CAG Report On Local Governance in Kerala 2011-12

Report of the
Comptroller and Auditor
General of India
For the year ended 31 March 2012
(Local Self Government Institutions) Government of Kerala
PREFACE
This Report is prepared for submission to the Governor under Article 151 of the Constitution. The findings arising from performance audit and audit of accounts of Local Self-Government Institutions (LSGIs) for the years up to 2002-03 were included in the Report (Civil) of the Comptroller and Auditor General of India (CAG). From 2003-04 onwards, a separate Report of the CAG on LSGIs is prepared each year for inclusion of audit findings relating to LSGIs. Chapter I of this Report contains an overview of organisation, devolution and accountability framework of LSGIs. In Chapter II, Finances and Financial Reporting issues of LSGIs and comments arising from supplementary audit under the scheme of providing Technical Guidance and Supervision to the Director of Local Fund Audit under Section 20 (1) of the CAGs (DPC) Act, 1971 are included. The remaining chapters contain audit observations arising from performance and thematic audits and audit of accounts of all categories of LSGIs viz., District Panchayats, Block Panchayats, Grama Panchayats, Municipal Corporations and Municipalities. The cases mentioned in the Report are among those which came to notice in the course of test audit of accounts during the year 2011-12 as well as those which had come to notice in earlier years, but could not be included in previous Reports. Matters relating to the period subsequent to 2011-12 have also been included, wherever necessary.
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OVERVIEW This Report comprises four chapters of which Chapters I and II contain an overview of structure, accountability, finances and financial reporting issues of Local Self-Government Institutions (LSGIs) and comments arising from supplementary audit under the scheme of providing Technical Guidance and Supervision (TGS) arrangement. Chapters III and IV contain four performance/thematic audits and seven transaction audit paragraphs. Copies of draft performance and thematic audits and transaction audit paragraphs were forwarded to the Government and replies, wherever received, have been duly incorporated. Accountability framework, finances and financial reporting issues of LSGIs The District Planning Committees (DPCs) had not prepared the Draft Development Plan. Thus, the DPCs did not discharge their constitutional obligations of preparing and forwarding District Development Plan to the Government for integration with State Plan. Though individual LSGIs plans were approved by the DPCs, their final consolidation into an integrated District Development Plan, encapsulating the aspirations and felt needs of the rural populace, could not materialise and therefore the State Plan, to that extent, lacked popular support at the grassroots level. (Paragraph 1.5.1) The amount spent for productive sector accounted for only 14 per cent of the total Development Expenditure incurred by LSGIs during 2011-12. High incidence of establishment expenses (including salary) was noticed in Urban Local Bodies. Utilisation of funds by LSGIs on the implementation of Centrally Sponsored Schemes was substantially low (11.94 per cent). Substantial portion of the funds amounting to ` 1911.38 crore released by Government of India (GOI)/ State Government, was lying unspent with LSGIs, Kudumbashree, Poverty Alleviation Units and Kerala Sustainable Urban Development Project. On account of short utilisation of funds during 2009-10, ` 279.73 crore was deducted from budget allocation for 2011-12 under Development Expenditure and Maintenance Expenditure Funds. The LSGIs were not adhering to the procedures laid down for reporting monthly progress of expenditure to the concerned authorities and were not preparing monthly accounts. Maintenance of primary financial records by LSGIs was defective. The database revealing the consolidated picture of the finances of LSGIs for the year 2011-12 was yet to be uploaded by the LSGIs. (Paragraph 2.1 to 2.8) Implementation of Mahatma Gandhi National Rural Employment Guarantee Scheme Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) provided employment through participative planning duly involving the Panchayat Raj Institutions and village population through Grama Sabhas in order to identify the works to be taken up for generation of employment and creation of durable assets. The Scheme resulted in empowerment of women and fostering social equity in the State. v
Audit Report (LSGIs) for the year ended March 2012
There was delay in convening Grama Sabhas for identification and recommendation of works and also in forwarding labour budget and action plans from Grama Panchayats (GP) to block level. Out of the 14.16 lakh households provided with employment as at the end of March 2012, the State provided 100 days of employment only to 1.24 lakh households (8.76 per cent). Though the State had to bear only 25 per cent of the material cost, failure of the Government to contribute even this minimum 10 per cent of the total cost of the project (25 per cent of 40 per cent material cost to be borne by the State) resulted in non-creation of durable assets. Due to lack of inclination to fund the material component, the selection of works was restricted to bush/jungle clearance, grass cutting, etc., which did not result in any enduring outcome. Though the Act stipulates payment of unemployment allowance, it is generally avoided by merging the demand for work and provision of work. Work was not seen provided as and when demanded by the job seeker, thereby defeating the concept of a rights-based demand driven scheme. In Malappuram District, though employment was not provided to 46 workers, the unemployment allowance due to them was also not paid. Improper maintenance and tampering of Muster Rolls by way of erasing, cutting, overwriting, etc., was noticed in nine GPs in Thiruvananthapuram District. Transparency and accountability in various stages of implementation was not ensured. The potential benefit of convergence of MGNREGS with other rural development schemes has not been tapped for creation of sustainable outcomes. (Paragraph 3.1) Assessment, levy and collection of taxes in Thiruvananthapuram Municipal Corporation Thiruvananthapuram Municipal Corporation (TMC) does not have a definite system to identify and list all buildings liable for Property tax assessment. An amount of ` 8.81 crore was not levied due to not bringing all assessees in the tax net/not collecting tax at the appropriate rate. Lack of comprehensive database relating to Profession tax has affected tax collection to a great extent. Non-levy of Entertainment tax on films screened and programmes conducted by Film Societies, has adversely affected revenue collection. Delay in collection of revenue has an adverse impact on the development and welfare projects of TMC. (Paragraph 3.2) Total Sanitation Campaign As there was no comprehensive assessment of beneficiaries/requirement of latrines in rural and tribal areas, a number of Below-Poverty-Line households were not provided with Institutional Household Latrines. Many of the Community Sanitary Complexes (CSCs) constructed were not properly maintained due to lack of initiative of Panchayat Raj Institutions. A large number of CSCs were constructed in locations which do not provide unhindered access to public. There was shortage of 17759 toilets/ urinals in
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Overview
3080 schools in the State. Girl Friendly Toilets were not available in 2912 (94 per cent) out of 3087 Girls/ mixed schools in the four districts test-checked. Out of 4234 Anganwadis functioning in Government buildings in the four districts test-checked, 2641 Anganwadis (62 per cent) had no Baby Friendly Toilet and 54 numbers did not have any toilet at all. There was poor utilisation of funds earmarked for solid and liquid waste management. Out of ` 15.90 crore earmarked for 14 districts, only ` 5.54 crore (35 per cent) was utilised. There was very poor performance in implementation of the component relating to establishment of Rural Sanitary Marts/Production Centres. In the testchecked districts, it was observed that half of the established ones had become non-functional and the functional ones were financially non-viable with very low sales. (Paragraph 3.3) Implementation Brahmapuram of Municipal Solid Waste Disposal Facility at the the for the
Implementation of the project was deficient in many respects. Lapse on part of the consultant/contractor in revising the plan and design of building caused severe damages to the building, rendering it unfit operation. Kochi Municipal Corporation failed to repair the building at risk and cost of the contractor.
Pre-sorting machine, refuse derived fuel plant and vermi-compost plant were idling in the plant premises. The machinery, vehicles and workshop materials purchased for various activities were not taken to stock and those were dumped along with accumulated waste. (Paragraph 3.4) Transaction Audit Audit of financial transactions subjected to test check in various LSGIs revealed instances of misappropriation of money, infructuous/unproductive expenditure, excess/avoidable payment, idle investment and other irregularities as mentioned below: Failure to exercise proper internal checks led to misappropriation of ` 1.77 lakh in Kerala Sustainable Urban Development Project, Thiruvananthapuram. (Paragraph 4.1) Kadakkal Grama Panchayat, Varkala and Pathanamthitta Municipalities created a liability for payment of service tax of ` 42.98 lakh from own resources due to non-collection of the same from the tenants. (Paragraph 4.2) Sulthan Bathery Grama Panchayat made excess payment of ` 27.92 lakh towards electricity charges for 94 Sodium Vapour Lamps due to its failure to verify the demand raised by Kerala State Electricity Board. (Paragraph 4.3) One hundred and eighty six Local Self-Government Institutions of Ernakulam and Kottayam Districts lifted 4013.499 MT of foodgrains during 2007-08 under Sampoorna Gramin Rozgar Yojana Scheme, of which foodgrains worth
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` 7.38 crore remained unutilised/deteriorated in quality in various godowns

for the past four years. (Paragraph 4.4) Absence of safeguard clause in the agreement for purchase of buses in the event of delayed delivery led to avoidable payment of Excise Duty of ` 1.93 crore and non-utilisation of VTS facilities resulted in unfruitful expenditure of ` 7.27 crore. (Paragraph 4.5) A modern slaughter house constructed at a cost of ` 22.08 lakh in Chelakkara Grama Panchayat by Pazhayannoor Block Panchayat remained nonoperational for the past three years due to non-handing over of the slaughter house to the Grama Panchayat. (Paragraph 4.6) Kochi Municipal Corporation incurred expenditure of ` 69.92 lakh on salt water flushing for mosquito eradication without adequate documentation on account of which the authenticity of payments could not be ensured. (Paragraph 4.7)
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CHAPTER I ORGANISATION, DEVOLUTION AND ACCOUNTABILITY FRAMEWORK OF LOCAL SELF-GOVERNMENT INSTITUTIONS

1.1 Introduction
The Seventy-third and Seventy-fourth amendments of the Constitution of India giving constitutional status to Local Self-Government Institutions (LSGIs), established a system of uniform structure, regular elections and flow of funds. Consequent to these amendments, the State Legislature passed the Kerala Panchayat Raj Act, 1994 (KPR Act) and the Kerala Municipality Act, 1994 (KM Act) to enable LSGIs to work as third tier of the Government. The Government has also identified and amended other related laws to empower LSGIs. As a follow-up, the Government entrusted LSGIs with such powers, functions and responsibilities as to enable them to function as Institutions of Local Self-Government. In particular, LSGIs are required to prepare plans and implement schemes for economic development and social justice, including those included in the Eleventh and Twelfth Schedules of the Constitution.
1.1.1 Status of transfer of functions and functionaries

Under KPR Act and KM Act, it shall be the duty of LSGIs to meet the requirements of the area of their jurisdiction in respect of the matters enumerated in the respective Schedules of the Acts, and LSGIs shall have the exclusive power to administer the matters enumerated in Schedules and to prepare and implement schemes relating thereto for economic development and social justice. The Acts envisaged transfer of functions of various Departments of the Government to LSGIs together with the staff to carry out the functions transferred. The transfer of functions to different tiers of LSGIs was to be done in such a way that none of the functions transferred to a particular tier overlapped with that of the other. The Eleventh Schedule of the Constitution contains 29 functions pertaining to the Panchayat Raj Institutions (PRIs). As mandated by KPR Act, the Government transferred (September 1995) 26 of these functions to PRIs. The functions relating to minor forest produce, distribution of electricity and implementation of land reforms were yet to be transferred to PRIs. Likewise, the Twelfth Schedule of the Constitution contains 18 functions pertaining to Urban Local Bodies (ULBs). The Government has transferred 17 functions mandated under KM Act to ULBs and the function relating to fire service is yet to be transferred. The services of related officers were also transferred to LSGIs. In addition to the functions mandated under the Constitution and the State Local Bodies Acts, LSGIs also undertake agency functions like World Bank aided projects, Asian Development Bank aided projects, etc., on behalf of both Central and State Governments to implement development programmes.
1.2
State profile
The comparative demographic and developmental picture of the State is given in Table 1.1. Keralas rate of population growth is Indias lowest and Keralas
decadal growth (4.86 per cent in 2011) is less than one-third of the all-India average of 17.64 per cent. Women constitute 52.01 per cent of the population. Kerala has the highest literacy rate (93.91 per cent) and has the highest life expectancy (74 years) among Indian states. The service sector, along with the agricultural and fishing industries, dominate Keralas economy.
Table 1.1: Important statistics of the State
Sl. No. 1 2 3 4 5 6 7 8 9 10 11 Population Population density Urban population GDP from primary sector Gender ratio Population below poverty line Literacy Birth rate Infant mortality rate Unemployment rate Gross Domestic Product (201112) at current prices Indicator Crore Per Sq Km Per cent Per cent Females per 1000 males Per cent Per cent Per 1000 population Per 1000 population Per cent ` in crore Unit State value 3.34 859 47.72 14.94 1084 11.4 93.91 14.8 13 16.7 326693 National value 121.02 382 31.16 20.4 940 21.8 74.04 22.1 47 6.6 8279976
Source: Economic Review 2010-11 of Kerala State Planning Board, SRS Bulletin December 2011
1.3
Profile of LSGIs
As on 31 March 2012, there were 1209 LSGIs in the State. The details of the area, population, etc., are presented in Table 1.2.
Table 1.2: Comparative position of LSGIs
Level of LSGIs Number Number of wards Average area per LSGI (Sq.Km) Average population per LSGI
District Panchayats (DPs) Block Panchayats (BPs) Grama Panchayats (GPs) Municipal Corporations Municipalities Total
14 152 978 5 60 1209 359 2216 19255 16680
2651.70 244.24 37.16 95.60 23.65 -
1903357 175309 26674 491240 51664 -
1.4
Organisational set up
LSGIs constituted in rural and urban areas are referred to as PRIs and ULBs respectively. In the three-tier Panchayat Raj system in the State, each tier functions independently of the other. The Government in Local Self-Government Department (LSGD) is empowered to issue general guidelines to LSGIs in accordance with the National and State policies in matters such as finance, maintenance of accounts, office management, formulation of schemes, selection of
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Chapter I Organisation, Devolution and Accountability Framework of LSGIs
sites and beneficiaries, proper functioning of Grama Sabha, welfare programmes and environmental regulations, and LSGIs have to comply with such directions. The Government also conducts periodical performance audit in respect of the administration of LSGIs. Chart 1.1 depicts the organisational set up (as at the end of March 2012) in LSGD and LSGIs to execute the functions of the Government and that of LSGIs.
Chart 1.1: Organisation chart of LSGD and LSGIs
State Level
Local Self-Government Department
Minister, Panchayats
Minister, Rural Development
Minister, Municipalities & Corporations
Principal Secretary
Secretary
Panchayat Director
Urban Affairs Director
Chief Town Planner
Rural Development Commissioner
Chief Engineer (LSGD)
State Performance Audit Officer
Director
KREWS
IKM
Kudumba shree
Suchitwa Mission
SRRDA
Development Authorities
KLGSDP
KILA
SIRD
KLGDF
KURDFC
KSUDP
KREWS- Kerala Rural Employment and Welfare Society, IKM- Information Kerala Mission, SRRDA-State Rural Road Development Agency, KLGSDP-Kerala Local Government Service Delivery Project, KILA-Kerala Institute of Local Administration, SIRD- State Institute of Rural Development, KLGDF- Kerala Local Government Development Fund, KURDFC- Kerala Urban and Rural Development Finance Corporation, KSUDP - Kerala Sustainable Urban Development Project
LSGIs Level
The members of each tier of PRIs elect the President, Vice-President and Chairpersons of the Standing Committees. Similarly, Councillors of the Municipality/Municipal Corporation elect the Chairperson/Mayor, ViceChairperson/Deputy Mayor and Chairpersons of the Standing Committees. The President/Chairperson/Mayor is the Chief Executive Head of LSGIs. Each LSGI has a Secretary who is the Chief Executive Officer.
1.4.1 Standing Committees

To execute the various functions of LSGIs, Standing Committees have been constituted (four each for GPs and BPs, five for DPs, six for Municipalities and eight for Corporations) with elected representative as the Chairperson and the Secretary as the Chief Executive Officer. The type, role and responsibilities of Standing Committees are given in Appendix I.
1.5 1.5.1
Decentralised Planning District Planning Committees
In pursuance of Article 243ZD of the Constitution of India and Section 53 of KM Act, the Government constituted District Planning Committee (DPC) in each district. The procedure to be followed in the meeting of the Committee is governed by Kerala District Planning Committee (Election of Members and Proceedings of Meeting) Rules, 1995. The tenure of DPC is five years. The Committee consists of 15 members of whom: twelve members are from among the elected members of Panchayats at district level and of Municipalities in the district in proportion to the ratio between the population of rural areas and of urban areas in the district; President of DP in that district; District Collector; and one person having considerable experience in the administration and planning, nominated by the Government.
The members of the House of the People and members of the Legislative Assembly of the State, representing any area comprised in a district are permanent
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invitees to DPC. A member of the Council of States (Rajya Sabha) representing the State is a permanent invitee to the DPC of the district in which he is registered as elector in the electoral roll of any Municipality or Panchayat. A member nominated to the Legislative Assembly of the State is a permanent invitee to the DPC of the district in which he ordinarily resides. The President of DP is the Chairman and District Collector is the member Secretary of the DPC. The functions of the DPC include scrutiny and approval of annual plans of LSGIs, consolidation of plans prepared by LSGIs and preparation of draft development plan for the district. The DPC is to monitor the quantitative and qualitative progress, especially its physical and financial achievements in the implementation of the approved District Plan Schemes and State Plan relating to the district and is to evaluate the action programmes already completed. The Government, while preparing the State Plan, considers the proposals and priorities included in the draft development plan prepared for each district by DPC. However, since the draft development plans were not prepared by the DPCs for the year 2011-12 as highlighted below, the priorities and plans for projects and schemes based on the felt needs of the populace were not reflected in the State Plan. As per the orders issued by the Government, each LSGI is required to prepare its annual plan in a twelve step process beginning from situation analysis by working groups to DPC approval. DPCs are constitutionally responsible to consolidate the plans prepared by LSGIs in the district and to prepare a draft development plan for the district as a whole for onward transmission to the Government. DPCs are expected to play a crucial role in the planning process. From the data made available to audit by the 14 DPCs, Audit noticed certain deficiencies in their activities during 2011-12 as mentioned in Table 1.3.
Table 1.3: Functioning of DPCs
Particulars Provisions in the Act Audit findings
Preparation of In terms of Article 243 ZD Draft of the Constitution and Development Plan Section 53 of the KM Act, 1994, each DPC has to prepare Draft Development Plan and forward to the Government for approval. The Government, while preparing the State Plan, is required to consider the proposals and priorities included in the Draft Development Plan prepared for each District by DPC. Participation of Expert Members in DPC meeting for approving the District Development Plan Of the 12 members nominated by the Government to the DPC, one shall be a person having considerable experience in administration and planning.
None of the 14 DPCs prepared the Draft Development Plan. Thus, the DPCs did not discharge their constitutional obligations of preparing and forwarding District Development Plan to the Government for integration with State Plan. Though individual LSGIs plans were approved by the DPCs, their final consolidation into an integrated District Development Plan, encapsulating the aspirations and felt needs of the rural populace, could not materialise and therefore the State Plan, to that extent, lacked popular support at the grassroots level. The District Planning Officer, Thiruvananthapuram stated (December 2011) that no steps were taken to consolidate the Draft Development Plan as his Office was not equipped with manpower and allied facilities and for want of specific instructions. The Government nominated (November 2011) the Expert Members in 13 districts. In two districts the Expert Members did not attend any of the DPC meetings held during 2011-12. In 11 districts the Expert Members attended only 50 out of 160 meetings conducted during 2011-12. Audit noticed that out of the 164691 annual 5

