Land Transport or as the case may be the Director of Municipal Administration or the Chief Commissioner of the Corporation or any officer of Corporation shall furnish to him any information concerning any receipt of expenditure which may be required by him. (6) The Director of Urban Land Transport shall prepare Annual Report of the operation of the Fund and furnish the report to the Government for laying before each House of the State Legislature. Audit report and compliance in this regard shall also be laid before each House of the State Legislature.

(1) If the expenditure incurred by the Government or by the Corporation for any purpose authorised by rules is such as to benefit the inhabitants of the city, the corporation may make a contribution towards such expenditure. (2) The Government may direct the corporation to show cause, within a period fixed by the Government in this behalf not being less than one month after receipt of the order containing the direction, why any contribution referred to in sub-section (1) should not be made. (3) If the corporation fails to show cause within the said period to the satisfaction of the Government, the Government may direct it to make such contribution as it shall name and it shall be paid accordingly.

(1) The corporation may, in pursuance of any resolution passed at a special meeting, barrow by way of debenture or otherwise, on the security of all or any of the taxes, duties, fees and dues authorised by or under this Act, any sums of money which may be required,- (a) for the construction of works, (b) for the acquisition of lands and buildings, or (c) to pay off any debt due to Government, or (d) to repay a loan previously raised under this Act or any other law previously in force: Provided that,- (i) no loan shall be raised without the previous sanction of the Government, and (ii) the amount of the loan, the rate of interest and the terms including the date of floating, the time and method of repayment and the like shall be subject to the approval of the Government. (2) When any sum of money has been borrowed under sub-section (1),- (a) no portion thereof shall, without the previous sanction of the Government, be applied to any purpose other than that for which it was borrowed, and (b) no portion of any sum of money borrowed under clause (a) of sub-section (1) shall be applied to the payment of salaries or allowances to any corporation officers or servants other than those exclusively employed upon the works for the construction of which the money was borrowed.

The time for the repayment of any money borrowed under section 184 shall in no case exceed sixty years, and the time for the repayment of any money borrowed for the purpose of discharging any previous loan shall not, except with the express sanction of the Government, extend beyond the unexpired portion of the period for which such previous loan was sanctioned. Provided further that, the private street to be declared as public street shall have connectivity from the public road or public street. (2) On the request of site owners abutting a private street or otherwise such street which was shown by the erstwhile land owner as road in the sale deed made by the land owner and based upon which the abutting building sites were carved out by the land owner, who has obtained the benefit of such road or street upon by making the sale of abutting building sites and upon such road is declared as public street under sub-section (1), in that event the land owner, shall not be eligible for any type of compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (Central Act No. 30 of 2013) or any other law, including Development Rights Certificates under section 14-B of the Karnataka Town and Country Planning Act, 1961 (Karnataka Act 11 of 1963). Explanation:-For the purpose of this section,- (i) "Erstwhile Land Owner" means the person in whose name the agriculture or converted land stood at the time of selling the sites and includes all those persons claiming under or through him; and (ii) "Public Street" means any street, road, square, court, alley, passage or riding path over which the public have a right of way maintained by the Corporation or Government or by any public authorities, whether a thoroughfare or not and includes;- (d) the roadway over any public bridge or causeway; (e) the footway attached to any such street public bridge or causeway; and (f) the drains attached to any such street, public bridge or causeway and the land, whether covered or not by any pavement verandah or other structure which lies on either side of the roadway upto the boundaries of the adjacent property, whether that property is private property or property belonging to the Government or the Corporation.

Notwithstanding anything hereinafter contained, the borrowing powers of the corporation shall be limited so that the sum payable annually for interest and for the maintenance of the sinking funds as hereinafter provided, and for interest and repayment of any sums borrowed otherwise shall not, except with the express sanction of the Government, exceed ten percent of the rateable value of buildings and lands as determined under this Act.

All debentures issued under this chapter shall be in such form as the corporation, with the previous sanction of the Government may determine, and shall be transferable in such manner as shall be therein expressed; and the right to sue in respect of the moneys secured by any of such debentures shall vest in the holders thereof for the time being without any preference by reason of some such debentures being prior in date to others.

