Chapter XV FINANCE, ACCOUNTS AND AUDIT

(1) The City Corporations shall be formed in such a manner that they are economically viable to undertake all their the obligatory and mandatory functions.

1. (2) In case of any of the City Corporations are not in a position to raise enough resources on its own to carry out its obligatory and mandatory functions and their establishment cost, the State Government shall provide grants in aid to such City Corporations to meet the resource gap.
2. (3) The State Finance Commission under Article 243Y of the Constitution of India shall give recommendations to the State Government for such grant-in- aid to one or more of the City Corporations after evaluating the sources of revenue and the expenses in each of the City Corporations. The State Finance Commission shall also identify the potential sources of revenue which can be raised in each City Corporation along with the rates and the efficacy of the collection; as also providing incentives to the Ward for revenue mobilization.
3. (4) There shall be for each City Corporations constituted under this Act a City Corporation Fund which will receive monies from all the sources of the revenue including the grant-in-aid provided by the State Government.
4. (5) The City Corporation Fund shall be held, applied and disposed of in accordance with the provisions of this Act, the rules and the regulations made there under or any other law for the time being in force.
5. (6) Every head of accounts shall be suitably categorised into revenue account and capital account and all items of receipts shall be kept appropriately under such revenue account or capital account as the case may be.
6. (7) The expenditure from the City Corporation Fund shall be kept appropriately under such revenue account or capital account, as the case may be.
7. (8) The City 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. (1) The moneys credited to the City Corporation fund from time to time shall be applied for payment of all sums, charges and costs necessary for carrying out the purposes of the Act and the rules and the bye-laws made there under and for payment of all sums payable out of the City 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. (2) The Government shall prescribe the procedure for the application of City Corporation fund, accounting practices, publication of the financial documents and such other processes for efficient financial management.

Urban Transport Fund.- (1)There shall be constituted a Fund called the Urban Transport Fund which shall consist of,-

1. (a) Urban Transport Cess collected under the Act;
2. (b) All grants received from the State Government and Central Government, if any; and
3. (c) Any other receipts, interest or any other form of income to this fund.

1. (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, Public Authorities and in the State Government; and
   • (d) any other purpose as may be prescribed by the State Government.
2. (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.
3. (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 Commissioner of the City Corporation or any officer of City Corporation shall furnish to him any information concerning any receipt of expenditure which may be required by him.

1. (6) The Commissioner 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.

Contribution to expenditure by the City Corporation.- (1)If the expenditure incurred by the Government or by the City Corporation for any purpose authorised by rules is such as to benefit the inhabitants of the City, the City Corporation may make a contribution towards such expenditure.

1. (2) The Government may direct the City 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.
2. (3) If the City 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) If any money borrowed by the City 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 City Corporation fund or any part thereof.

1. (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

Preparation of the City Corporation budget.- (1)Every 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 man power and such other expenses for the purposes of effective implementation of the Act within a particular zone.

1. (2) No committee shall submit a budget estimate to the Mayor without consulting with the ward committees and considering its recommendations.
2. (3) The ward committees shall prior to making its recommendations to the committees organize such public consultations as necessary.
3. (4) The format and process for submission of committee budgets estimate shall be as specified.
4. (5) The Commissioner shall prepare a budget estimate for the City Corporation upon considering the budget estimates from all the committees.
5. (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 City 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 committee and the basis for the utilization of such amounts.
6. (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.

taxation, finance and appeals.- (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 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 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 City Corporation for the next year.

1. (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 City 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 City Corporation to the Government;
   • (c) allow for a cash balance at the end of the year of not less than one lakh of rupees under General Account Revenue.
   • (d) The 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 City Corporation may from time to time, for specific reasons to be explained in writing, during the financial year,-

1. (a) Increase the amount of any budget grant under any head;
2. (b) Make an additional budget grant for the purpose of meeting any special or unforeseen requirement arising during the said year;
3. (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
4. (d) Reduce the amount of the budget grant under any head.

The City 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 there of to the Government.

1. (2) The Government may sanction the budget in its entirety or subject to such modification as it thinks fit: Provided that, if within two months from 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 City 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 one lakh of rupees: Provided that no item shall be included in the supplemental budget which had been disallowed by the Government while sanctioning the Budget.