Particulars Provisions in the Act Audit findings
projects approved by DPC during 2011-12, 140065 projects (85 per cent) were without obtaining the assistance of the Expert Members. Even though statutory DPC was constituted in Thrissur District in February 2011, the Government had not nominated an Expert Member even as of October 2012. The DPC approved 15703 projects during 2011-12 without the assistance of the Expert Member. In the absence of Expert Member in the DPC meeting, the LSGIs could not obtain expert opinion. Participation of The District Collector being District Collector the Member Secretary of the in DPC meeting DPC, has a key role to ensure that the tasks assigned to the DPC are carried out promptly. While the District Collector, Wayanad attended all the meetings of the DPC, the District Collector, Kozhikode attended none. Attendance of the remaining District Collectors ranged between one (out of 12) and 14 (out of 18).
In order to ascertain the effectiveness of the functioning of DPCs, audit examined the district planning process by DPC, Thiruvananthapuram and noticed the following: Development reports and vision documents for the district were not prepared as instructed (May 2007) by the Government. The Expert Member who has to give expert opinion in planning process did not attend 12 out of 15 DPC meetings. The District Collector did not attend 13 out of the 15 meetings held during 2011-12. As per circular issued by the Government in October 2008, a Committee consisting of the District Planning Officer, Deputy Director of Panchayat, Assistant Development Commissioner (General), District Town Planner, Deputy Director, Economics and Statistics, Regional Joint Director (Urban Affairs) and Expert Member of DPC under the Chairmanship of the District Collector, was to meet at least once in a month to analyse the progress of the planning and implementation of the projects. During 2011-12, no such meeting was held to analyse the progress of the planning and implementation of the projects. As per the Government Order (May 2007) special report was to be submitted by Technical Advisory Group (TAG) to DPC on their assessment of the quality of projects along with suggestions for improving the quality of implementation. Such special report was not submitted by any of the TAGs. In order to avoid duplication, functions of each tier of LSGI have been demarcated in Schedule III to V of KPR Act, 1994. 132 projects with an outlay of ` 9.97 crore in respect of 12 DP/BPs approved by DPC during 2011-12 related to functions not entrusted to that particular DP/BPs. This was tantamount to grant of approval for diversion of funds for unauthorised functions, which was fraught with the risk of duplication and overlapping.
As per instructions issued (July 2008) by the Government, ceiling limits were prescribed for projects formulated by LSGIs based on which DPs and BPs would not formulate projects below ` 10 lakh and ` five lakh respectively. DPC approved 289 projects of Thiruvananthapuram DP, each with outlay below ` 10 lakh with a total outlay of ` 12.87 crore and 603 projects of 11 BPs each below ` five lakh with a total outlay of ` 13.21 crore. This included 207 projects with estimated cost ranging from ` 7875 to ` one lakh. Taking up of small works relating to the functions of GPs by the DP and BPs was against the Government order. Further, formulating too many small projects would dissipate the efforts of DP/BPs and fritter their efforts which ultimately would be of not much use for the targeted population. As per the Government Order issued in May 2011, the last date fixed for approval of annual plans for 2011-12 was 10 June 2011. Audit noticed that the DPC approved the annual plans of LSGIs between 7 July 2011 and 22 October 2011. The process of approval for amended projects continued up to 26 May 2012. This had resulted in delay in implementation/nonimplementation of the projects.
Thus, the functioning of Thiruvananthapuram DPC was not effective during 201112, in view of the deficiencies mentioned above.
1.6
Accountability Framework
1.6.1 Internal control system at the level of LSGIs

The internal control system at the level of each LSGI has been designed by the Government through KPR Act, KM Act, Kerala Panchayat Raj (Manner of Inspection and Audit System) Rules, 1997, Kerala Municipality (Manner of Inspection and Audit System) Rules, 1997 and application of State Governments own rules and policies relating to finance, budget and personnel matters. The significant provisions are given in Appendix II.
1.6.2 Authority and Responsibility of the Government with regard to LSGIs

In accordance with KPR Act and KM Act, the Government exercises its powers in relation to LSGIs as detailed in Appendix III. The KPR Act and KM Act entrust the Government with the following powers so that it can monitor the proper functioning of LSGIs: Call for any record, register, plan, estimate, information from LSGIs; Inspect any office or any record or any document of LSGIs; Arrange periodical performance audit of the administration of LSGIs; Inspect the works and development schemes implemented by LSGIs; and Take action for default by an LSGI President or Secretary.
In addition, the KPR Act and KM Act, inter alia, empower the Secretary, LSGD who is the State Performance Audit Authority at the State level with the following powers:
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Rectification of defects and pointing out mistakes after inspecting the accounts, money transactions, office functioning and public works of LSGIs; To give necessary instructions to LSGIs to take follow up actions on the performance audit report; and To ensure that the performance audit teams are conducting tri-monthly performance audit in all LSGIs.
Further, the Secretary of an LSGI may adopt the following procedure to assist the Government in preventing passing of resolutions which are not in conformity with the Act. The Secretary shall request in writing to LSGI to review any resolution passed by them, if he is of the opinion that the resolution passed by LSGI has not been legally passed or is in excess of the powers conferred by the Act. After discussion of the subject, if LSGI resolves to uphold its earlier decision, the Secretary shall forward LSGI resolution and his opinion thereon to the Government for its decision. The Secretary shall inform the President/Chairperson any direction received from the Government and shall take further action in accordance with the said direction.
Despite the above mentioned duties and powers vested in the Government for the enhancement of quality of public service and governance, Audit noticed numerous deficiencies in the implementation of schemes, matters relating to finance, selection of beneficiaries, etc., as mentioned in Chapters II, III and IV of this Report.
1.6.3 Role of the Government of India as sanctioning authority

The Government of India (GOI) transfers funds to LSGIs under devolved grants on the recommendation of Finance Commission and development grants directly or through the State budget. Both the grants enjoin upon sanctioning authorities in the GOI, the responsibility to ensure proper utilisation of grant money. This is achieved through receipt of progress reports, utilisation certificates and internal audit of scheme accounts in LSGIs by the Internal Auditors of line Ministries. Each sanction of grant is to contain certain conditions of grant-in-aid mentioned in General Financial Rules, 2005.
1.7
Vigilance mechanism
1.7.1 Ombudsman for LSGIs

As envisaged in the KPR Act and KM Act, an Ombudsman for LSGIs was set up in the State in May 2000. The Ombudsman is a high powered quasi-judicial body functioning at the State level. A former judge of High Court is appointed as Ombudsman. The Ombudsman can conduct investigations and enquiries into instances of maladministration, corruption, favouritism, nepotism, lack of integrity, excessive action, inaction, abuse of position, etc., on the part of officials and elected representatives of LSGIs. He can even register cases suo moto if instances
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of the above kind come to his notice. During the period 2011-12, out of 4135 cases (including 2174 old cases), 2174 cases (52.6 per cent) were disposed of by the Ombudsman.
1.7.2 Tribunal for LSGIs

As envisaged in KPR Act and KM Act, a judicial tribunal for LSGIs was set up in the State in February 2004, with a District Judge as the Tribunal to consider appeals/revisions by citizens against decisions of LSGIs taken in exercise of their regulatory functions like issue of licences, grant of permits, etc. All the appeals/revisions filed in the Tribunal are required to be considered and disposed of within two months of filing. As on 31 March 2012, out of 1062 cases, 13 cases (appeal & revision) were pending before the Tribunal.
1.8
Role of State Performance Audit Authority
The Principal Secretary to Government in LSGD is the Performance Audit Authority at the State Level for conducting the performance audit. The State Performance Audit Officer assists the Performance Audit Authority. The performance audit teams constituted under Regional Performance Audit Officers conduct performance audit in Municipalities and PRIs. The Performance Audit Authority shall submit annual reports to the Government which contain common defects in the assessment of tax and the fluctuation in the collection of tax of LSGIs, details regarding mobilisation of more resources, approximate figure of liability of LSGIs and progress regarding refund thereof, problems connected with Panchayat/Municipal administration to which the Government may draw attention and remedies thereof.
1.9
Quality control systems in Directorate of Local Fund Audit
The Director of Local Fund Audit (DLFA) is the Statutory Auditor of LSGIs as per Kerala Local Fund Audit Act, 1994, KPR Act and KM Act. Apart from LSGIs, other local funds such as Universities, Devaswom Boards and Religious and charitable institutions are also audited by DLFA. The Local Fund Audit Department under State Finance Department is headed by a Director and has District offices in all the districts headed by Deputy Directors. The DLFA is to carry out a continuous audit of the accounts of LSGIs and shall send a report to LSGIs concerned and a copy thereof to the Government. DLFA is to specify in the report all cases of irregular, illegal or improper expenditure or of failure to recover money or other property due to the LSGIs. The Acts empower the DLFA to disallow any illegal payment and surcharge the person making or authorising such payment. DLFA can also charge any person responsible for the loss or deficiency of any sum which ought to have been received. DLFA has adopted the Auditing Standards for LSGIs prescribed by the Comptroller and Auditor General of India (CAG). The guidelines issued by CAG for financial attest audit have been accepted by DLFA.
1.10
Role of Comptroller and Auditor General of India
The Comptroller and Auditor General of India conducts audit of substantially financed local bodies under Section 14 (1) of the Comptroller and Auditor General of Indias (Duties, Powers and Conditions of Service) Act, 1971 and audit of specific grants to local bodies under Section 15 of the Act ibid in the office of
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sanctioning authority. The nature of audit by CAG is compliance, performance audit and assessment of internal control system. The attestation of accounts is entrusted to DLFA. The Government had entrusted Technical Guidance and Supervision role of DLFA (Primary External Auditor) to CAG in October 2002 under Section 20(1) of CAG's (DPC) Act, 1971 for a period of five years. Government extended (December 2007) the scheme of Technical Guidance and Supervision for a further period of five years up to March 2013.
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CHAPTER II FINANCES AND FINANCIAL REPORTING ISSUES OF LOCAL SELF-GOVERNMENT INSTITUTIONS

2.1 2.1.1 Financial Profile of LSGIs Funds flow to LSGIs
The resource base of LSGIs consists of funds devolved by State Government, Government of India (GOI) Grants, Own Revenues and Loans from financial institutions. Diagram 2.1 below depicts the funds flow to LSGIs during 2011-12.
Diagram 2.1: Funds flow to LSGIs during 2011-12
*Details of MPLADS/Special Development Fund for MLAs and contributions not included # Includes Own revenue of 921 out of 1209 LSGIs
2.1.1.1
Resources: Trends and Composition
Table 2.1 below shows the composition of resources of LSGIs for the period 200708 to 2011-12. Pie-chart 2.1 shows the source-wise receipts during 2011-12.
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Audit Report (LSGIs) for the year ended March 2012 Table 2.1: Time series data on Resources of LSGIs
(` in crore) Resources Own Revenue: (i) (ii) Tax Revenue Non Tax Revenue 334.42 315.08 649.50 385.36 349.37 734.73 450.76 377.43 828.19 952.97# 952.97 561.79 376.69 938.48 4103.87 2007-08 2008-09 2009-10 2010-11 2011-12 Total
Total Own Revenue State Grant: (i) Traditional Functions (ii) Maintenance Expenditure (Road Assets and Non-Road Assets) (iii) Expansion and Development (iv) Funds for State Sponsored Schemes & State share of Centrally Sponsored Schemes Total State Grant GOI grants: (i) Centrally Sponsored Schemes (ii) Development and expansion Total GOI grant Receipts from loans & other sources Total Receipts
329.98 404.98
363.98 397.52
399.31 448.04
440.47 440.58
644.98 713.94
2178.72 2405.06
1538.44 976.71
1670.23 807.44
1842.29 840.80
2277.72 1358.24
2021.52 1358.45
9350.20 5341.64
3250.11
3239.17
3530.44
4517.01
4738.89
19275.62
454.68
811.12
832.49
1163.79
1280.72
4542.80
-454.68 23.14
-811.12 7.81
-832.49 72.35
-1163.79 812.36
622.84* 1903.56 39.16
622.84 5165.64 954.82
4377.43
4792.83
5263.47
7446.13
7620.09
29499.95
Source: Details of own funds furnished by LSGIs, Finance Accounts of the State for the respective years, information from Commissioner of Rural Development, Information Kerala Mission (IKM), Kerala Urban and Rural Development Finance Corporation (KURDFC), Kerala Sustainable Urban Development Project (KSUDP), Kudumbashree # break up of Tax & Non tax revenue not provided by the LSGIs Road Renovation Scheme Fund of ` 14.44 crore received from GOI during 2010-11 released by the State Government during 2011-12
*includes
12
Chapter II Finances and Financial Reporting Issues of LSGIs Chart 2.1: Source-wise receipts of LSGIs
(figures in per cent) 1 25 12
Own revenue
Traditional Functions 8 Maintenance of Assets Expansion and Development 18 9 State Sponsored Schemes GOI grant Loans
27
During the five year period (2007-08 to 2011-12), the increase in total receipts of LSGIs was 74 per cent. Out of ` 1410.02 crore allotted during 2011-12 under 13 distinct heads, ` 197.27 crore was surrendered (vide Appendix IV). The major surrender was noticed under Major Head 2217-Urban Development. Out of the total allocation of ` 210.51 crore under this head, ` 153.76 crore was surrendered (73 per cent) indicating poor utilisation of fund for implementation of State Sponsored Schemes. Non-utilisation of funds was due to delay in approval of projects and slow implementation of projects.
2.1.1.2
Transfer of funds from the Government and associated audit issues
The Government provides three types of funds to LSGIs from the Consolidated Fund grants, funds for State Sponsored Schemes and State share of Centrally Sponsored Schemes (CSSs). Appendix IV to the Detailed Budget Estimates of the Government gives the LSGI-wise allocation of funds. The Heads of Account in the Detailed Budget Estimates for drawal of funds from the Consolidated Fund along with the releases made during 2011-12, are given in Table 2.2.
13
Audit Report (LSGIs) for the year ended March 2012 Table 2.2: Categories of funds and their release to LSGIs
Sl. No. Category Major Head of Account from which Budget Provision is released Amount released during 2011-12 (` in crore) 3450.56 Routed through Public Account Release mechanism
Grants, World Bank aided Performance grant under KLGSDP 1 , KSUDP, ADB 2 assistance, Thirteenth Finance Commission award, Road Renovation Scheme as per Twelfth Finance Commission award
3604-Compensation and Assignments to Local Bodies and Panchayat Raj Institutions 3054-Roads and Bridges 5054-Capital Outlay on Roads and Bridges
507.68 14.44
Total 2 3 State Sponsored Schemes State share for CSSs 13 Major Heads 4 Major Heads
3972.68 1212.75 145.70 Routed through State Level Nodal Agencies 3 / Poverty Alleviation Units
Grand total
5331.13
The funds are transfer credited to the Public Account by Finance Department in monthly instalments to enable LSGIs to draw money from treasuries. The various procedures involved in the transfer of these funds from the Government to LSGIs are shown in Diagram 2.2.
Kerala Local Government Service Delivery Project Asian Development Bank 3 Kudumbashree, KSUDP, Suchitwa Mission
2
14
Chapter II Finances and Financial Reporting Issues of LSGIs Diagram 2.2: Transfer/Fund flow process
Transfer Process Fund Flow Process
Finance Department
Sanction Order
Finance Secretary issues sanction orders for transfer credit of fund
Consolidated Fund
Transfer credit
Controlling Officers Issue Letter of Authority