When any debenture or security issued under this Act is payable to two or more persons jointly, and either or any of them dies, then, the debenture or security shall be payable to the survivor or survivors of such persons: Provided that nothing in this section shall affect any claim by the representative of a deceased person against such survivor or survivors.

When two or more persons are joint holders of any debenture or security issued under this Act, any one of such persons may give an effectual receipt for any interest or dividend payable in respect of such debenture or security, unless notice to the contrary has been given to the corporation by any other of such persons.

(1) Notwithstanding anything to the contrary contained in this Chapter, the corporation may consolidate all or any of its loans and for that purpose may invite tenders for a new loan (to be called the "Corporation Consolidated Loan, 20....") and invite the holders of corporation debenture to exchange their debentures for scrip of such loan. (2) The terms of any such consolidated loan and the form of its scrip and the rates at which exchange into such consolidated loan shall be permitted, shall be subject to the prior approval of the Government. (3) The period for the extinction of any such consolidated loan shall not, without sanction of the Government extend beyond the farthest date within which any of the loans to be consolidated would be otherwise repayable. (4) The corporation shall provide for the repayment of any such consolidated loan by a sinking fund in the manner laid down in section 204 having regard to the amount transferred to such sinking fund under section 203.

All payments due from the corporation for interest on and repayment of loans shall be made in priority to all other payments due from the corporation.

(1) If any money borrowed by the corporation from the Government, whether before or after the commencement of this Act, or any interest or costs due in respect thereof, be not repaid according to the conditions of the loan, the Government may attach the corporation fund or any part thereof. (2) After such attachment, no person except an officer appointed in this behalf by the Government shall in any way deal with the attached fund; but such officer may do all acts in respect thereof which any municipal authority, officer or servant might have done if such attachment had not taken place, and may apply the proceeds in satisfaction of the arrears and of all interest and costs due in respect thereof and all expenses caused by the attachment and subsequent proceedings: Provided that no such attachment shall defeat or prejudice any debt for which the fund attached was previously charged in accordance with law; but all such prior charges shall be paid out of the proceeds of the fund before any part of the proceeds is applied to the satisfaction of the debt due to the Government.

(1) Every zonal committee shall submit a budget estimate to the Mayor which shall comprise of the required budgetary support for the implementation of the existing schemes, list of capital expenses, required manpower and such other expenses for the purposes of effective implementation of this Act within a particular zone. (2) No zonal committee shall submit a budget estimate to the mayor without consulting with the ward committees and considering its recommendations. (3) The ward committees shall prior to making its recommendations to the zonal committees organize such public consultations as necessary. (4) The format and process for submission of zonal committee budgets estimate shall be as specified. (5) The chief commissioner shall prepare a budget estimate for the Corporation upon considering the budget estimates from all the zonal committees. (6) The budget estimate shall state the following,- (a) The receipts and payments for the previous financial years and expected receipts and payments for the upcoming financial year; (b) Compliance to the medium term fiscal plan; (c) Rates at which various taxes, surcharges, cess and fees that shall be levied by the Corporation for the immediately succeeding financial year; and (d) The amount of money to be raised as a loan amount of money allocated to each zonal committee and the basis for the utilization of such amounts. (7) The budget estimate shall be prepared, presented and adopted in such form and in such manner and shall provide for such matters as may be prescribed.

(1) The standing committee for taxation and finance and appeal shall, on or as soon as may be, after the fifteenth day of January consider the estimates and proposals of the chief Commissioner and after having obtained proposals, if any, of other standing committees and such further detailed information, if any, as it shall think fit to require from the chief Commissioner and having regard to all the requirements of this Act, shall prepare there from, subject to such modifications and additions therein or thereto as it shall think fit, a budget estimate of the income and expenditure of the corporation for the next year. (2) In such budget estimate, the standing committee shall,- (a) provide for the payment, as they fall due of all instalments of principal and interest for which the corporation may be liable on account of loans; (b) provide for the payment as it falls due, of any amount towards contributions, fees or such other amounts as may be payable by the corporation to the Government; (c) allow for a cash balance at the end of the year of not less than Rs. 1,00,000 under General Account Revenue. (3) The Chief Commissioner shall cause the budget estimate as finally approved by standing committee, to be printed and shall, not later than the first day of February, forward a printed copy thereof to each councillor.