Re-adjustment of income and expenditure to be made by the City Corporation during the course of the official year whenever necessary.- (1) If it shall at any time during any year appear to the City 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 this Chapter, the income of the City 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 one lakh of rupees under General Account-Revenue, it shall be incumbent on the City Corporation either to diminish the sanctioned expenditure of the year, so far as it may be possible 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 one lakh of rupees under General Account-Revenue at the close of the year.

1. (2) Whenever the City 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 this Act.

(1)The Mayor in consultation with the Commissioner, Standing Committee and ward Committees prepare a medium-term fiscal plan for the City 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. (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 City Corporation shall frame a Comprehensive Debt Limitation Policy applicable in the case of loans, including short term loans, to be raised by the City Corporations and laying down the general principles governing the raising of loans by the City Corporation having regard to its financial capacity.

1. (2) The City Corporation may borrow by way of loan or any other form of credit provided such loan or credit is permitted under the Comprehensive Debt

Mandatory compliance.- (1) The budget estimate prepared by the City 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.

1. (2) The Government may direct the City Corporation to prepare the budget estimate a fresh, 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.

1. (3) No direction under sub-section (2) shall be given without providing the

Establishment of Sinking Fund.- (1) The City 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.

1. (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 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 City 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 in to 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 City 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 trans posed.

1. (2) All sums received in respect of any investment under sub-section (1) shall, as soon as possible, after their receipt, be paid in to the Sinking Fund and shall be invested in the manner laid down in that sub-section.
2. (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 City Corporation to allocate the securities held in such investments to the several Sinking Funds.
3. (4) Subject to the provisions of sub-section (1), any investment made under this section may, from time to time, be varied or trans posed.

The City 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.

Corporation shall, at the end of every year submit to the Government a statement showing,- (i)the amount, which has been invested during the year;

(ii)the date of the last investment made previous to the submission of the statement; (iii)the aggregate amount of the securities then in their hands; and (iv)the aggregate amount which has, upto the date of the statement, been applied in or towards discharging loans.

1. (2) Every such statement shall be laid before the City Corporation and published.

Corporation shall appoint with the approval of the Government, a Chief Financial Officer who shall guide the City Corporation on all financial matters and perform such duties as allocated by the Mayor or the Commissioner from time to time.

1. (2) The Chief Financial Officer shall be of such rank and designation as may be specified by the Government.

(1) The 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 City 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.

1. (2) The form and the manner of preparation of financial statement and the balance sheet, and the balance sheet shall be as such as may be prescribed.

(1) The accounts of all receipts and expenditure of the City Corporation shall be kept in such manner and in such form as may be prescribed.

1. (2) The Government shall appoint one of its officers as the City Corporation Chief Auditor who shall subject to the supervision and control of the Controller of State Accounts conduct an audit of the City Corporation accounts and for this purpose, he shall have access to the City Corporation accounts and to all receipts and expenditure relating thereto and the Commissioner shall furnish to him any information concerning any receipt or expenditure which may be required by him.
2. (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 City 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.
3. (4) The Controller, State Audit and Accounts Department shall send Consolidated Annual Audited Report pertaining to the City Corporation to the Government for being placed before both Houses of the State Legislature.
4. (5) The Chief Auditor of City Corporation shall report to the prescribed City 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 City Corporation or in the City Corporation accounts and shall furnish information in respect of such matter as may be laid down in the rules.
5. (6) He shall be paid such salary and allowances as the Government may determine and shall been titled 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 City 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 City Corporation fund.
6. (7) There shall be constituted an Adhoc Audit Committee with the following members and chairperson for the purpose of examining the audit reports submitted to the Government and evaluating the replies and compliance thereof by the City Corporations or the Greater Bengaluru Authority and taking decisions on the replies or compliances,–
   • (i) Additional Chief Secretary, Urban Development Department – Chairperson
   • (ii) Chief Commissioner of the Greater Bengaluru Authority/Commissioner of the City Corporation – Member
   • (iii) Special Commissioner/Additional Commissioner/Joint Commissioner in-charge of audit in the Greater Bengaluru Authority/City Corporation –Member Secretary
   • (iv) Officer of the State Audit and Accounts Department – Member
   • (v) Chief Auditor of the Greater Bengaluru Authority/the City Corporation – Member
   • (vi) Any other officer nominated by the Chairperson