Letter of Authority
to LSGIs and mark copy of it to District Treasury Thiruvananthapuram and Transacting Treasuries of LSGIs
Public Account of State Reduction from

total allocation
District Treasury Thiruvananthapuram

Adjustment in accounts
makes corresponding reduction in allocation under the Head of Account opened in the Public Account opened for LSGIs.
The District Treasury Officer/Sub Treasury Officer provides matching funds under the
corresponding Heads of Account of the LSGIs
Providing Matching Fund
Deposit Accounts of LSGIs
Accumulation of funds in Deposit Accounts of LSGIs: Audit scrutiny of funds transferred to Deposit head (8448-Civil Deposits) and its utilisation for the period 2006-2012 revealed that ` 1458.30 crore (General Purpose Fund: ` 354.60 crore, Maintenance Expenditure Fund: ` 237.15 crore and Development Expenditure Fund: ` 866.55 crore) remained unutilised as at the close of March 2012. The accumulation of funds increased every year from 2006-07 due to non/slow implementation of plan schemes by LSGIs. Table 2.3 gives the details of funds released by the Government under various categories during 2011-12.
Table 2.3: Release of the Government Fund under different categories during 2011-12 (` in crore) Type of LSGIs Development Expenditure Fund 154.00 179.84 337.90 357.57 992.21 2021.52 Maintenance Expenditure Fund 55.16 79.74 147.74 21.56 409.74 713.94 General Purpose Fund 81.03 99.13 17.50 22.80 424.52 644.98 Total
Corporations Municipalities District Panchayats (DPs) Block Panchayats (BPs) Grama Panchayats(GPs) Total
290.19 358.71 503.14 401.93 1826.47 3380.44
15
Audit noticed the following points in the release of the Government funds: Delayed release of funds: Monthly transfer credit of fund from Consolidated Fund to Public Account was devised as a means to ensure availability of fund for incurring expenditure by LSGIs. The State Finance Department was required to transfer fund on the first working day of the month. Audit noticed that there was delay in transferring funds ranging from two to 47 days in 24 out of 32 transfer credits made during 2011-12. Delay in issuing Letters of Authority: There were delays in issuing Letters of Authority by the Controlling Officers. Delay ranging from two to 81 days was noticed in 96 out of 128 instalments of LSGI funds released during 2011-12. This included 34 instances where the delay was more than one month of which 25 instances related to Director of Urban Affairs. The delay in issue of Letter of Authority has resulted in deficiency of fund and consequent delay in implementation of projects. Non-release of full amount to LSGIs: Supplementary Nutrition Programme (SNP) is being implemented by LSGIs utilising Development Expenditure Fund. GOI reimburses 50 per cent of the expenditure on SNP to the Government who in turn transfers the money to LSGIs through Child Development Project Officers of Social Welfare Department. As at the end of March 2012, the Social Welfare Department had received ` 112.03 crore from GOI towards reimbursement of expenditure on SNP fund against which the Social Welfare Department transferred only ` 35.18 crore to LSGIs. The Department utilised ` 2.60 crore for another scheme, viz., Wheat Based Nutrition Programme and transferred ` 54.52 crore to a separate account for construction of Anganwadi buildings. The balance ` 19.73 crore was retained by the Department (October 2012). Thus, the Department retained 69 per cent of the fund reimbursed by GOI to LSGIs towards expenditure on the implementation of SNP. Irregular deduction from Development Expenditure Fund: During 201112, the Controlling Officers, under the direction of the Government, deducted ` 30.02 crore from Development Expenditure Fund and remitted the same to Kerala Water Authority towards arrears of water charges of LSGIs. Routine and non-plan expenditure should have been met from either Own Fund or General Purpose Fund. Utilisation of Development Expenditure Fund for routine non-plan expenses was not in order. Deduction from allocation due to short utilisation: As per the Government Order, LSGIs were to utilise at least 80 per cent of the allocation for 2009-10 under Development Expenditure Fund and Maintenance Expenditure Fund. On account of short utilisation of fund during 2009-10, ` 279.73 crore was deducted (Development Expenditure Fund: ` 199.78 crore; Maintenance Expenditure Fund: ` 79.95 crore) from budget allocation for 2011-12. Comparison of the funds released to LSGIs for implementation of annual plans along with the State Plan outlay for the five years of XI Plan is given in Table 2.4.
16
Chapter II Finances and Financial Reporting Issues of LSGIs Table 2.4: State Plan vis--vis Development Expenditure of LSGIs
Year State Plan Outlay Development Expenditure Fund (` in crore) Percentage to State Plan Outlay
2007-08 2008-09 2009-10 2010-11 2011-12 Total
6950.00 7700.47 8920.00 10025.00 11030.00 44625.47
1538.44 1670.23 1842.29 2277.72 2563.76 9892.44
22.13 21.69 20.65 22.72 23.24 22.17
Development Expenditure Fund devolved to LSGIs constituted 22.17 per cent of the State Plan outlay for the period from 2007-08 to 2011-12.
2.1.1.3
Receipts from GOI

Table 2.5: Category-wise release of GOI fund
Category Amount (` in crore) 409.46 148.94 50.00 1280.72 14.44 1903.56
The category-wise release of fund by GOI during 2011-12 is given in Table 2.5.
Thirteenth Finance Commission grant4 Additional Central Assistance for Externally Aided projects for KLGSDP ADB assisted KSUDP Centrally Sponsored Schemes Road Renovation Scheme Fund (received from GOI during 2010-11 released by the State Government during 2011-12) Total
Delay in release of Thirteenth Finance Commission grant: As per the recommendation of the Thirteenth Finance Commission, GOI grant to LSGIs was to be released in two tranches within three days of receipt of funds from GOI or in the first week of the months of July and January of every fiscal year if the grant from GOI was not received till then. Audit noticed that there was delay in the release of Thirteenth Finance Commission grant by State Government to LSGIs. The second instalment of the Finance Commission grant was released in March 2012 instead of January 2012. Further, the additional release of Thirteenth Finance Commission grant of ` 21.66 crore received from GOI in March 2012 was released in May 2012 only. GOI grant for implementation of CSSs: The GOI provided grants amounting to ` 1280.72 crore to LSGIs for implementation of 10 CSSs. The grants were provided to LSGIs through State Budget/ State Level Nodal Agencies (SLNAs)/ Poverty Alleviation Units (PAUs), etc. The details of GOI grants transferred to LSGIs for implementation of CSSs during 2011-12 are given in Table 2.6.
Up to 2010-11, Grants to LSGIs by Central Finance Commission were subsumed in the Development Funds devolved by the State Government. From 2011-12, Central Finance Commission Grants are released in a separate stream (General Basic Grant: ` 315.34 crore; General Performance Grant: ` 53.64 crore, General Performance Grant forfeited by non-performing States: ` 40.48 crore)
17
Audit Report (LSGIs) for the year ended March 2012 Table 2.6: Release of GOI grants during 2011-12
Sl. No. 1 Authority/Agency through which the grant was released State Budget Details of Scheme Jawaharlal Nehru National Urban Renewal Mission Urban Infrastructure and Governance (JNNURMUIG) Integrated Housing and Slum Development Programme (IHSDP) National Rural Livelihood Mission (NRLM) Swarna Jayanti Shahari Rozgar Yojana (SJSRY) Total Sanitation Campaign (TSC) Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) 3 Directly to Poverty Alleviation Unit Swarnajayanti Gram Swarozgar Yojana (SGSY) Indira Awaas Yojana (IAY) Integrated Wasteland Development Programme (IWDP)/ Hariyali 4 By online transfer to the Joint Bank Account of District Programme Coordinator and Joint Programme Co-ordinator Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) Amount (` in crore) 67.86
Directly to State Level Nodal Agencies
6.75 1.00 13.77 1.59 0.06 36.93 181.60 20.11 951.05
Total
1280.72
The Government provided ` 145.70 crore as its share for implementation of CSSs. Thus the total fund for implementation of CSSs during 2011-12 was ` 1426.42 crore. Compared to 2010-11, the GOI grant for implementation of CSSs was ` 116.93 crore more. Substantial increase was noticed in the release of funds for JNNURM5 (161 per cent) followed by MGNREGS6 (35 per cent) over the year 2010-11.
2.1.1.4
Own funds of LSGIs
Own fund consists of tax 7 and non-tax revenue 8 collected by LSGIs as per provisions of Kerala Panchayat Raj Act, 1994 (KPR Act)/Kerala Municipality Act, 1994 (KM Act) and allied Acts. This category also includes income derived from assets of LSGIs, beneficiary contributions, earnest money deposits, retention money, etc. The details of own fund are not compiled and consolidated by the Government as envisaged in the Act. Hence, the details of own fund collection of all LSGIs were not available. Though all LSGIs were requested by audit to furnish the details of own revenue in a pro forma, many of the LSGIs did not respond. As per the details obtained from respective controlling officers/IKM, the own revenue
Release during 2010-11 : ` 25.99 crore Release during 2010-11 : ` 704.23 crore 7 Property tax, Profession tax, Entertainment tax, Advertisement tax, etc. 8 Licence fee, Registration fee, etc.
5
6
18
Chapter II Finances and Financial Reporting Issues of LSGIs
of 921 out of 1209 LSGIs amounted to ` 938.48 crore. There was lack of concerted efforts on the part of LSGIs in generating their own revenues. A review on the collection of revenue by Thiruvananthapuram Municipal Corporation has revealed that an amount of ` 23.42 crore was pending collection (as on 31 March 2012) towards tax revenue. Further, audit noticed that ` 8.81 crore was not levied due to not bringing all assessees in the tax net/not collecting tax at the appropriate rate. High establishment costs in ULBs: The establishment expenses (including salary) of ULBs are to be met from own revenue/General Purpose Fund. As against the ULBs own revenue and General Purpose Fund totalling ` 589.08 crore during 2011-12, ` 679.58 crore was spent towards establishment expenses. Out of ` 333.84 crore towards Development Fund received from the State Government, ` 90.50 crore (27.10 per cent) was diverted for incurring establishment expenditure, which had adverse implications on development works.
2.1.1.5
Loans availed by LSGIs
As per provisions of Kerala Local Authorities Loans Act, 1963, LSGIs raise loans from KURDFC, Co-operative Banks, HUDCO9, etc. Table 2.7 gives the details of loans availed by LSGIs during 2011-12 and loans outstanding as at the end of March 2012.
Table 2.7: Loans availed during 2011-12 and loans outstanding as of 31 March 2012 (` in crore)
Source of loan State Government Co-operative Banks (EMS housing scheme) HUDCO KURDFC TOTAL Loan availed Loans outstanding as at the end of March 2012
27.00 4.34 7.82 39.16
21.94 278.49 22.65 44.70 367.78
2.1.1.6
Application of Resources: Trends and Composition
In terms of activities, total expenditure is composed of expenditure on Productive Sector, Infrastructure Sector, Service Sector and other expenditure. Though all LSGIs were requested to furnish the details of total expenditure incurred in a pro forma, many of the LSGIs did not respond. As per the details obtained from respective Controlling Officers/IKM, the total expenditure incurred by 921 out of 1209 LSGIs amounted to ` 6864.65 crore. Table 2.8 below shows the composition of application of resources of LSGIs on these components for the period from 2007-08 to 2011-12.
Housing and Urban Development Corporation Limited
19
Audit Report (LSGIs) for the year ended March 2012 Table 2.8: Application of resources
Sector 2007-08 2008-09 2009-10 2010-11 2011-12 (` in crore) Total
Productive Sector Infrastructure Sector Service Sector Total Development Expenditure Other Expenditure Total Expenditure
411.79 548.84 1336.56 2297.19 1607.70 3904.89
443.94 589.58 1463.55 2497.07 1951.94 4449.01
511.49 656.11 1842.91 3010.51 2125.96 5136.47
447.69 936.05 2139.26 3523.00 1798.26 5321.26
595.77 1343.41 2306.59 4245.77 2618.88 6864.65
2410.68 4073.99 9088.87 15573.54 10102.74 25676.28
Source: Details furnished by IKM/LSGIs
Low priority to Productive Sector: The amount spent for productive sector accounted for only 14 per cent of the total Development Expenditure during 201112 and 15 per cent of the total Development Expenditure during 2007-12 indicating that the LSGIs had given low priority to Productive Sector like Agriculture, Animal Husbandry, Fishing, etc.
2.1.1.7
Public investment in social sector and rural development through major Centrally Sponsored Schemes Poor utilisation of funds
Public investment in social sector and rural development through major CSSs are made to LSGIs through agencies such as PAUs and SLNAs (viz., Kudumbashree, KSUDP, Suchitwa Mission, etc.). The grants for CSSs enjoin upon sanctioning authorities in GOI the responsibility to ensure proper utilisation of grant money. This is to be achieved through receipt of progress reports, utilisation certificates and internal audit of scheme accounts in LSGIs. The details of funds released by GOI and State Government and its utilisation are given in Chart 2.2 below:
Chart 2.2: Flow chart on funds released and utilised during 2011-12
Net release ` 1570.98 crore
LSGIs
Utilisation
` 187.62 crore
20
Out of ` 2099 crore released by GOI/State Government, substantial portion of the funds amounting to ` 528.02 crore was lying unspent with Kudumbashree (` 66.38 crore), PAU (` 183.74 crore), and KSUDP (` 277.90 crore), thereby defeating the purpose for which the funds were earmarked and released by GOI/State Government. Out of ` 1570.98 crore released, the expenditure incurred by LSGIs was ` 187.62 crore (11.94 per cent)10. The balance amount of ` 1383.36 crore remained unutilised with LSGIs. Thus out of the total amount of ` 2099 crore available for utilisation under CSS, ` 1911.38 crore was remaining unutilised with various agencies.
2.1.1.8
Quality of expenditure
The Thirteenth Finance Commission has made recommendations on the need for improvement in the quality of expenditure to obtain better outputs and outcomes. The availability of better infrastructure in the social, educational and health sector in the country generally reflects the quality of its expenditure. In view of the importance of public expenditure on development heads from the point of view of social and economic development, it is important for the Government to take appropriate expenditure rationalisation measures and lay emphasis on provision of core public goods and services which will enhance the welfare of the citizens. Table 2.9 below shows the key parameters for evaluating the quality of expenditure of LSGIs.
Table 2.9: Components of expenditure with relative share
Year Total expenditure Development Expenditure (DE) Percentage of DE to total expenditure Social Sector Expenditure (SSE) (` in crore) Percentage of SSE to total expenditure
2007-08 2008-09 2009-10 2010-11 2011-12
3904.89 4449.01 5136.47 5321.26 6864.65
2297.19 2497.07 3010.51 3523.00 4245.77
58.83 56.13 58.61 66.21 61.85
1334.89 1461.28 1841.65 2139.26 2306.59
34.19 32.85 35.85 40.20 33.60
Source: Data furnished by LSGIs and IKM
The percentage of DE to total expenditure decreased from 66.21 in 2010-11 to 61.85 in 2011-12 and SSE to total expenditure decreased from 40.20 in 2010-11 to 33.60 in 2011-12. The fall in the ratios reflects deceleration in the commitment of LSGIs to sustain the growth momentum and less emphasis on social infrastructure in the form of health, nutrition, education, etc.
2.1.2 Poor implementation of projects by LSGIs

Under decentralised planning, LSGIs in the State formulated 183365 projects with a total estimate/outlay of ` 8300.07 crore during 2011-12. Of these, the LSGIs had taken up 133952 projects (73.05 per cent) for implementation and had spent ` 4245.77 crore on the projects. Of the works taken up for implementation, only 36966 projects (27.60 per cent) were completed during 2011-12 at a cost of ` 1234.78 crore. The details are given in Table 2.10.
10
Figures furnished by IKM
21
Audit Report (LSGIs) for the year ended March 2012 Table 2.10: Details of projects taken up and expenditure incurred
No. of projects Formulated Type of LSGIs Taken up Completed Outlay of projects formulated Amount (` in crore) Total expenditure on projects Expenditure on completed works Percentage of total expenditure to total outlay
Grama Panchayat Block Panchayat District Panchayat Municipality Corporation Total
141589 15519 8462 13647 4148 183365
103940 12168 5850 9189 2805 133952
28368 3489 1311 2943 855 36966
4775.57 1173.82 1051.07 663.05 636.56 8300.07
2384.43 707.06 563.28 325.69 265.31 4245.77
675.32 242.23 129.49 103.81 83.93 1234.78
49.93 60.24 53.59 49.12 41.68 51.15
The percentage utilisation of fund on the projects was only 51.15. The largest shortfall in the implementation of projects was noticed in Corporations, followed by Municipalities, GPs, DPs and BPs.
2.1.3 Database on LSGIs Finances

Based on the recommendations of the Eleventh Finance Commission, the Comptroller and Auditor General of India (CAG) had prescribed database formats for capturing the finances of all LSGIs. The database formats were prescribed with a view to have a consolidated position of the sector-wise resource and application of funds by LSGIs, details of works executed by LSGIs and their physical progress, etc. The Government accepted (September 2004) the formats prescribed by CAG and a database of LSGIs for the years 2009-10 and 2010-11 was created. Database for the year 2011-12 was yet to be uploaded by LSGIs (August 2012).
2.1.4 Maintenance of community assets

Eleventh/ Twelfth Schedules of the Constitution read with KPR Act, 1994 and KM Act, 1994 devolve the responsibility of maintenance of community assets to LSGIs. The Third State Finance Commission had recommended the maintenance grant for the period 2006-07 to 2010-11 applying 10 per cent annual growth rate. The Government accepted the recommendations for the first four months of 200607. For the remaining period, the Government decided that the horizontal distribution of funds among the LSGIs would be based on the value of actual assets transferred and the need for maintaining such assets for which a separate formula would be evolved. No such formula has been finalised so far pending collection of data regarding type, area, age, etc., of assets under the control of LSGIs. The Government also did not call for any return on nature of asset, year of creation and monetary value of the asset. Further, the asset registers maintained by LSGIs were defective as the registers did not contain details such as physical verification of assets, proper inventorisation of assets, etc.
2.1.5 Liabilities of LSGIs

Information as furnished by 266 LSGIs in 14 districts revealed that liabilities of ` 430.44 crore as detailed in Table 2.11 were outstanding as on 31 March 2012.
22
Chapter II Finances and Financial Reporting Issues of LSGIs Table 2.11: Outstanding liabilities of LSGIs
Nature of liability Salary and DA arrears Work bills Electricity charges of street lights Water charges of public taps Library Cess EMS housing Loan - Co-operative Banks KURDFC Pension Contribution Pension payable to retired employees River Management Fund IT/VAT, Sales Tax, etc. Loan from State Government HUDCO Other items Total
Source: Details furnished by LSGIs & Controlling officers
Amount (` in crore) 5.74 21.98 0.90 6.25 10.46 278.49 44.70 11.71 2.39 0.81 1.78 21.94 22.65 0.64 430.44
2.1.6 Misappropriation, loss, defalcation, etc.