The Corporation may from time to time, for specific reasons to be explained in writing, during the financial year,- (a) Increase the amount of any budget grant under any head; (b) Make an additional budget grant for the purpose of meeting any special or unforeseen requirement arising during the said year; (c) Transfer the amount of any budget grant or portion thereof under one head to the amount of budget grant under any other head; and (d) Reduce the amount of the budget grant under any head.

(1) The corporation shall finally pass the budget estimate at least three weeks before the beginning of the year to which it relates and shall forthwith submit a copy thereof to the Government. (2) The Government may sanction the budget in its entirety or subject to such modification as it thinks fit: Provided however that, if within two months of the date of receipt of the budget, the Government does not communicate any orders thereon, the budget shall be deemed to have been sanctioned by the Government.

The Corporation may, on the recommendation of the standing committee for taxation, finance and appeal during the year pass a supplemental budget estimate for the purpose of meeting any special or unforeseen requirements, arising during that year; so however that the estimated cash balance under General Account-Revenue at the close of the year shall not be reduced to less than Rs. 1,00,000: Provided that no item shall be included in the supplemental budget which had been disallowed by the Government while sanctioning the Budget.

(1) If it shall at any time during any year appear to the corporation upon the representation of the standing committee for taxation and finance, that, notwithstanding any reduction of budget grants that may have been made under section 195, the income of the corporation fund during the said year will not suffice to meet the expenditure sanctioned in the budget estimate of the said year and to leave at the close of the year a cash balance of not less than Rs. 1,00,000 under General Account-Revenue, it shall be incumbent on the corporation either to diminish the sanctioned expenditure of the year, so far as it may be possible so to do with due regard to all the requirements of this Act, or to have recourse to supplementary taxation, or to adopt both of these expedients in such measure as may be necessary to secure an estimated cash balance of not less than Rs. 1,00,000 under General Account - Revenue at the close of the year. (2) Whenever the corporation determines to have recourse to supplementary taxation in any year, it shall do so by increasing for the unexpired portion of the year the rate at which any tax or duty is being levied subject to the conditions, limitations and restrictions laid down in Chapter X.

(1) The Mayor in consultation with the Chief Commissioner, Standing Committee for Taxation, Finance and Appeal and Zonal Committees prepare a medium term fiscal plan for the Corporation in a manner as may be prescribed. (2) The medium-term fiscal plan prepared under sub-section (1) shall contain the receipts and payments projections for three years, assumptions underlying projections and evaluation of performance against targets set in the previous budget estimates.

(1) The Corporation shall frame a Comprehensive Debt Limitation Policy applicable in the case of loans, including short term loans, to be raised by the Corporations and laying down the general principles governing the raising of loans by the Corporation having regard to its financial capacity. (2) The Corporation may borrow by way of loan or any other form of credit provided such loan or credit is permitted under the Comprehensive Debt Limitation Policy.

(1) The budget estimate prepared by the Corporation shall be in compliance with the medium term fiscal plan, comprehensive debt limitation policy prepared and those orders issued by Government from time to time. (2) The Government may direct the Corporation to prepare the budget estimate afresh, if it is of the opinion that the budget estimate approved by the council is not in compliance with the medium-term fiscal plan and comprehensive debt limitation policy. (3) No direction under sub-section (2) shall be without providing the Corporation an opportunity of being heard.

(1) The Corporation shall establish a Sinking Fund in respect of each loan raised under this Chapter for the repayment of moneys borrowed and shall, every year pay into such Sinking Fund such sum as shall be sufficient for the repayment, within the period fixed for the loan, of the moneys borrowed. (2) If at any time the sum standing at the credit of a Sinking Fund established under this Act for repayment of any loan is of such amount that if allowed to accumulate at the rate of interest sanctioned, the Chief Commissioner with the prior approval of the Mayor discontinue the further payment towards such a fund.

(1) All moneys paid into a Sinking Fund shall, as soon as possible, be invested by the Corporation in accordance with the investment policy applicable to any public enterprise laid down by the Government (2) All sums received in respect of any investment under sub-section (1) shall, as soon as possible, after their receipt, be paid into the Sinking Fund and shall be invested in the manner laid down in that sub-section. (3) Moneys standing at the credit of two or more Sinking Funds may, at the discretion of the Municipality, be invested together as a common fund, and it shall not be necessary for the Corporation to allocate the securities held in such investments to the several Sinking Funds. (4) Subject to the provisions of sub-section (1), any investment made under this section may, from time to time, be varied or transposed.