The Kerala Financial Code stipulates that each DDO should report all cases of loss, theft or fraud to the Principal Accountant General and the Government. The Government is required to recover the loss, fix responsibility and remove systemic deficiency, if any. A consolidated statement of the details of misappropriations, losses, theft and fraud is not available with the Government. Table 2.12 shows the details of misappropriation/defalcation reported to Director of Urban Affairs, Commissioner of Rural Development, Project Director, KSUDP, Director of Panchayats and Secretary, LSGD during 2007-08 to 2011-12.
Table 2.12: Misappropriation, loss, defalcation
Name of LSGIs Amount (` in lakh) (Number of items in bracket) Total
Corporations Municipalities Block Panchayats Grama Panchayats KSUDP
2007-08 1.25 (1) 4.13 (1) 14.10 (5) -
2008-09 1.42 (1) 16.82 (6) 0.10 (2) Total
2009-10 0.42 (1) 15.72 (9) 0.50 (1) -
2010-11 3.92 (1) 2.31 (3) 0.37 (2) -
2011-12 0.82 (1) 22.14 (5) 0.19 (1) 13.78 (2)
3.91 (4) 8.05 (2) 56.99 (24) 15.26 (11) 13.78 (2) 97.99 (43)
23
2.2
Legal frame-work for maintenance of accounts
According to Section 215 of KPR Act, 1994 and Section 295 of KM Act, 1994 LSGIs shall prepare annual accounts for every year. The PRIs maintain accounts on cash basis. The Government has accepted the Budget and Accounting formats prescribed by the CAG, based on the Eleventh Finance Commissions recommendations and accounts are maintained accordingly. In respect of the accounting formats based on National Municipal Accounts Manual (NMAM) for ULBs, the Government has issued new accounting rules. The accrual system of accounting has been implemented in all the ULBs as of March 2012. Computerised accrual accounting system is being introduced in PRIs in phases and target to cover all PRIs by the middle of 2012-13 has been set. In the first phase, it has been implemented in 80 GPs. The Government prepared Accounting Rules and developed software 'Saankhya' for the introduction of accrual based accounting in PRIs.
2.3
Financial Reporting Issues
Financial reporting in LSGIs is a key element to ensure accountability of executives. The financial administration of LSGIs including budget preparation, maintenance of accounts, monitoring of expenditure, etc., is governed by the provisions of KPR Act, 1994, KM Act, 1994, Kerala Panchayats (Accounts) Rules, 1965, Kerala Municipal Accounts Manual, Kerala Financial Code, guidelines, standing orders and instructions.
2.3.1 Monthly Progress Reports

According to the guidelines issued (April 2006) by the Government for allocation and drawal of funds, each LSGI shall prepare a Monthly Progress Report (MPR) of Expenditure for obtaining funds for subsequent month. MPR is to indicate budget provision, up to date allotment and expenditure and percentage of expenditure to allotment. LSGIs are required to forward it to designated authorities (Deputy Director of Panchayats for GPs, Assistant Development Commissioner (General) for BPs, Regional Joint Director for Municipalities) by the 10th of subsequent month in respect of Development Expenditure Fund and Maintenance Expenditure Fund. Such authorities are to consolidate them and forward to Director of Panchayats, Commissioner of Rural Development and Director of Urban Affairs respectively by the 15th day of the month. These state level authorities are then required to make state-wise consolidated progress reports of expenditure and forward them to the Secretary to Government, LSGD and to the Secretary, Finance (Expenditure) Department by 20th of the month. DPs and Corporations are required to forward their MPRs by the 10th of the succeeding month to Secretary, LSGD and to Secretary, Finance (Expenditure) Department. Funds for the subsequent months are not to be allotted to those LSGIs which fail to forward the MPRs. These conditions were not adhered to by most LSGIs as mentioned below: Out of 228 MPRs due from DPs and Corporations during 2011-12, Finance Department had not received any MPRs. But Finance Department continued to allot funds for the subsequent months to DPs and Corporations which did not forward the MPRs, in contravention of its own orders.
24
On a scrutiny of MPRs submitted by DPs and Corporations to LSGD, Audit noticed that out of 228 reports due during 2011-12, 29 reports (13 per cent) only were received, resulting in shortfall of 199. As per instructions, DPs and Corporations were to forward MPRs to LSGD directly. But Corporations submitted the MPRs directly to the Director of Urban Affairs, who consolidated and forwarded them to LSGD. Due to adopting a procedure different from that prescribed, MPRs of Thiruvananthapuram Corporation for four months (December 2011 to March 2012) only were received on due dates and the remaining 56 MPRs for 2011-12 were not received. The Secretary, Finance (Expenditure) Department was to receive 36 consolidated MPRs during 2011-12 from Director of Panchayats, Commissioner of Rural Development and Director of Urban Affairs. But the Finance Department has not received any of the MPRs. Laxity in furnishing MPRs by the LSGIs points to the fact that the funds sanctioning authority had not scrupulously observed the responsibility thrust upon them.
2.3.2 Results of Supplementary Audit

The Comptroller and Auditor General of India conducted supplementary audits under Section 20(1) of the Comptroller and Auditor General of Indias (Duties, Powers and Conditions of Service) Act, 1971 on the accounts of 69 GPs, six BPs, four Municipalities and two Corporations during the year 2011-12. The findings of such audit are given in subsequent paragraphs.
2.3.2.1
Quality of Annual Financial Statements
The KPR Act, 1994 read with the Kerala Panchayat Raj (Manner of Inspection and Audit System) Rules, 1997 and the KM Act, 1994 read with Kerala Municipality (Manner of Inspection and Audit System) Rules, 1997 stipulate that the PRIs/ULBs shall prepare Annual Financial Statements (AFS) containing all receipts and payments and Demand, Collection, Balance (DCB) Statements and forward them to the Director of Local Fund Audit (DLFA) after approval by the Panchayat/Municipal Council/Corporation Council not later than 31 July/31 May/31 May respectively of the succeeding year. The Kerala Local Fund Audit Rules, 1996 (KLFA Rules) also empower the DLFA to return the defective AFS submitted for audit. Audit noticed that in 14 GPs there was delay ranging from one to 27 months in forwarding the AFS to DLFA (Appendix V).
2.3.2.2
Preparation of Monthly Accounts
As per Government guidelines for the maintenance of Panchayat/ULB accounts, every Panchayat/ULB shall prepare monthly accounts for every month and place it before the Panchayat committee/ Council at its first meeting held after the 10 th day of every month. Monthly Accounts were not prepared in 20 GPs and one BP (Appendix VI).
25
2.3.2.3
(a) Cash Book
Maintenance of primary financial records
Guidelines for maintenance of Panchayat accounts and Municipal Accounting Manual issued by the Government stipulates that all moneys received and payments made should be entered in the cash book and it should be closed every day. Monthly closing of cash book with physical verification of cash and reconciliation of cash book balance with bank pass book balance under proper authentication was to be made. Supplementary audit revealed the following deficiencies in maintaining cash book by the LSGIs listed in Appendix VII. Cash book is the primary accounting record and over-writing is not permitted. Erasure and over-writing were noticed in cash books maintained by 20 GPs. Daily closing of cash book was not certified by 45 GPs, one BP and one Municipality. 42 GPs, two BPs and one Municipality did not certify the monthly closing of the cash book. 29 GPs, one BP and one Municipality did not reconcile the cash book balance with pass book balance. Physical verification of cash was not done in 29 GPs, one BP and one Municipality. (b) Register of Advances Guidelines for maintenance of Panchayat accounts stipulates that all advances paid are to be recorded in the Register of Advances. Twenty three GPs, two BPs and one Municipality did not maintain Register of Advances during the period covered in audit (Appendix VIII), which could lead to inadequate monitoring of advances. (c) Deposit Register As per paragraph 3.37 of the Government order of June 2003 which prescribed the Accounting Format of Panchayats, each institution has to maintain Deposit Register to watch the receipts as well as adjustment of deposits. The procedures prescribed for the maintenance of Advance Registers were to be followed in the maintenance of Deposit Register. Audit noticed that Deposit Register was not being maintained properly by 20 GPs, three BPs and one Municipality as prescribed (Appendix VIII). (d) Asset Register Kerala Panchayat (Accounts) Rules, 1965, Kerala Municipal Accounts Manuals and Government Order (December 2005) stipulates that each LSGI should maintain an Asset Register in prescribed form containing particulars of assets owned by it. The particulars include description of asset, year of acquisition and cost of acquisition. The scheme guidelines in respect of Sarva Shiksha Abhiyan, Mid Day Meal, MGNREGS, etc., also stipulate recording of assets created in implementing projects under the scheme. Further, Kerala Financial Code stipulates
26
annual physical verification of assets. Audit noticed that Asset Register showing the date of purchase and value of assets as at the end of each accounting year was not maintained by 16 GPs and one Municipality (Appendix VIII), which could have adverse impact on physical verification and proper inventorisation of the assets. (e) Stock Register Stock Register showing opening balance of stock, items received/issued during the year, and balance as at the end of the year was not maintained by nine GPs and one Municipality (Appendix VIII). (f) Budget Section 214 (1A) of the KPR Act, 1994 and Section 287 and 289 of KM Act, 1994 stipulate that each PRI/ULB should prepare the budget estimate for the next financial year by 15 January and present it before the Committee/ Council by first week of March. There was delay in presentation of budget in 52 (46 GPs, four BPs, one Municipality and one Corporation) out of 81 LSGIs test-checked. It was also noticed that budget was not presented in prescribed format in nine GPs and three BPs (Appendix IX). In 46 GPs, four BPs, one Municipality and one Corporation there was no adequate discussion on the Budget as in most cases Budget became a one-day exercise. This was mainly due to delay in the presentation and inadequate appreciation of budget as an instrument of financial control.
2.4
Consolidation of accounts of LSGIs
KPR Act, 1994 and KM Act, 1994 stipulate that an officer authorised by the Government should consolidate audited accounts of LSGIs. The Government stated (May 2010) that the LSGD finalised the formalities for collection and consolidation of audited accounts of PRIs and authorised the Additional Secretary to Government (FM) to complete the process. Information with regard to progress in the collection and consolidation of accounts is awaited.
2.5
Administration Reports
According to Section 192 of the KPR Act, 1994 and Section 63 of KM Act, 1994, the LSGIs were to prepare Administration Reports every year by 30 September of the succeeding year and forward them to the officers authorised by the Government for consolidation and submission to the Government and the Legislative Assembly. If the report is not received within the said time limit, the Government may withhold the payment of grants due to LSGIs. However, the Government has not nominated any officer to ensure preparation and consolidation of the Administration Reports. Though the Act requires the Government to place the consolidated Administration Report before the Legislative Assembly, it was not done in any year.
2.6
Arrears in accounts
According to Kerala Local Fund Audit Act, 1994 (KLFA Act) it was mandatory for LSGIs to submit their accounts to DLFA for audit by 31 July every year. Further, Rule 16 of KLFA Rules, empowers DLFA to carry out proceedings in a
27
Court of Law against the Secretaries of LSGIs who default in the submission of accounts. As on 31 July 2012, 264 accounts pertaining to the period from 1996-97 to 201112 were in arrears. Of this, 116 accounts relate to the period 2005-06 and earlier periods.
2.7
Arrears in audit and issue of audit reports
As per KLFA Act, DLFA is to complete the audit of accounts submitted by LSGIs within six months of receipt of accounts and issue audit report within three months from the date of completion of audit. DLFA received 19173 accounts including 1196 accounts which were not due for audit up to July 2012. Of these, Audit Reports were issued in respect of 15629 accounts (October 2012). As at the end of March 2012, the arrears in issue of Audit Reports were 2348 (13.06 per cent). The KLFA Rules stipulate that the DLFA shall, not later than 30 September every year, send to the Government a consolidated report of the accounts audited by him during the previous financial year containing such particulars which DLFA intends to bring to the notice of the Government. The Committee on Local Fund Accounts deliberates on this report. DLFAs office intimated that such reports had been submitted to the Government up to the year 2011-12 and reports up to the year 2010-11 were presented to State Legislature.
2.7.1 Surcharge and Charge imposed by the DLFA

As per Section 16(1) of KLFA Act, 1994, the auditor may disallow any item which appears to him to be contrary to law and surcharge the same against the person making or person or body of persons authorising the making of the illegal payment and may charge against any person responsible therefore, the amount of any deficiency or loss caused by the negligence or misconduct of that person or any sum received which ought to have been, but has not been brought into account by that person and shall, in every such case, certify the amount due from such person. The amount, if not paid, shall be recovered under the provision of the Kerala Revenue Recovery Act, 1968 for the time being in force, as if it were an arrear of public revenue on land. During the period 2007-08 to 2011-12, DLFA had issued 86 charge certificates for ` 61 lakh and 586 surcharge certificates for ` 2.05 crore. Against the total charge/surcharge amount of ` 2.66 crore, only ` 8.54 lakh were realised (3.21 per cent) as shown in Table 2.13.
Table 2.13: Realisation of charge/surcharge amount
Year Charge Certificate Number Amount (` in lakh) 3 0.25 18 20.83 23 18.42 37 20.98 5 0.44 86 60.92 Surcharge Certificate Number Amount (` in lakh) 60 20.88 111 54.06 164 53.34 223 71.02 28 5.91 586 205.21 Amount recovered (` in lakh) 0.35 1.59 2.64 2.36 1.60 8.54
2007-08 2008-09 2009-10 2010-11 2011-12 Total
28
2.8
Conclusion
Compared to the increase in the amount of total Development Expenditure incurred by LSGIs, amount spent for productive sector was very low. The deceleration in development and social sector expenditure vis--vis total expenditure of LSGIs was a matter of serious concern highlighting the need for greater emphasis on provision of core public goods and services for improved socio-economic development. High incidence of establishment expenses (including salary) was noticed in ULBs compared to their own revenue and General Purpose Fund. Utilisation of funds on the implementation of CSSs was substantially low (11.94 per cent). LSGIs were not adhering to the procedures laid down for reporting monthly progress of expenditure to the concerned authorities. LSGIs were not preparing monthly accounts. Maintenance of primary financial records by LSGIs was defective.
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CHAPTER III PERFORMANCE/THEMATIC AUDITS 3.1 IMPLEMENTATION OF MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME
Highlights The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA), provides for the enhancement of livelihood security of the households in rural areas of the country by providing at least one hundred days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled manual work. Through the process of providing employment on works that addresses causes of chronic poverty such as drought, deforestation and soil erosion, the Act seeks to strengthen the natural resource base of rural livelihood and create durable assets in rural areas. A performance audit of the implementation of the scheme in the State revealed absence of system for proper recording/acknowledgement for applications for jobs, non-preparation of District Perspective Plans resulting in lack of advance planning for identification of works to provide long term employment, execution of low priority/non-permissible works, deficiencies in monitoring mechanism, etc. Some other important points are indicated below: Though Government of India had assessed vulnerabilities with regard to registration of households, distribution of Job cards, selection and allotment of works, payment of wages, etc., and laid down detailed mechanism to ensure public vigilance and transparency in each stage of implementation, the mechanisms to address these risks were either absent or deficient in the State. (Paragraphs 3.1.9 & 3.1.10) Lack of inclination on the part of the Government to incur expenditure on the material component led to non-creation of durable assets, though a massive expenditure of ` 2511.81 crore was incurred. (Paragraph 3.1.10) Applications for the works were collected in bulk by the workers of Area Development Society as and when works were ready and jobs were provided collectively and not individually, defeating the primary objective of the scheme to provide fall-back employment source when other employment alternatives are scarce. (Paragraph 3.1.9.3) Though MGNREGS specify the role of line department in giving technical support and supervision in the execution of work, the involvement of the line department in the scheme implementation was observed only in Palakkad District. (Paragraph 3.1.10.2) Delays ranging from 16 to 193 days in wage payment were noticed in majority of the test-checked GPs, even though the workers were entitled to obtain
31
wages within a fortnight of the date on which work was done. In Malappuram District, total delayed payment amounted to ` 73.06 crore during 2009-10 to 2011-12. (Paragraph 3.1.10.5) Social Audit Reports did not contain any significant findings on the deficiencies in the scheme implementation such as delay in payment of wages, short payment, non-prioritisation of works, non-payment of compensation for delayed payments, inflated estimates, deficiencies in measurement, etc. (Paragraph 3.1.12.3) An important objective of MGNREGA, that at least one-third of the beneficiaries are to be women, has been achieved as more than 92.24 per cent of the beneficiaries and 100 per cent of the Mates in the State are women. (Paragraph 3.1.11.1)
3.1.1
Introduction
National Rural Employment Guarantee Act (NREGA) promulgated in September 2005 guarantees 100 days of employment in a financial year to any rural household whose adult members are willing to do unskilled manual work. NREGA was renamed as MGNREGA in October 2009. The Act aimed to provide a strong safety net for the vulnerable groups by providing a fall-back employment source when other employment alternatives are scarce or inadequate. Through the process of providing employment on works that addresses causes of chronic poverty such as drought, deforestation and soil erosion, the Act seeks to strengthen the natural resource base of rural livelihood and create durable assets in rural areas. The Act came into force initially with effect from 2 February 2006 in 200 districts in the country, and was subsequently extended to cover the remaining districts from 2008-09 onwards. The Government formulated (June 2006) the Kerala Rural Employment Guarantee Scheme (KREGS) Rules, conforming to the minimum features specified under NREGA. National Rural Employment Guarantee Scheme was implemented in the State from 2006-07 onwards in the two Backward Districts, viz., Palakkad and Wayanad. Subsequently, Idukki and Kasaragod Districts were notified on 01 April 2007 and the scheme was extended to the remaining 10 districts with effect from 01 April 2008. As per 2011 Census, Keralas population is 3.34 crore of which 52.28 per cent live in rural areas. The per capita income of the State is ` 83,725 and the unemployment rate is 16.7 per cent. As per National Sample Survey Report 2004-051, 9.60 per cent of rural population live below poverty line.
3.1.2
Organisational set up
The State Employment Guarantee Council (SEGC) was constituted (March 2006) with the Minister for Rural Development as the Chairman to advise the Government on the implementation of the Scheme and also to evaluate and monitor it. As required under MGNREGA, the Government designated the Commissioner of Rural Development as the State Rural Employment Guarantee
1
No official estimation has taken place since 2004-05
32
Chapter III Performance/Thematic Audits
Commissioner responsible for ensuring that all activities required to fulfill the objectives of the Act are carried out. The Government had designated District Collector as the District Programme Coordinator (DPC) who was entrusted with the overall responsibility of overseeing the proper implementation of the Scheme at the district level. To assist the DPC, Joint Programme Co-ordinators (JPCs) were appointed in eight districts2. Block Programme Officer (BPO) who was not below the rank of a Block Development Officer (BDO) appointed by the Government, was responsible for implementation of the Scheme at the Block Panchayat (BP) level. The Government also accorded sanction for the creation of State NREG Cell with eight temporary posts of Programme Officers (POs). Later (December 2010), a separate Social Audit Cell was constituted for conducting social audit of Local Self-Government Institutions. The Panchayat Raj Institutions (PRIs) are the sole implementing agencies of the Scheme in the State with 100 per cent execution materialising at the Grama Panchayat (GP) level. GPs are responsible for identification of works in the GP area as per the recommendation of the Grama Sabha and for execution and supervision of works. At the intermediate level, the BP is responsible for scrutinising GP plans and ensuring that the works are selected to match the employment demand. The DPC consolidates the Block Plans into a District Plan and the District Panchayat (DP) approves the District Plan.
3.1.3
Audit objectives
The audit objectives of the Performance Audit were to ascertain whether: the procedures for preparing perspective plan and annual plan at different levels for estimating the likely demand for work, and preparing shelf of projects were adequate and effective and structural mechanisms have been put in place; funds were released, accounted for and utilised by the Government in compliance with the provisions of Act/Rules; there was an effective process of registration of households, allotment of Job cards, and allocation of employment in compliance with the Act/Rules; the primary objective of ensuring livelihood security by providing 100 days of annual employment to the targeted rural community at the specified wage rates was effectively achieved; the auxiliary objectives of protecting the environment, empowering rural women, reducing rural-urban migration, fostering social equity, etc., were effectively achieved in accordance with the Act and the Rules; the convergence of the Scheme with other Rural Development Programmes as envisaged was effectively achieved in ensuring sustainable livelihood to the targeted rural community and improving the overall rural economy; complete transparency was maintained in the implementation of the Act by involving all stakeholders at various stages of implementation and all requisite records and data maintained at various levels and the MGNREGS
Thiruvananthapuram, Kollam, Alappuzha, Idukki, Thrissur, Palakkad, Kozhikode and Wayanad
33
data automated completely and provides reliable and timely Management Information System (MIS); and there was effective mechanism at State level to assess the impact of MGNREGS on individual households, local labour market, migration cycle and efficacy of assets created.
3.1.4
Audit criteria
Audit criteria were derived from the following: NREGA 2005 and amendments thereto and notifications issued there under. State Employment Guarantee Fund Rules, 2009. NREGA Operational Guidelines (2006 and 2008) issued by the Government. Circulars and orders issued by the Ministry of Rural Development (MORD), Local Self-Government Department (LSGD), Commissionerate of Rural Development (CRD). KREGS Rules.
3.1.5
Audit scope, sampling and methodology
A review on the effectiveness of the implementation of NREGA in the Backward Districts, Palakkad and Wayanad, was included in paragraph 3.1 of the Report of the Comptroller and Auditor General of India (Local Self-Government Institutions) for the year ended March 2007. The review highlighted the weakness in the planning process, delay in formulating KREGS rules, under-utilisation of funds, non-conducting of surveys, non-issue of Job cards to registrants, payment of wages less than the minimum wage rate, etc. The Committee on Local Fund Accounts discussed the review. The recommendations of the Committee are awaited. The Performance Audit for the Report of the Comptroller and Auditor General of India (Local Self-Government Institutions) was conducted from March 2012 to June 2012, covering the period from 2007-08 to 2011-12. Out of the total 14 districts in the State, four districts (25 per cent), viz., Thiruvananthapuram, Kottayam, Malappuram and Palakkad were selected. From each selected district, 25 per cent BPs were selected using Simple Random Sampling Without Replacement (SRSWOR). Accordingly, 13 BPs were selected from four districts (three BPs each from three districts and four BPs from one district). From each selected BP, 25 per cent GPs (subject to a minimum of three) were selected using SRSWOR. Thus, 39 GPs were chosen. The BPs and GPs selected for review are given in Appendix X. In each selected GP, 25 per cent of works executed each year were selected for detailed examination. Audit methodology included beneficiary survey, physical verification of works and scrutiny of the records of CRD, DPs, BPs and GPs. The Performance Audit commenced with an entry conference held on 27 March 2012 with the Principal Secretary, LSGD. An exit conference was held on 22 August 2012 wherein the major findings observed during the course of audit were discussed. The
34
Government response on the audit observations have been incorporated in this report, wherever applicable.
Audit findings 3.1.6 3.1.6.1 Physical and financial performance Physical performance
Physical performance (cumulative) under the Scheme during the five years from 2007-08 to 2011-12 was as given in Table 3.1.
Table 3.1: Physical performance under the Scheme
(Figures in lakh) Number of households registered 5.30 21.35 26.34 29.23 18.79 Number of households issued Job card 4.79 18.98 26.26 29.16 18.60 Number of households demanded employment 1.88 6.99 9.60 11.95 14.18 Number of households provided with employment 1.82 6.92 9.57 11.85 14.16 Person days generated# 59.69 153.74 340.35 492.73 631.94 Number of households completed 100 days 0.09 0.14 0.43 0.69 1.24
Period
2007-08 2008-09 2009-10 2010-11 2011-12*

*
There was change in figures on account of ward delimitation in 2010 connected with Panchayat election. # Not cumulative
Of the 14.16 lakh households provided with employment as at the end of March 2012, the State provided 100 days of employment to 1.24 lakh households (8.76 per cent) only. In the four test-checked districts, 6.54 lakh households registered for jobs during the period 2007-08 to 2011-12 and 6.51 lakh households were issued with job cards. Employment was provided to 4.74 lakh households who demanded jobs. The person days generated was 582.69 lakh and 42822 households received jobs for 100 days. Of the total fund of ` 1070.22 crore available during 2007-08 to 2011-12, ` 885.19 crore was expended. 132451 works were completed after spending ` 720.11 crore during the period. The Government stated (September 2012) that MGNREGS was a demand driven scheme and that instance of individual job card holder demanding job was seldom found in the State as the demand of women workers who form 92.24 per cent of the entire work force was articulated in a collective manner. However, only 8.76 per cent of households (1.24 lakh) were provided with 100 days of employment. Audit is of the view that in the absence of a system for proper recording/acknowledgment for applications for job, it could not be ensured that individual demand for job by a registered worker was actually fulfilled.
3.1.6.2
Financial performance
The details of funds released by Government of India (GOI) and State Government and the expenditure incurred on the implementation of the Scheme from 2006-07 (year of inception) to 2011-12 are given in Table 3.2.
35
Audit Report (LSGIs) for the year ended March 2012 Table 3.2: Receipt and utilisation of fund during 2006-07 to 2011-12 (` in crore)
Amount released Year OB 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Total 11.02 19.87 3.90 57.20 103.96 126.29 GOI 31.82 58.11 198.87 467.71 704.23 951.05 2411.79 State 4.76 7.57 23.60 40.00 17.25 25.10 118.28 Misc. receipts 0.17 1.72 55.24 9.73 2.47 8.75 78.08 Expenditure Total 47.77 87.27 281.61 574.64 827.91 1111.19 27.90 83.37 224.41 470.68 701.62 1003.83 2511.81
The total financial assistance provided by the GOI up to 31 March 2012 was ` 2411.79 crore. The Government contributed ` 118.28 crore. The total fund available at the end of March 2012 was ` 2619.17 crore including the OB of 200607 (` 11.02 crore) and miscellaneous receipt during 2006-07 to 2011-12 (` 78.08 crore), and the State expended ` 2511.81 crore. The aggregate utilisation of fund during 2006-07 to 2011-12 was 95.90 per cent.
3.1.7
Planning
Planning is an important process for the successful implementation of the Scheme. A key indicator of success is the timely and adequate generation of employment while ensuring that the design and selection of works are such that good quality assets are developed. The need to act within a time limit necessitates advance planning. The basic aim of planning process under MGNREGS is to ensure that each district is prepared well in advance to offer productive employment on demand.
3.1.7.1
District Perspective Plan
DPP was not finalised in Malappuram
The Operational Guidelines (OG) stipulate preparation of a five year District Perspective Plan (DPP) to facilitate advance planning and provide a development perspective for the district to achieve an important objective of the Scheme, i.e., strengthening the livelihood resource base of the rural poor along with the creation of durable assets. The aim is to identify the type of MGNREGS works to be encouraged in the districts and the potential linkages between these works and long term employment generation and sustained development. A DPP of five years has the advantage of facilitating the annual labour budget as a framework of long term planning. Funds for preparation of DPPs were provided by the GOI to the State Government for onward distribution to districts. Audit noticed the following deficiencies in the preparation of DPP: (i) Out of the four test-checked districts, DPP was not finalised in Malappuram District. Though the DPP of Palakkad District was approved (November 2008) by SEGC, subject to modifications, the expert agency engaged to submit the revised plan of Palakkad had not completed the revised plan as of September 2012. As regards approval of DPPs of the remaining districts, the Government stated
36
Survey was not conducted for preparation of DPP
(September 2012) that the Committee constituted to scrutinise the final plans had not furnished a report to the SEGC for final approval. (ii) The agencies3 entrusted with the preparation of DPP were to conduct surveys in each village to facilitate the Grama Sabha to identify the local needs. The CRD stated (April 2012) that the agencies had conducted survey in each village to facilitate GP/Grama Sabha to identify the local needs. Audit, however, observed that such survey was conducted only in 10 out of the 39 GPs test checked. In the absence of the survey there was no assurance that the felt needs of the people in rural areas had been considered while preparing the DPP. Nonpreparation/non-finalisation of DPP had resulted in lack of advance planning for identification of works (as mentioned in paragraph 3.1.10.1).
3.1.7.2
Development Plan
The Development Plan is an Annual Work Plan comprising a shelf of projects for each village with administrative and technical approvals so that work can be started as soon as there is demand for work. Section 16 (3) & (4) of MGNREGA stipulates that every GP shall prepare a Development Plan comprising a shelf of projects on the basis of the recommendations of the Grama Sabha. Convening Grama Sabhas is the preliminary step in the planning process in the implementation of the Scheme. As per OG, Grama Sabhas are to be convened on 2 October of each year for identification and recommendation of works. The GP is required to forward the Development Plan with its priorities to the PO by October 15 for preliminary scrutiny and approval prior to the commencement of the year in which it is proposed to be executed. The PO is to consolidate the GP proposals and the proposals of the Intermediate Panchayat into a Block Plan by November 15 and after the approval of the Intermediate Panchayat, forward it to the DPC by November 30 for scrutiny and consolidation into a District Plan. The DP is to examine and approve the District Plan. Audit observed the following points in the preparation and approval of Development Plans:
Grama Sabhas were convened belatedly
(i) Grama Sabhas were not convened on October 2 in any of the test-checked GPs. In three GPs4 test-checked in Thiruvananthapuram, Grama Sabhas were not convened exclusively for identification and recommendation of MGNREGS works. In the remaining GPs test-checked, Grama Sabhas were convened at a later date which extended up to January. the Grama Sabhas were participative and responsive in nature. Out of the 780 beneficiaries interviewed from 39 test-checked GPs, 754 stated that they participated in Grama Sabha meetings, and 562 beneficiaries voiced their opinion/suggestions in the meetings.
Further,
Delay in convening the Grama Sabha led to delay in identification and recommendation of works as well as forwarding of Development Plans to higher levels.
3
Beneficiaries of MGNREGS attending Grama Sabha meeting
Palakkad: Centre for Management Development, Kottayam: Centre for Rural Management, Malappuram: Maithri, Thiruvananthapuram: Loyola Extension Centre 4 Elakamon, Kanjiramkulam & Karumkulam GPs
37
The Government stated (September 2012) that the State had set its own time schedule for preparation of Development Plans and the Grama Sabhas were convened accordingly. Audit, however, noticed that none of the GPs test-checked had adhered to the time schedule set by the Government.
Estimated demand for work was highly inflated
(ii) Scrutiny of the Development Plans prepared by the GPs test-checked revealed significant variations between estimated demand and actual employment provided. The variation ranged between 18 per cent and 91 per cent in eight GPs during 2009-10 to 2011-12 as given in Table 3.3.
Table 3.3: Estimated demand vis--vis employment provided (in person days)
Name of GPs Estimated demand for three years (2009-10 to 2011-12) Actual employment Percentage of variation
Parathode Neendoor Bharananganam Moorkanad Urangattiri Edava Elakamon Peringammala
162206 158181 67125 127390 1316525 153071 316900 725796
56833 37115 54938 74826 116080 66653 225502 386535
65 77 18 41 91 56 29 47
The Government stated (September 2012) that the Labour Budget was only indicative for release of Central funds and that the actual demand would sometimes be less than the forecast and vice versa on some other occasion. The Government reply will have to be viewed in the perspective that had the GPs prepared the Labour Budget on the basis of the actual achievement trends in the previous year as stipulated in the OG the wide variations between the estimates and the actual could have been avoided and the assessment of GOI on the requirement of fund by the State would have been more realistic. Estimated benefits in terms of employment generated measurable in person days and physical improvement envisaged were projected in the Development Plans of selected GPs in three districts except in the GPs in Thiruvananthapuram District where physical improvement envisaged was not spelt out. No information with regard to benefits accruing to community was provided in the Development Plans of the GPs test-checked.
3.1.7.3
Labour Budget
Based on the assessment of labour demand shown in the Development Plans of GPs, the DPC was to prepare a Labour Budget in December every year, for the next financial year, containing the details of anticipated demand for unskilled manual work in the district, and the plan for engagement of labourers in the works covered under the Scheme, and to submit to the DP for approval. Audit noticed that there was considerable delay in forwarding the Development Plans from the GPs to BP level.
Labour budgets prepared by GPs were inflated
The number of works and expenditure projected by all the GPs in the four testchecked districts were unrealistic and were based on inflated figures. During 201112, substantial variation between the estimated figures and the actuals was noticed in 10 out of 39 GPs test-checked. The details are given in Table 3.4.
38
Chapter III Performance/Thematic Audits Table 3.4: Projected figures in Labour Budget vis--vis actuals Number of works Amount (` in lakh)
Name of GPs Included in Labour budget 83 284 277 263 386 113 89 359 262 369 Completed Variation (per cent) 0 67 70 73 71 52 81 47 39 81 Provision Actual expenditure 41.59 33.35 75.70 63.41 60.64 66.64 9.15 264.20 78.39 22.79 Variation (per cent) 45 56 29 97 70 26 97 65 67 87
Arpookkara Neendoor Mankada Nediyiruppu Urangattiri Edava Elakamon Peringammala Kottoppadam Vallapuzha
83 94 83 72 113 54 17 192 161 71
75.6 74.98 106.49 2319.79 200.18 89.60 276.00 752.9 235.15 173.34
The Government stated (September 2012) that the labour budget forecast could not be achieved in the initial years due to the infancy of the Scheme and the trend started changing from 2011-12 onwards. The fact, however, remains that there was substantial variation even during 2011-12.
3.1.7.4
Formulation of KREGS and associated rules
Under MGNREGA, the Government was required to formulate its own Rural Employment Guarantee Scheme in conformity with the provisions of the Act within six months from the date of commencement of the Act. The Government formulated KREGS Rules on 23 June 2006 after a time-lag of three months. There were also delays ranging from four to six years in framing associated Rules as stipulated under Section 32 of MGNREGA. Timely framing of relevant rules would have rendered a strong structural framework for effective implementation and guaranteed better performance in areas such as payment of unemployment allowance and grievance redressal where the scheme suffered setbacks as detailed in paragraphs 3.1.9.4 and 3.1.12.1 respectively.
3.1.8 3.1.8.1
Financial Management Funding
Funds required for the implementation of the Scheme are provided by GOI and State Government in the manner as given in Table 3.5.
Table 3.5: Funding pattern
GOI share State share
Entire wages of unskilled workers
Unemployment allowance
75 per cent of cost of materials and 25 per cent of cost of materials and wages of wages of skilled/semi-skilled workers skilled/semi-skilled workers
Six per cent (four per cent up to 2008-09) of the funds allotted by GOI are earmarked for administrative expenses. The amount required for implementation of
39
the Scheme was passed on to the GPs as shown in the Flow Chart given in Appendix XI.
3.1.8.2
SEGF was constituted only in May 2012
State Employment Guarantee Fund
In terms of Section 21 of MGNREGA the Government, by notification, was required to establish a fund called State Employment Guarantee Fund (SEGF) which was to be expended as a Revolving Fund to ensure utilisation according to the purposes of the Act. The Government constituted the Fund only in May 2012. Till then, Central share of funds was credited direct by MORD to the bank accounts of DPCs maintained for the purpose whereas State share was passed on to them through CRD. In the three test-checked districts, viz., Malappuram, Kottayam and Palakkad, funds were transferred from DPCs to GPs through POs at the block level whereas in Thiruvananthapuram District, funds were transferred to the GPs directly from DPC. Non-formulation of SEGF till May 2012 enabled the transactions involving scheme funds to remain outside the purview of the SEGF in contravention of the Act.
3.1.8.3 Fund Management Non-adherence to fund management guidelines