The Corporation may apply a sinking fund or any part thereof, in or towards the discharge of the loan or part of a loan for which such fund was created, and until such loan or part is wholly discharged shall not apply the same for any other purpose: Provided that, when any loan or parts thereof have been consolidated the trustees shall transfer to the sinking fund of the consolidated loan so created such part of the sinking funds of the original loans as may be proportionate to the amount of the original loans incorporated in the consolidated loan.

(1) The Corporation shall, at the end of every year submit to the Government a statement showing,- (a) the amount which has been invested during the year; (b) the date of the last investment made previous to the submission of the statement; (c) the aggregate amount of the securities then in their hands; and (d) the aggregate amount which has, up to the date of the statement, been applied in or towards discharging loans. (2) Every such statement shall be laid before the Corporation and published.

(1) If any money borrowed by the Corporation from the Government, whether before or after the commencement of this Act, or any interest or costs due in respect thereof, be not repaid according to the conditions of the loan, the Government may attach the Palike fund or any part thereof. (2) After such attachment, no person except an officer appointed in this behalf by the Government shall in any way deal with the attached fund; but such officer may do all acts in respect thereof which any Corporation authority, officer or servant might have done if such attachment had not taken place, and may apply the proceeds in satisfaction of the arrears and of all interest and costs due in respect thereof and all expenses caused by the attachment and subsequent proceedings: Provided that, no such attachment shall defeat or prejudice any debt for which the fund attached was previously charged in accordance with law; but all such prior charges shall be paid out of the proceeds of the fund before any part of the proceeds is applied to the satisfaction of the debt due to the Government

(1) The Corporation shall appoint a Chief Financial Officer who shall guide the Corporation on all financial matters and perform such duties as allocated by the Mayor or the Chief Commissioner from time to time. (2) The Chief Financial Officer shall be of such rank and designation as may be specified by the Government.

(1) The Chief Commissioner, within two months of the close of a financial year, cause to be prepared an annual financial statement containing an income and expenditure account, cash flow statement and receipts and payments account for the preceding financial year in respect of the accounts of the Corporation, and a balance sheet as of the last day of the preceding financial year, along with schedules to the above and notes to accounts including significant accounting policies including details of contingent liabilities and any other such information as may be useful in understanding the financial statements clearly. (2) The form of the financial statement and the balance sheet, and the manner in which the financial statement and the balance sheet shall be prepared in a manner such as may be prescribed.

(1) The accounts of all receipts and expenditure of the corporation shall be kept in such manner and in such form as may be prescribed. (2) The Government shall appoint one of its officers as the Corporation Chief Auditor who shall subject to the supervision and control of the Controller of State Accounts conduct an audit of the corporation accounts and for this purpose, he shall have access to the corporation accounts and to all receipts and expenditure relating thereto and the Chief Commissioner shall furnish to him any information concerning any receipt or expenditure which may be required by him. (3) Subject to the provisions of any law for the time being in force, the audit of all transactions of receipts and expenditure of the Corporation shall be subject to technical guidance and supervision of the Comptroller and Auditor General of India and he shall send the annual technical inspection report to Government for being placed before both Houses of the State Legislature. (4) The Controller, State Audit and Accounts Department shall send Consolidated Annual Audited Report pertaining to the Corporation to the Government for being placed before both Houses of the State Legislature. (5) The Chief Auditor of Corporation shall report to the prescribed Corporation authority any material impropriety or irregularity which he may at any time observe in the expenditure or in the recovery of moneys due to the corporation or in the corporation accounts and shall furnish information in respect of such matter as may be laid down in the rules. (6) He shall be paid such salary and allowances as the Government may determine and shall be entitled to privileges in accordance with the rules and regulations of the branch of the Government service to which he belongs and in force for the time being and the corporation shall make such contribution towards his leave, allowances, pension and provident fund as may be payable under such rules and regulations by him or on his behalf from the corporation fund.