(i) As per paragraph 8.5.1 of OG, Panchayats were required to operate separate accounts opened in the name of President and Secretary in GP. Joint accounts were to be opened at the district level by JPC and DPC and at BP level by the BPO and the officer next to him exclusively for MGNREGS. In violation of the above direction, no joint accounts were opened in three BPs in Malappuram 5 and two BPs in Kottayam6. The PO replied that the account was opened in the name of BPO only for speedy implementation. In Peringammala GP it was observed that payment of wages was made from the joint accounts of the Chairperson and Secretary of Area Development Society (ADS) from 2008-09 onwards. Government stated (September 2012) that DPC, Malappuram had given directions to the Blocks concerned to open joint account. (ii) The progress of expenditure was indicated in data uploaded in MIS and Utilisation Certificates (UCs) were forwarded to GOI. Audit noticed that there was delay in release of GOI grants by DPC to four GPs7 in Thiruvananthapuram District for the year 2011-12. In three of these GPs, payment of works completed before 31 March 2012 was pending as on the date of audit in June 2012, whereas Peringammala GP effected payment from own fund. (iii) As per paragraph 8.5.2 of OG 2008, all payments made from the MGNREGS account are to be reported to the GP at its next meeting and approval has to be obtained. This was observed as done only in 14 out of the 39 GPs test-checked. No recordings of regular reporting of payments to GP were available to address the potential risks of non-payment/late payment/under payment of wages, payment to wrong/non-existent workers and projects. The Government, while accepting the audit observation, stated (September 2012) that instruction would be given to all
5 6
Joint accounts were not opened in five BPs
Release of GOI grants by DPC to GPs was delayed
Payments made from MGNREGS accounts were not reported to GPs regularly
Areacode, Mankada and Perinthalmanna Lalam and Kanjirappally 7 Edava, Kallara, Karumkulam and Peringammala GPs
40
GPs to report MGNREGS payments both in the Standing Committee and the Panchayat Committee.
Funds were transferred to GPs without verification of expenditure statements/VMC Reports
(iv) In Thiruvananthapuram, Kottayam and Palakkad Districts, statements of work-wise expenditure or reports of Vigilance and Monitoring Committee (VMC) approved by Grama Sabhas were not sent to POs. In the case of Malappuram District, though statement of expenditure/UC was sent to PO, VMC reports were not sent to POs. In the test-checked GPs in Thiruvananthapuram and Malapppuram Districts, Project completion reports were also not prepared. Thus it was evident that requests for funds from GPs were entertained without verification of expenditure statements/reports of VMCs. There was no documentary proof to show that the works were actually executed/ completed as mentioned in paragraph 3.1.10.5(ii). (v) Funds released were to be accounted every month under three heads, viz., (a) money held in cash/bank account, (b) advances to implementing agencies/officials and (c) vouchers of actual expenses. This was not seen followed in the test-checked districts and BPs in the State. (vi) As per paragraph 6.4.5 (iv) of OG 2008, the remuneration of Mates should be included in the cost estimates under material component. The Government stated (September 2012) that an independent Mate could be provided to a work only when the number of workers exceeded 40. Audit, however, observed that in Edava GP in Thiruvananthapuram District, though the number of workers exceeded 40 in 43 works, wages to Mates were classified under unskilled wages, thus shifting the liability on this account to the Centre. (vii) In two of the GPs, Chalissery in Palakkad District, and Manimala in Kottayam District, funds were deposited in non-interest bearing current account. Government stated (September 2012) that the GPs had been directed to close the Current Account and open a Savings Bank Account.
Monthly reconciliation of bank accounts was not conducted Bank charged ` 50 to ` 100 from the workers for opening bank accounts
(viii) In the three test-checked BPs8 and one GP (Elakamon) in Thiruvananthapuram District, no monthly reconciliation was conducted in respect of the bank accounts during the period 2008-12. In Mannarkkad BP in Palakkad District, there was difference in the Opening Balance (OB) of each year and Closing Balance (CB) of previous year. (ix) As per scheme guidelines, banks were to be requested to open the accounts for MGNREGS labourers without any charge for opening the bank account. In three GPs in Palakkad District and two GPs in Thiruvananthapuram District9, a nominal amount was collected by the ADS worker as initial deposit from the wage seeker for opening the bank account. In Erumely GP in Kottayam District, accounts of beneficiaries were opened in a Co-operative Bank where the bank charged ` 50 to ` 100 from the workers for opening the bank accounts. Government replied (September 2012) that the matter would be taken up with the banks. (x) The limit of four per cent for admissible administrative expenses as fraction of the annual cost of the projects under MGNREGS has been revised to six per cent from 2009-10 onwards. In Vallapuzha GP in Palakkad District, administrative expenses ranged from 8.6 per cent to 14.14 per cent whereas in Keezhattoor GP in
8 9
Varkala, Vamanapuram and Athiyannoor BPs Ambalappara, Nellaya and Vallapuzha GPs in Palakkad District, Peringammala and Pullampara GPs in Thiruvananthapuram District
41
Malappuram District it ranged from 7.3 per cent to 26.46 per cent during the period 2008-09 to 2011-12. The Government stated (September 2012) that the slow progress in execution of works had resulted in high administrative cost.
Diversion of fund
The Government permitted (November 2009) to take up works like ground clearance, excavation of earth for foundation and basement filling for construction of houses under Indira Awaas Yojana (IAY) and EMS Housing Scheme in rural areas under MGNREGS. During 2010-11 and 2011-12, a total amount of ` 1.16 crore was spent from MGNREGS fund for the foundation works of 649 EMS and IAY houses in the three BPs10 test-checked in Thiruvananthapuram District. The expenditure was in contravention of GOI guidelines as the above type of works were not permitted under MGNREGS.
3.1.9 3.1.9.1
Awareness programmes were not effective
Registration and Employment Door-to-door survey
The OG require that a door-to-door survey is to be undertaken to identify persons willing to register under MGNREGS. Such a survey was attempted only in five11 out of the 39 GPs test-checked. The Government stated (September 2012) that door-to-door survey was conducted during the initial stages of scheme implementation in all districts utilising the services of Kudumbashree, tribal volunteers, etc. The reply which was supportive of an informal arrangement is not acceptable due to the fact that there are detailed guidelines for formulation of a team for conducting the survey. Moreover, there was no system in place to check whether Kudumbashree is following GOI guidelines scrupulously.
3.1.9.2
Issue of Job cards
GPs violated the provision for issuing Job cards
As per OG, Job card is to be issued to a household within 15 days of receipt of application for registration. The following violations in the above provision were noticed in the test-checked GPs in Malappuram District: In 47 cases of Job cards shown as issued by Moorkanad GP in October 2011 and November 2011, the cards were not yet handed over to the beneficiaries (June 2012). The GP replied that the land owners did not collect the cards as works were not started. 84 Job cards were not issued but retained by the GPs12. The GPs replied that the beneficiaries, in spite of repeated requests, did not turn up to receive the job cards. In respect of 86 applications received in March 2008 by Pulpatta GP, the Job cards were issued only on 28 October 2008 i.e., after seven months.
The Government stated (September 2012) that there were instances where people had come forward to register for employment in the hope of getting permanent Government jobs and the Job cards of those registrants happened to remain in the custody of GPs. The Government reply is indicative of lack of awareness
10 11
Varkala, Vamanapuram and Athiyannoor BPs Urangattiri, Mankada, Karimba, Kottoppadam and Thachampara GPs 12 Elamkulam GP:23, Keezhattur GP:14 and Nediyiruppu GP:47
42
campaigns undertaken. Had the GPs conducted intensive Information Education Communication activities, the misconceptions of the local residents about the scheme could have been substantially removed, if not eliminated altogether. Audit also noticed that though the registration lists were regularly updated to add eligible workers, there was no deletion of names of ineligible workers who died/migrated/secured Government jobs, etc. Non-exclusion of ineligible persons from the list is fraught with the risk of misutilisation of Job cards. The Government accepted the observation for compliance.
3.1.9.3
Timeliness in providing employment
MGNREGA marks a paradigm shift from all precedent wage employment programmes wherein a rights-based framework for wage employment is provided. Employment is dependent upon the worker exercising the choice to apply for registration, obtain a Job card, and seek employment for the time and duration that the worker wants. Applications were to contain the registration number of the job card, the date from which the employment is required and the number of days of employment required. A dated receipt for application received is to be issued to the applicant in proof of receipt of application. The GP is responsible for providing employment to the applicants within 15 days from the date on which employment has been sought. If the 15 day time limit for fulfilling the legal guarantee of providing employment to the applicant is not met, he is eligible to get unemployment allowance. All applications for employment were to be entered in the Employment Register. Audit noticed the following:
Application for work was not acknowledged The objective to provide fall-back employment source, when other employment opportunities are scarce, was not achieved
(i) The application for work was not acknowledged or recorded in the Employment Register. Hence Audit could not assess whether employment was provided to the worker within 15 days of application or not. (ii) Applications for the work were collected in bulk by the workers of ADS as and when the work was ready and not at the will of the job seeker. A test check of Muster Rolls and Employment Register in respect of selected works in 39 GPs revealed that the job days applied for and that allocated to all beneficiaries were the same. Further, the date of application of all beneficiaries was the same in respect of each work. The deviation from the provisions of MGNREGA was against the primary objective of the scheme to provide fall-back employment source when other employment alternatives are scarce.
3.1.9.4
Unemployment allowance due was not paid
Unemployment allowance
The Act stipulates payment of unemployment allowance in case the employment is not provided within 15 days of application for employment. CRD stated (April 2012) that unemployment allowance was sought for and disbursed in the State only in two cases, one each in Wayanad and Kozhikode Districts. The GPs test-checked also replied that in all cases, employment was provided within 15 days. The veracity of the above statements is doubtful as it was noticed in audit that Pulpatta GP in Malappuram District had received a complaint of not providing employment to 46 workers and the unemployment allowance due, which worked out to ` 51,750, was also not paid so far (June 2012). The Secretary of the GP attributed (June 2012) the reason for not providing timely employment to the workers to delay in according technical sanction to works. The Government stated
43
(September 2012) that direction would be given to Pulpatta GP to report the matter of unemployment allowance.
3.1.9.5
Days of employment
Schedule II of MGNREGA stipulates that all registered persons belonging to a household shall be entitled to employment in accordance with the scheme for as many days as each applicant may request, subject to a maximum of one hundred days per household in a given financial year. OG also prescribe the mechanism to ensure that the public is informed of the work allotted or ready to be allotted, along with the names of the allottees, their date of application, location and type of work, and other relevant information to guard against the vulnerabilities of out-of-turn allotments/favouring/discriminating against people in allotting type/location of work.
Only 8.76 per cent of the registrants were provided with 100 days of employment
Verification of MIS data of the State for the year 2011-12 revealed that only 8.76 per cent of the households provided with employment had completed 100 days. GOI has laid down (September 2006) that Central funding will be available only up to 100 days of guaranteed wage employment. However, it was noticed that in Peringammala GP in Thiruvananthapuram District, wages amounting to ` 4.42 lakh for person days exceeding 100 days were paid out of Central share. The Government replied (September 2012) that direction would be given to DPC, Thiruvananthapuram to recover the excess amount paid out of Central share.
3.1.10
Works and their execution
The OG envisage the achievement of the MGNREGA goal of growth engine for sustainable development of an agricultural economy. Schedule I of the Act specifies that strengthening the livelihood resource base of the rural poor and creation of durable assets shall be an important objective of the scheme and lays down the list of permissible works to be taken up under the Scheme in their order of priority. It also stipulates that the State Council shall prepare a list of preferred works for different areas based on their ability to create durable assets. In order to ensure the creation of durable assets, the GOI provided liberal funding towards material cost (including the wages of the skilled and semi-skilled workers) up to as high as 40 per cent of the total cost of project. GOI bears a significant share of 75 per cent of the material cost of a project. Consequently, for creation of durable assets the State had to bear only 25 per cent of the material cost, which worked out to a mere 10 per cent of the total cost.
No durable assets created
However, Audit observed that the State had exhibited lack of inclination to bear even the meagre 25 per cent share of the material cost and issued (August 2010) directions not to take up works with material component. As a result, the material component of works undertaken in the State was less than four per cent of the total cost of work and included only the rent of implements and wages to Mates. Consequently, the extent of utility of assets created with a massive expenditure of ` 2511.81 crore was doubtful. There was thus no assurance that the key objective of the Scheme to create durable assets in rural areas had been achieved. Secretaries of 39 test-checked GPs stated that the scheme had not resulted in creation of durable assets in their locality. The following deficiencies were noticed in the execution of works.
44
Out of 5,60,954 works undertaken during five years (2007-12), the State abandoned 87,280 works with an outlay of ` 349.59 crore. In two of the test-checked GPs (Elamkulam and Angadippuram), partially completed works with less than 50 per cent of the estimated expenditure were shown as completed. Wide variation was noticed in the estimated cost of work and the actual cost of completion in almost all the test-checked GPs mainly due to partial execution of the works. Inclusion of material component in the estimate and actual execution of works without involving material component also resulted in the variation. While admitting the facts, the Government stated (September 2012) that the DPCs would be directed to furnish the reasons for partial execution of works.
About 32 works undertaken in private land by Angadippuram GP in Malappuram District, mainly consisting of uprooting of plants (cost: ` 32.37 lakh), were classified under the prioritized work of water conservation and water harvesting. Though water conservation work was the first among the various works in the order of priority, it was not taken up in five13 out of the 12 GPs test-checked in Malappuram District as the Grama Sabha had accorded priority to other works. The OG prescribe that the measurement of work should be done on a daily basis. It was observed that in Thiruvananthapuram and Malappuram Districts, measurements were taken only on completion of works and recordings made in the Measurement Book without proper details of location of work site, denying chances of further verification in audit.
3.1.10.1
Selection of work
As per the vulnerability assessment done by the GOI, the selection of work to be taken up in a particular GP involves the risk of selection of low priority work/ inappropriate work / work that serves a vested interest. To address these risks, OG stipulate that the shelf of projects/works to be taken up is to be determined and assessed for relevance and priority by the Grama Sabha and a list of the finally selected works in their order of priority publicly displayed at the GP office. Audit observed the following:
Works not permissible under the Scheme were taken up
Works not permissible were undertaken in 15 GPs test-checked which included (i) foundation works of houses under EMS/IAY housing scheme in 14 GPs14 test-checked, (ii) works relating to rubber plantations in private land undertaken in Urangattiri GP in Malappuram District. The Government stated (September 2012) that the foundation works of houses under EMS/IAY housing scheme were undertaken under MGNREGS as per the Government order issued in November 2009. The reply is not acceptable as these works are not included in the list of permissible works.
13
14
Kondotty, Kavannur, Keezhattur, Angadippuram and Elamkulam GPs Erumely, Meenachil and Neendoor GPs in Kottayam District, Elamkulam GP in Malappuram District, Ambalappara, Nagalassery, Pattithara GPs in Palakkad District, Edava, Elakamon, Karumkulam, Ottoor, Peringammala, Pullampara and Venganoor GPs in Thiruvananthapuram District
45

Majority of works selected related to clearance of bush/jungle/ grass
Majority of the works selected related to clearance of bush/jungle, cutting of grass, etc. These works were categorized under land development and widely undertaken in the State during the five year period 2007-12. In Ambalappara GP in Palakkad District, more than 50 per cent of works executed during the five year period related to cutting of grass and bushes. The utility of these works when observed through the perspective of creation of durable assets appears doubtful. These works were not amenable to precise measurement, which was critical for assessing whether all the persons shown in the muster rolls have really worked and those who have worked have put in the stipulated number of hours on the job. The Government have since prohibited (February 2012), uprooting and destruction of plants under the scheme in the State. In Thiruvananthapuram District, 638 road works were undertaken by eight15 test-checked GPs, incurring an expenditure of ` 2.49 crore during the three year period 2008-12. Of these, 559 were earthen roads. Construction of earthen roads, which are non-durable and unfit to provide all weather road access, is not permitted under MGNREGS. In reply, the Government stated (September Earthen road constructed under MGNREGS 2012) that the construction of earthen roads was taken up in the State since utilisation of materials was not allowed. The reply is not acceptable as material component up to 40 per cent of the total cost was allowable under the scheme. In Peringammala GP, development of a work at an estimated cost of ` 1.01 crore was undertaken as per decision of the GP. It consisted of a number of components and was categorised as land development. One of the components was construction of contour bunds (cost: ` 36.55 lakh) which were not in place during site verification. The GP stated that the Agrifarm authorities converted the contour bund site for cultivation according to their need. Thus the expenditure of ` 36.55 lakh incurred on the construction of contour bunds has become wasteful. One of the test checked GPs (Keezhattur) in Malappuram District stated that low priority works were taken up as insisted by a ward member. As per the GOI instructions, in case of work taken up in the land of small/marginal farmers having possession of land of less than five acres, the land owner must be a Job card holder, and shall participate in the work. The beneficiary survey in Thiruvananthapuram District revealed that in four16 out of the nine GPs test-checked, the land owners did not participate in the work. Works were taken up in the land of persons who did not
Works were taken up in private land without observing GOI instructions
15
Edava, Elakamon, Ottoor, Peringammala, Pullampara, Venganoor, Karumkulam and Kanjiramkulam GPs 16 Elakamon, Kanjiramkulam, Karumkulam and Ottoor GPs
46
possess Job cards. There were no records to show that the owners were farmers engaged in farming for their livelihood. It was also noticed in one of the GPs17 that land development work was undertaken in a land where the land owner possessed more than the stipulated limit of five acres of land. Audit observed that works in large number were taken up in private lands in four GPs in Malappuram District during 2010-11 and 2011-12 as shown in Table 3.6.
Table 3.6: Expenditure on private land
Name of GP Total expenditure 2010-11 Expenditure on private land (percentage of expenditure in bracket) Total expenditure 2011-12 Expenditure on private land (percentage of expenditure in bracket)
(` in lakh)
Elamkulam Kavannur Makkaraparamba Moorkanad
43.89 35.95 55.43 37.88
26.08 (59) 27.67 (77) 47.11 (85) 32.57 (86)
52.58 77.30 65.53 49.56
50.56 (96) 68.66 (89) 64.24 (98) 43.51 (88)
In the absence of inclination to fund the material component, the selected works were restricted to bush clearance, grass cutting, etc., which did not result in any enduring outcomes. The reason for taking up works in private land was attributed to non-availability of public land. To address this problem, the Government needs to seriously consider the possibilities of convergence with other schemes.
Genuineness of rates applied for execution of works could not be ascertained
The OG stipulate that State may evolve norms for measurement of work in order to reduce corruption and underpayment. For this purpose, the Government was required to undertake comprehensive work, time and motion studies to observe out-turn and fix rates after detailed location specific observations. Productivity norms were to be based on possible out-turn under different geo-morphological and climatic conditions, across and within districts. Audit observed that District Schedule of Rates (DSR) were not formulated in the State after conducting comprehensive work, time and motion studies. As a result of this, the genuineness of the rates applied for the execution of works could not be ascertained. The Government stated (September 2012) that approved DSRs were being piloted in selected BPs in Palakkad District and that time and motion studies in Phase III districts were underway. In none of the GPs test-checked in Thiruvananthapuram and Palakkad Districts, project reports indicating enduring outcomes were prepared for works undertaken under MGNREGS. Most of the works undertaken under the Scheme were clearing of jungles/thorny bushes, cleaning of canals/drainage and digging of pits. Project/work completion reports were not prepared in any of the test-checked GPs in Thiruvananthapuram and Malappuram Districts during the entire audit period (2007-12). The Government replied (September 2012) that all districts would be directed to prepare project/work completion reports. As per Schedule I of MGNREGA, engaging of contractors for implementation of the projects under the Scheme is prohibited. As far as
17
Kanjiramkulam GP in Thiruvananthapuram District
47
possible, tasks are to be performed by using manual labour, and not machines. In one of the test-checked GPs (Peringammala) in Thiruvananthapuram District, construction of thatched sheds and toilets in the District Agricultural Farm, Peringammala was entrusted to the Convener of a Beneficiary Committee. Total expenditure incurred for the above work was ` 2.54 lakh which was spent from MGNREGS fund. The Government stated (September 2012) that entrusting of MGNREGS activities to Beneficiary Committee was seriously observed and strict action would be taken.
Unique identity numbers, to prevent duplication, were not provided to works
The OG prescribe that a unique identity number is to be given to each work, which is to be recorded in the Works Register at GPs to enable verification and prevent duplication. In all the test-checked GPs unique identity number was not provided in the Annual Action Plan. The Government stated that unique identity number would be included in the Annual Action Plan.
3.1.10.2
Involvement of Line Departments
Line Departments were not involved in the execution of MGNREGS works
The OG specify the role of line departments in giving technical support in the nature of preparation of estimates, measurement and supervision of the works executed. Involvement of line departments in scheme implementation was observed only in Palakkad District, wherein technical support of Forest Department was obtained during preparation of estimates in the case of Harithakeralam project. However, there was no involvement of the Department in the supervision and Site of anti-sea erosion works which did not measurement of works. In give the desired result Malappuram District, though the Government ordered involvement of Agriculture Department for estimate preparation, supervision and measurement of works in respect of watershed development works, the GPs did not comply with the direction. In Karumkulam GP (Thiruvananthapuram District), non-involvement of the Anti-sea erosion wing of Water Resources Department had resulted in non-realisation of the desired objective of arresting sea erosion, after incurring an expenditure of ` 55.82 lakh.
3.1.10.3
No fruitful convergence of MGNREGS with other Government programmes/ schemes
Convergence
The State Government have issued (July 2008) guidelines regarding food security programme for promoting food production by converging MGNREGS with other programmes of line departments. The integrated watershed development programme was to be undertaken as a convergence work as per GOI guidelines issued in May 2009. The Government also issued (April 2009) guidelines to implement the scheme with the involvement of Agriculture Department for estimate preparation, measurement, supervision, etc. However, in the four testchecked districts, Audit did not come across any instance of productive convergence of MGNREGS with other Rural Development Schemes.
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3.1.10.4
Muster Rolls were defective in many respects
Muster Rolls
The Muster Roll is a critical document containing important details such as name of the beneficiary, Job card number, days worked/absence and wages paid. According to the OG, Muster Rolls with unique identity numbers are to be issued by the PO to the GPs who are to maintain them henceforth. Muster Rolls are required to bear the signature/thumb impression of the payee and are to form part of the expenditure record of the GPs. The OG entrust the responsibility of maintaining Muster Rolls at worksites to the Mates, who are directly responsible for ensuring the authenticity of data in the Muster Rolls, and the quality of work execution. The maintenance of Muster Rolls and their accounts were defective as detailed below: (i) In seven test-checked GPs18 in Thiruvananthapuram District, the Muster Rolls issued by the PO in the Block did not tally with those received by the GPs as revealed by the entries in the Muster Roll Receipt Register. In one GP (Kallara) the Muster Roll Receipt Register was not maintained. (ii) The signature of the worker in a Muster Roll establishes the bona fides of a person having worked on a job. In Edava GP, it was noticed that Muster Roll was signed for a work (foundation work of EMS housing scheme) from 9 September 2010 to 20 September 2010 and wages were paid to workers who were not holding Job cards. Though the GP produced Job cards later as proof, those Job cards were identified as cards issued on dates after the execution of work. In the same GP, verification of signature on Muster Roll revealed that the signature of the same card holder employed in different works varied from work to work which needs to be investigated. (iii) In Elakamon GP, same labourers were shown as having worked in two different work sites on the same day (EMS housing scheme foundation works for two different beneficiaries). In another case it was noticed that workers put signature on both the Muster Rolls of the same work (Muster Roll No. 650/10-11 and Muster Roll No. 651/10-11 of EMS Housing scheme foundation work) on same dates which resulted in double payment. (iv) Instances of claiming unauthorised wages by Panchayat President and two ward members were noticed in Peringammala GP. This was done by signing the Muster Rolls even though they attended Panchayat Committee meetings and claimed sitting fee during those days. The GP replied that the money drawn fraudulently had been recovered. (v) The Muster Roll is a document having financial implication. Tampering of any document which has significant financial implication is to be viewed seriously. Tampering of Muster Rolls by way of erasing, cutting, over writing, etc., was noticed in the nine GPs19 test checked in Thiruvananthapuram District. The Government stated (September 2012) that the deficiencies pointed out would be investigated. (vi) GOI Notification (December 2008) prescribes that the workers engaged in a work will select from among themselves not less than five workers on a weekly rotational basis to verify and certify all the bills/vouchers of their worksite at least
18 19
Edava, Elakamon, Ottoor, Peringammala, Pullampara, Venganoor and Kanjiramkulam GPs Edava, Elakamon, Kallara, Ottoor, Peringammala, Pullampara, Venganoor, Karumkulam and Kanjiramkulam GPs
49
once a week. It was stated by 26 test-checked GPs that such a monitoring mechanism was not in vogue. In the case of GPs who certified such verification, no proof to confirm this was provided. Lack of monitoring mechanism to watch the authenticity of payments is fraught with the risk of misappropriation of funds. (vii) Out of the nine GPs test-checked in Thiruvananthapuram District, in three GPs (Elakamon, Ottoor and Venganoor), Muster Rolls contained names of ghost workers. (viii) The guidelines stipulate that wage should be disbursed to the worker only on production of wage slip. Wage slips were not generated in any of the testchecked GPs. In the absence of wage slips to workers, workers could not know the details of the amount of eligible wages credited in their bank accounts. The Government admitted (September 2012) that instances of non-issue of wage slips had come to notice and that electronically generated wage slips would be introduced to address the issue. The Government stated (September 2012) that the above deficiencies have been brought to the notice of the JPCs concerned.
3.1.10.5
Payment of wages
Section 3(2&3) of MGNREGA stipulates that, every person working under the Scheme is entitled to wages on a weekly basis, and in any case within a fortnight of the date on which work was done. In the event of any delay, the recipients are to be paid compensation as per the provisions of the Payment of Wages Act, 1936. Compensation cost is to be borne by the Government. The risk factors in payment of wages were non-payment, late payment, under payment and payment to wrong person/ ghost workers/non-existent works. The OG also details the following mechanisms to address the above risks: The names of payees and amounts of payments are to be read aloud to ensure that illiterate are not cheated and to check ghost payments. Disclosure of piece-rate measurement is to be made individually and not en masse, so as to provide each worker his exact due to prevent division of the wage earned by ghost workers. Measurements are to be taken on a daily basis and in a transparent manner. Measurements are to be made by qualified personnel a week before payment of wages. For every work there is to be a local VMC composed of members of the locality or village where the work is undertaken to monitor the progress and quality of work while it is in progress.
Payment of wages was delayed in majority of testchecked GPs
Audit noticed that the GPs test-checked had not observed the above mentioned mechanism as detailed below: (i) Wage payment was delayed in majority of the test-checked GPs and the delay ranged from 16 to 193 days. Out of the 780 beneficiaries interviewed, 361 experienced delay in receipt of wages. The reason for delay was attributed to the delay on the part of the Mate in returning the Muster Rolls, overburdening of staff, delay in taking measurement/check measurement of works, delay in getting the wage bills of the labourers passed by the section concerned, etc. In Malappuram District, total delayed payment amounted to ` 73.06 crore during 2009-10 to
50
2011-12. In Pulpatta GP, delay up to 71 days (` 0.12 crore) occurred due to delay in signing the cheque by the Secretary. The GP also experienced delay in release of funds (` 0.06 crore) from the BP (Areacode) which resulted in delayed payment of wages. For the delayed payment of wages, no compensation, though provided as per the provisions of the Payment of Wages Act, was paid in any of the testchecked GPs.
Payment of ` 12.86 lakh was made without measurement of works
(ii) As per paragraph 6.7.5 of the OG, qualified personnel are required to measure works before making payment. In Vazhayur GP, though it was recorded in the Measurement Book that measurement was taken by the overseer before payment, 45 cases of non-measuring of works undertaken during 2010-11 were observed in audit, for which payment to the tune of ` 12.86 lakh was made. This indicates that the procedure relating to measurement, a critical function, was violated. This also points to the absence of effective vigilance and monitoring mechanism. The GP Secretary, while accepting the audit observation, assured compliance in future. (iii) The OG specify that every agency making payment of wages must record on the Job card, the amount paid and the number of days for which payment has been made. It was observed in audit that out of the 39 test-checked GPs proper recording of payment details in Job cards was not made in 24 GPs. In the absence of proper entries in the Job cards, the workers were unable to know the details of wages due.
3.1.11
Auxiliary Objectives of the Scheme
MGNREGA envisages empowerment of rural poor, social equity, etc.
3.1.11.1
Best practices - Empowerment of rural women
One of the salient features of MGNREGA is that at least one-third of the beneficiaries are to be women who have registered and requested for work under the Scheme. In the State more than 92.24 per cent of the beneficiaries and 100 per cent of the Mates are women. Implementation of the Scheme has had an impact on the well-being of women in numerous ways. Some of the positive impacts include creating space for participation of women in public works, and the opportunity for collective work. Entrusting of work supervision to women has enhanced the supervisory and managerial skills of some of the women engaged as Mates. Audit observed that subsequent to Women at work participation in the Scheme, an ADS worker became a ward member in a test-checked GP in Palakkad. The income earned from the Scheme, and payment of wages to the individual bank accounts of workers, increased the financial security of women. Their family income increased which in turn resulted in better standard of living and enhanced status of their family as per the feedback obtained in beneficiary survey.
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3.1.11.2
Best practices Fostering Social Equity
In the State, out of 18,68,188 beneficiary households, 2,51,746 (13.48 per cent) belonged to SC/ST. The number of SC/ST persons registered under the Scheme was 4,11,286. The Scheme helped in increasing their income and improving social status. The wage earned helped the workers in taking care of their childrens education. There was improvement in the social relationship among the community members as per information obtained in beneficiary survey. The Scheme thereby helped reduction in poverty and fostering of social equity.
3.1.11.3
The objective of sustainable development by strengthening the natural resource base of rural livelihood was not met
Environment Protection
The Scheme aims at sustainable development of an agricultural economy. It assigns priority to works that addresses causes of chronic poverty such as drought, deforestation and soil erosion, thereby strengthening the natural resource base of rural livelihood. Audit observed the following: In Angadippuram GP (Malappuram District), tree plantations taken up under Harithakeralam Project were not in existence. In Mankada GP, 644 trees planted at a cost of ` 7,218 were not handed over to any user group for maintenance or maintained by the GP. The GP was also not in a position to give information on the present status of the plants.
In Meenachil GP in Kottayam District, 18 projects costing ` 14.85 lakh were taken up for growing 69,185 plants during 2009-10 to 2011-12. In Thiruvananthapuram District, 30 afforestation works were taken up in four GPs 20 incurring an expenditure of ` 18.65 lakh. The GPs stated that most of the plants had been destroyed during road maintenance work or eaten up by animals. The GPs stated that technical sanction/separate fund for further maintenance of plantations was not obtained. Five works were abandoned in a test-checked GP (Elamkulam) in Malappuram District after incurring an expenditure of ` 3.83 lakh. Four of the above works were flood relief works in water logged areas. By stopping the work half-way, the GP has failed to achieve the objective of flood control in the area. The Government replied (September 2012) that detailed enquiry on the allegations levelled would be initiated through State level inspecting officers of concerned districts and report furnished to Audit. Further developments are awaited (December 2012).
3.1.12
Transparency and Accountability
The Scheme envisages adequate provisions for ensuring transparency and accountability at all levels of implementation. Grievance Redressal mechanisms are to be put in place for ensuring a responsive implementation process. Regular inspection and supervision of works taken up under the Scheme are to be made to ensure proper quality of work and that the total wages paid for the completion of the work are commensurate with the quality and quantity of work done. VMCs are required to be constituted to monitor the progress and quality of work while it is in progress. The Scheme assigns central role to social audits as a means of continuous public vigilance to ensure public accountability in implementation.
20
Kallara, Venganoor, Karumkulam, Kanjiramkulam GPs
52
Proper maintenance of records and computer based MIS are vital for ensuring data integrity.
3.1.12.1
Grievance Redressal
The PO is required to be the Grievance Redressal Officer at the Block level and the DPC at the District level. Though the OG prescribe wide publicity to be given to facilitate grievance redressal at all levels, Audit observed that Grievance Redressal Mechanism was not publicised to the general public by way of notices, etc., in any of the test-checked GPs. Further, 12 complaints received in Venganoor GP during 2011-12 were not recorded in the Complaint Register as it was not maintained. In the absence of proper maintenance of complaint register, monitoring of disposal of complaints could not be verified.
3.1.12.2
Huge shortfall in conducting physical verification of works
Inspections
OG stipulate internal verification of 100 per cent works at BP level, 10 per cent at district level and two per cent at State level by the official functionaries to be achieved within a quarter. There was a huge shortfall to the extent of 94 per cent in conducting physical verification of works. The quantum of inspection conducted at various levels is detailed in Appendix XII.
3.1.12.3
Constitution of Social Audit forums were not as per the Act
Social Audits
Social Audit being an innovative feature of MGNREGS, was considered to be an ongoing process through which the potential beneficiaries and other stakeholders of an activity/project are involved at every stage from planning to implementation, monitoring and evaluation of the Scheme. The process was to help in ensuring that the project is designed and implemented in a manner most suited to the local conditions, appropriately reflecting the priorities and preferences of those affected by it, and most effectively serves public interest. Periodic assemblies referred to as Social Audit forums were to be convened by the Grama Sabha as part of the process of Social Audit. The Government constituted (December 2010) a State Social Audit Cell at a belated stage and the State Performance Audit Officer was given full additional charge of the Director, Social Audit Cell. Based on the findings of the model Social Audit conducted by the Cell, the Chief Minister has issued orders to conduct departmental enquiry and take necessary action to ensure that all the stipulations and provisions of MGNREGA are being adhered to by the implementing officers concerned.
Social Audit teams had not undertaken any preparatory work before the public hearing at the Grama Sabha
Proceedings of the Forum are to be conducted in a transparent and non-partisan manner, where the poorest and most marginalised can participate and speak out in confidence and without fear. In order to ensure transparency, the guidelines required a person not part of the Panchayat to chair the meeting and a person from outside the Panchayat to be the Secretary of the Forum. In 34 out of the 39 testchecked GPs, the Chairman and the Secretary were from within the Panchayat. In the test-checked districts, Audit observed that no preparatory work, including interaction with beneficiaries, was undertaken by the social audit teams before the public hearing at the Grama Sabha. The MGNREGS accounts of the GPs are to be presented for scrutiny at the social audits. Such a system was not followed in Thiruvananthapuram District. Though
53
22 test-checked GPs in the other three districts selected for the review stated that GP accounts were presented for scrutiny at the social audits, Audit could not verify the authenticity of statements made by the GPs in the absence of records/proof of having presented these accounts for scrutiny. Audit also noticed that the Social Audit Reports prepared by teams headed by people who were part and parcel of the GPs did not contain any significant findings. The pattern of this report was uniform in all wards of a GP. This report was the only proof of an audit being conducted. But majority of workers were unaware of such a process. The reports failed to point out deficiencies in scheme implementation such as delay in payment of wages, short payment, nonprioritisation of works, non-payment of compensation for delayed payments, inflated estimates, deficiencies in measurement, etc. But it had comments on inadequate travelling allowance to the GP staff engaged in field duty.
3.1.12.4
Maintenance of Registers
In order to facilitate systematic collection of information at various levels, OG prescribe that records such as Muster Roll Issue/ Receipt Register, Job Card Application Register, Job Card Register, Employment Register, Works Register, Asset Register and Complaint Register are to be maintained in the Panchayats and recordings made properly. These records which were to ensure transparency and accountability were either not opened or improperly maintained. Test check of records available in the selected Panchayats in four districts revealed deficiencies as shown in Appendix XIII.
3.1.12.5
MGNREGS Website
To ensure integrity of data in MIS, there have to be records in support of data entered and cross verification by another person. It was observed in audit that there were no records in support of data entry and there was also no system of cross verification by another person. Therefore, there was no assurance with reference to authenticity of MIS information. There were discrepancies in the figures of test-checked districts, relating to number of households registered, households issued with Job cards, person days generated, works executed, expenditure incurred, etc., when cross-checked with the figures uploaded in MIS. The Government stated (September 2012) that the data entered at the cutting edge level would be authenticated by the GP Secretary and that reporting issues in the MIS could be rectified at the administrator level.
3.1.13
Human Resource Management
As per the provisions of MGNREGA, every State Government was required to appoint a full-time dedicated PO not below the rank of BDO in each Block with necessary supporting staff for facilitating implementation of the Scheme at BP level. The responsibility of PO was to be discharged by the BDO. In such circumstances, an Additional PO was to be appointed.
Staff structure was not commensurate with the volume of works and magnitude of funds provided
Out of 152 BPs in the State, 16 BPs had exclusive BPOs. In the remaining 136 BPs, BDOs were designated as BPOs. Though Joint BDOs were appointed as Additional POs solely for the execution of the Scheme in these BPs, Audit observed that these officers were also entrusted with additional duties. The
54
Government stated (September 2012) that the appointment of 136 BPOs was under active consideration. Paragraph 3.1.1 of OG stipulates the appointment of Employment Guarantee Assistant (EGA) in every GP, overseeing the process of registration, holding Grama Sabha meetings, conducting Social Audit, etc. In the 39 GPs test checked, no EGA was appointed except in Mankada GP in Malappuram District where a Co-ordinator had been appointed on deputation with the same duties and responsibilities of EGA. At the GP level, GP Secretaries who were assigned with work relating to implementation of various schemes were entrusted with the duty of receiving applications for registration, issue of Job cards, work allotment, payment of wages, etc. The Government stated (September 2012) that the Kudumbashree/ADS volunteers who were assigned a pivotal role in scheme implementation help the GPs in the execution of functions related to the Scheme. The reply is not acceptable as the absence of an effective control/monitoring mechanism over Kudumbashree may not ensure the compliance of the stipulated guidelines of GOI. JPCs were posted in eight districts21 to assist the DPCs in Scheme implementation. The Project Director, Poverty Alleviation Unit functions as the JPC in the remaining six districts. One IT Professional and one Accountant-cum-Computer Operator were posted in the office of the JPC for addressing MIS issues, maintaining cash book, ledger, etc. and for preparing daily report of progress under this Scheme. The Government stated (September 2012) that the appointment of JPCs in the remaining districts was under active consideration. The posts of an Assistant Engineer/Overseer and an Accredited Engineer were sanctioned in all GPs and BPs for preparation of work estimates and supervision of works (February 2006). The Government also authorised to utilise services of Engineers in LSGD and Overseers as well as retired Engineers in Technical Groups in District/Block level in the preparation of estimates, supervision and check measurement. Services of an Accredited Engineer/Overseer were made available at BP level in Palakkad, Malappuram and Kottayam Districts for assisting in estimation, measurement, etc. However, such a technical hand was not seen posted in one of the test-checked BPs (Varkala) in Thiruvananthapuram District.
3.1.13.1
Training
The Government designated (July 2009) State Institute of Rural Development (SIRD) as the nodal agency for implementing a Special Capacity Building Training Programme under MGNREGS. The training module for various stakeholders of the programme as well as the Training Calendar for implementing the above programme was prepared by SIRD and approved by GOI, MORD. In addition, the Institute also organised specific training programmes as directed by the Government. Though CRD stated (April 2012) that training programmes for all level officials and elected representatives of PRIs and Kudumbashree members were conducted in respect of preparation of district plans and other related factors under MGNREGS, it was observed in audit that training was imparted to staff only in
21
Thiruvananthapuram, Kollam, Alappuzha, Idukki, Thrissur, Palakkad, Kozhikode and Wayanad Districts
55
ten out of thirty nine test-checked GPs. Lack of training had adversely affected timely preparation of Development Plans, prioritisation of permissible works, preparation of realistic estimates, etc., in GPs.
3.1.14
Evaluation
The objective of MGNREGA is strengthening the livelihood resource base of the rural poor and the creation of durable assets. Investments made under MGNREGA are expected to generate employment and purchasing power, raise economic productivity, promote womens participation in the work force, strengthen the rural infrastructure through the creation of durable assets, reduce distress migration and contribute to the regeneration of natural resources thereby transforming outlays of the Scheme into outcomes. The OG stipulate that District-wise evaluation studies should be conducted by the SEGC and block-wise studies by the DPC to assess the outcomes. SEGC should seek the association of research institutions of repute with this process and the findings of the evaluation studies should be used by SEGC and the DPs for initiating corrective action. The Government entrusted the Kerala State Planning Board in 2010 and the Tata Institute of Social Sciences in 2011 to carry out evaluation studies on the implementation of MGNREGS in the State. The major findings in their reports included (i) lack of awareness about right to demand work, right to unemployment allowance, right to compensation for delayed payment, etc., (ii) absence of foolproof estimation of demand for work (iii) mismatch between number of days for which employment was guaranteed and actual number of days employed (iv) delay in payment of wages (v) non-exploration of possibilities of convergence between MGNREGS activities and local panchayat plans (vi) nonprovision of shelter for workers at work site (vii) problems faced by women employees at worksites, etc. Audit noticed that no corrective action has been taken by the implementing units based on the recommendations made in the evaluation study reports.
3.1.15
Conclusion
MGNREGS provided employment through participative planning duly involving the Panchayat Raj Institutions and village population through Grama Sabhas in order to identify the works to be taken up for generation of employment and creation of durable assets. The scheme provided for empowerment of women and fostering social equity. There was delay in convening Grama Sabhas for identification and recommendation of works and also forwarding labour budget and action plans from the GPs to block level. The DPP to facilitate advance planning and to provide a development perspective for the district was not finalised in Malappuram. The DPPs prepared for Thiruvananthapuram and Kottayam Districts had not been approved by SEGC. Out of the 14.16 lakh households provided with employment as at the end of March 2012, the State provided 100 days of employment only to 1.24 lakh households (8.76 per cent). Though the State had to bear only 25 per cent of the material cost, failure of the Government to contribute even to this minimum 10 per cent (25 per cent of the 40
56
per cent material cost to be borne by the State) of the total cost of the project resulted in non-creation of durable assets. Due to lack of inclination to fund the material component, the selection of works was restricted to bush/jungle clearance, grass cutting, etc., which did not result in any enduring outcome. Though the Act stipulates payment of unemployment allowance, it is generally avoided by merging the demand for work and provision of work. Work was not seen provided as and when demanded by the job seeker thereby defeating the concept of a rights-based demand driven scheme. In Malappuram District, though employment was not provided to 46 workers, the unemployment allowance due to them was also not paid. Four GPs in Thiruvananthapuram District experienced delay in release of GOI grants by DPC for the year 2011-12. MGNREGS fund was diverted for foundation works of EMS and IAY houses in three BPs test-checked in Thiruvananthapuram District. Muster Rolls were maintained improperly. Tampering of Muster Rolls by way of erasing, cutting, overwriting, etc., was noticed in nine GPs in Thiruvananthapuram District. The potential benefit of convergence of MGNREGS with other rural development schemes has not been tapped for creation of sustainable outcomes.
3.1.16
Recommendations
The Government should utilise the Scheme to create durable assets by increasing its share of the overall cost. This would require enhanced contribution from the State exchequer towards implementation of the Scheme. All GPs should prepare shelf of projects well in advance to provide at least 100 days of employment in a financial year to every household whose adult members volunteer to do unskilled labour. There should be zero tolerance towards improper maintenance of vital records. Redressal of grievances and social audit forums need to be accorded priority.
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3.2 ASSESSMENT, LEVY AND COLLECTION OF TAXES IN THIRUVANANTHAPURAM MUNICIPAL CORPORATION

3.2.1 Introduction
Section 230 of the Kerala Municipality Act, 1994 (KM Act) empowers the Municipality to levy and collect different types of taxes, viz., Property tax, Profession tax, Entertainment tax, Advertisement tax, etc., and fees like licence fee on business establishments, and permit fee on construction of buildings from individuals and institutions located within their jurisdictional areas. The levy and collection of taxes is governed by relevant provisions of KM Act, as well as Rules framed by the Government in respect of each type of tax. The various taxes levied by Thiruvananthapuram Municipal Corporation (TMC) and manner of levy of each item are given in Appendix XIV. Contribution of various taxes to the revenue of TMC during 2011-12 is depicted in Chart 3.1.
Chart 3.1: Contribution of various taxes to the revenues of TMC
The objective of Audit was to verify whether there was a proper system for assessment and collection of taxes in TMC. Audit was conducted during April 2012 to July 2012 covering the period 2007-08 to 2011-12. Out of the 100 divisions in the Corporation, 2522 were selected by Statistical Sampling method, viz., Probability Proportional to Size Without Replacement. The audit methodology included scrutiny of files/registers/records maintained in TMC, issue of audit enquiries and obtaining replies, discussion with officials, interaction with departments of the Government and agencies, apart from the scrutiny of data available from electronic and other media, site verification, etc.
3.2.2
Organisational set-up
The Secretary of TMC is the administrative head of the Corporation. The Revenue Officer who is the head of the Revenue Department is responsible for the assessment, levy and collection of tax and is assisted by Revenue Inspectors, Bill Collectors and other administrative staff.
22
Kazhakkoottam, Chanthavila, Sreekaryam, Ulloor, Kinavoor, Nalanchira, Kesavadasapuram, Medical College, Pattom, Muttada, Kudappanakunnu, Nanthancode, Kunnukuzhi, Palayam, Thycaud, Vazhuthacaud, Kanjirampara, Vattiyoorkavu, Poojappura, Nemom, Vizhinjam, Thiruvallom, Kadakampally, Akkulam, Attipra
58
Audit findings The audit findings are organised into the following sections: Property tax Profession tax Entertainment tax and Advertisement tax The sections are organised in the same order as they appear in the KM Act.
3.2.3
Tax revenue and collection efficiency
Details of tax revenue of TMC during the five years 2007-12 are given in Table 3.7.
Table 3.7: Tax revenue during 2007-12
Year Property tax Profession tax Entertainment tax 291.98(9) 273.86(7) 316.76(6) 303.13(6) 343.27 (5) (` in lakh) Advertisement and other taxes 27.01(1) 37.18(1) 65.11(1) 77.53(2) 124.09(2)
2007-08 1773.11(51) 1361.46(39) 2008-09 2137.88(52) 1635.18(40) 2009-10 2438.64(50) 2101.49(43) 2010-11 2672.62(53) 1972.16(39) 2011-12 4056.68(57) 2522.09(36) Source: Income and expenditure statement of the respective years Figures in bracket represent percentage of each item of tax revenue to total tax revenue
Property tax and Profession tax together constituted more than 90 per cent of the tax revenue of TMC during 2007-08 to 2011-12. The collection efficiency of these taxes is given in Appendix XV which shows that the collection efficiency was not encouraging. During 2007-08 to 2011-12, Property tax constituted more than 50 per cent of the tax revenue of TMC, the collection efficiency of which was within the range of 52 per cent to 62 per cent of the demand. Even though KM Act provides for initiation of revenue recovery procedures against defaulters of tax, TMC had not resorted to such measures and there was no mechanism to pursue the cases when the assessee failed to remit the taxes. As per the Demand Collection and Balance Statement for the year 2011-12, taxes pending collection as on 31 March 2012 amounted to ` 23.42 crore (Property tax: ` 20.80 crore, Profession tax: ` 2.34 crore and Advertisement tax: ` 0.28 crore). A considerable portion of the arrears represented dues of GOI buildings. The average annual expenditure incurred by TMC towards collection of revenue was ` 4.12 crore. Raising the collection efficiency of Property tax to 85 per cent of the projected demand was one of the mandatory reforms to be implemented as part of JNNURM23. TMC, however, could not take any effective step in this regard despite lapse of seven years since the launching of the project. Audit noticed that during 2010-11 and 2011-12, the actual collection was far less than the Budget Estimates.
3.2.4
Property tax
Property tax is a major source of revenue of TMC and is levied and collected on all the buildings within its limits. As per the provisions of KM Act which existed up to October 2009, Property tax was to be levied as a percentage of annual value
23
Jawaharlal Nehru National Urban Renewal Mission, which is being implemented in Thiruvananthapuram from 2005-06 onwards
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(probable rent that the building may fetch, if let out annually). The Act was subsequently amended24 to levy the tax based on plinth area of buildings. This new methodology for assessment, which was expected to bring in a greater degree of transparency and enhanced revenue collection, has not been brought into effect till date (September 2012). The annual tax once assessed is payable in two half-yearly instalments.
3.2.4.1
Database of all assessable properties
Absence of integrated database

TMC lacked comprehensive database of taxable units
Complete and accurate data on all assessable public and private properties such as residential and non-residential properties, Central and State Government properties, properties of autonomous bodies, etc., is a pre-requisite for raising proper demand. This has the added benefit of detecting unauthorised structures. Audit noticed that TMC had no comprehensive database of all assessable properties. A system of requiring prior permissions for construction of buildings is already in place in the Town Planning Wing. Such information could have served as an effective aid for creating centralised database for Property tax. Only illegal construction, i.e., construction made without building permits, would not have found place in the database. The information available in the Town Planning Section was not utilised and there was no co-ordination between the wings of Town Planning and Revenue in this regard. GIS mapping In order to avoid properties from escaping the tax net, various Indian cities (Bangalore, Hyderabad, Kanpur, etc.) have adopted Geographic Information Systems (GIS) mapping, for listing properties. The Fourth State Finance Commission had also recommended creation of a GIS based database for Property tax to provide additional information which would help to streamline the assessment procedure. TMC initiated GIS data collection during 2008-09, but the project was temporarily dropped due to some technical difficulties. However, TMC is now in the process of reactivating the project. Computerisation Thiruvananthapuram is one of the cities where JNNURM project is being implemented, and as per the requirement of the project, computerisation of Property tax data on the basis of GIS mapping, is one of the mandatory reforms to be implemented by the Urban Local Body. In TMC, applications for building permits were being received online. Processing of application, issue of permit/Occupancy Certificate (OC) and assessment of Property tax were done manually. TMC had also provided facility for remitting tax online. Accounting of taxes was partially computerised.
3.2.4.2 (i)
Raising of demand Oversight role of the Government in Property tax process
KM Act was amended in October 2009 to levy Property tax based on the plinth area of buildings. But the detailed order to give effect to the provisions of the
24
Act 30 of 2009 with effect from October 2009
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amended Act was issued by the Government only in January 2011. Audit scrutiny revealed that as part of implementation of Government order, the Corporation area was divided into different zones and the rates applicable to each zone, after obtaining approval by Finance Standing Committee, had been submitted to the Corporation Council for approval. As the works in connection with revision of Property tax are still in progress (January 2013), the amended methodology for assessment has not been brought into effect. Section 233(4) of KM Act stipulates that Property tax is to be revised once in five25 years subject to the rules framed by the Government. The Government also issued Ordinance on 24 November 2012 stipulating that rates of Property tax shall be enhanced by 25 per cent at the end of every five years. In the absence of rules, TMC could not revise Property tax rates since 1994, which adversely affected its revenue earning potential. The Fourth State Finance Commission had made observations regarding nonrevision of Property tax since 1993-94 and pointed out that had such a revision been attempted, minimum enhancement of the tax by now would have been an appreciable 95 per cent or more. The Commission had also recommended that a Property Tax Board on the lines of West Bengal Central Valuation Board may be constituted for overall policy guidance and supervision of Local Government zonation and classification process. The five yearly enhancement or revision of tax could be done with the help of the Board.
(ii)
Inadequate mechanism for identifying buildings for tax assessment
In the absence of a comprehensive database, the only way to detect newly constructed buildings was to trace them from the permits issued for construction or the completion reports from the owner on new construction/alteration. Audit noticed that even this mechanism was deficient as discussed below:
Deficiency in maintenance of records and lack of co-ordination

Town Planning Section issues permits for construction of buildings in its jurisdictional area. The validity of building permit is for three years and requires to be renewed in case the construction prolongs beyond that period. On completion of construction, the owner submits a completion report to the Corporation based on which Town Planning Section issues an OC to the owner of the building. One copy of OC is given to Revenue Section. This forms the basis for tax assessment. Revenue Section assesses the property and notes it in the Assessment Register. Audit noticed the following deficiencies in the system: Permit Register which is the basic record for issuance of permits for new construction was not maintained properly by TMC as the columns for recording the essential details (plot area, Floor Area Ratio (FAR), date of receipt of completion report, date of assessment, etc.) were kept blank. No register/record was maintained in Town Planning and Revenue Sections for noting the details of OCs issued/received. Details of assessments made were not passed on to Town Planning Section by Revenue Section for noting in the Permit Register. Thus, there was total lack of co-ordination between Town Planning and Revenue Sections. As a result, the two important control registers, viz., Permit Register and
25
Till 06 October 2009 Property tax was to be revised once in four years (Section 238 of KM Act)
61
Assessment Register, remained as two independent islands of information without any link, with the result that the mechanism to ensure that Revenue Section was assessing all cases where OCs were issued, has failed. TMC has to depend totally on the owner of the building to report the completion, which may or may not be given. Audit further noticed that the software installed was not being utilised as it was not comprehensive with requisite parameters to cover all provisions of the Act/Rules necessary for issue of permits/OCs and for assessment of Property tax. The processing of application for permits/OCs and assessment of Property tax were being done manually. However, there was no system of follow up in respect of lapsed permits. TMC stated (February 2013) that as part of implementation of e-Governance under National Mission Mode Project this software was being updated, which is expected to be completed by March 2014.
(iii)
Non-assessment of Property tax/Service charges
Audit noticed that TMC failed to assess a large number of buildings including buildings which had already been identified by it. A list of buildings identified by TMC but not assessed to tax is given in Appendix XVI. TMC failed to explain the reasons for not assessing these buildings. Though some of the important buildings were not assessed by TMC, Audit computed the Property tax based on the details collected and these are mentioned below:
BSNL Quarters
Post and Telegraph Department had constructed 129 staff quarters in Ward 11 of TMC, with plinth area 8619.01 square metre. Even though the construction of these buildings was completed in April 1994, TMC had not assessed Service charge in respect of these buildings. When BSNL was incorporated as a company in October 2000, the above buildings were transferred to BSNL and full Property tax was leviable on these buildings since the formation of the company. Annual Service charge leviable on the above buildings from 1994-95 to first half of 2000-01 amounted to ` 4.19 lakh and annual Property tax leviable from second half of 2000-01 onwards amounted to ` 5.59 lakh. Thus, the total Property tax/Service charge due on the above buildings from 1994-95 to 2011-12 amounted to ` 91.46 lakh. TMC stated (November 2012) that action would be taken to levy Property tax on BSNL buildings.
TMCs failure to assess buildings identified by it, resulted in loss of revenue of ` 4.13 crore
KHRWS Pay Wards

Kerala Health Research and Welfare Society (KHRWS) is a Society registered under the Travancore Cochin Literary Scientific and Charitable Societies Registration Act, 1955, and the Society is having several pay wards26 attached to Medical Colleges and other major Government hospitals in the State. Property tax is leviable on these
26
KHRWS Building in Medical College Campus
Rooms for accommodating patients on rental basis
62
buildings as per the provisions of KM Act. As per the details collected by Audit from the Managing Director, KHRWS, there were 357 rooms (named as KHRWS Pay Wards) attached to Thiruvananthapuram Medical College, SAT Hospital, Thycaud Women & Children Hospital and Ophthalmic Hospital, in addition to the Headquarters building of KHRWS. TMC had not assessed Property tax in respect of these buildings. As details regarding the plinth area, date of construction of these buildings, etc., were not available, Audit computed the tax effect based on the assessment made by TMC in respect of KHRWS Pay Wards attached to Government Hospital, Peroorkada. The annual Property tax leviable on above mentioned pay ward buildings was estimated at ` 11.23 lakh27 and the total Property tax due for the period 2007-08 to 2011-12 worked out to ` 56.14 lakh (even though these buildings were completed years back, tax has been worked out only for the period of review as the date of completion of the buildings were not available). TMC stated (November 2012) that instructions had been issued to concerned Revenue Inspectors for assessing the buildings. Kerala Legislative Assembly Complex Buildings Construction of the Kerala Legislative Assembly Complex buildings was completed in May 1998. The buildings were, however, not assessed to Property tax. When the fact of non-assessment of the buildings was pointed out (February 2011) in audit, TMC assessed the buildings in January 2012 as detailed in Table 3.8.
Table 3.8: Details of assessment of Kerala Legislative Assembly Complex Buildings
Sl. No. 1 2 3 4 5 Building No. TC 14/7 (1) TC 14/7 (2) TC 14/7(3) TC 14/7(4) TC 14/7(5) Details of building Legislature Secretariat (Assembly Building) Legislature Secretariat (Administrative Building) Honble Speakers official residence Honble Deputy Speakers official residence Speakers staff quarters Year of completion 1998-99 1992-93 1990-91 1995-96 1995-96 Annual tax (` ) 18,89,284 4,54,758 14,188 23,886 16,085
Total demand for the above buildings including Library cess for the period from 1990-91 to 2011-12 amounted to ` 3.33 crore (Property tax: ` 3.15 crore, Library cess: ` 18.27 lakh). The Secretary, Kerala Legislature Secretariat informed (April 2012) TMC that they were bound to pay Property tax for the period from 2008-09 only as the demand for the earlier period was time barred as per Section 539 of KM Act and remitted ` 1.01 crore (pertaining to the period 2008-09 to 2011-12). TMC had, however, addressed (September 2012) the Legislature Secretary, to remit the demand raised for earlier period also.
Based on the data (area of one room: 25.58 M 2; rental value: ` 50 per M2 per month) adopted by TMC for assessment of KHRWS pay wards attached to Government Hospital, Peroorkada
27
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Non-assessment of Malayala Manorama building TMC granted permission in October 2002 for construction of a press building with four floors (plinth area: 1139.82 square metre). However, the assessee constructed a fifth floor without permit. The Building Inspector reported (January 2006) that construction of all the floors was almost complete and the building had been partially put Malayala Manorama Building to use. Even though the assessee filed application for regularisation of the building, the Secretary, TMC rejected it and issued (November 2007) orders to demolish the unauthorised construction. But the Tribunal for LSGIs stayed orders of the Secretary for demolishing the building. As per Section 242 of KM Act, in the case of unauthorised construction, the assessee was liable to pay the tax due28 on the building constructed unlawfully till the date of its demolition. TMC had not taken any action to assess the building under Section 242 of KM Act. The order of the Tribunal staying the demolition of the building was not a genuine reason for not assessing the building. The revenue loss on account of not assessing the building amounted to ` 33.40 lakh. TMC stated (February 2013) that action would be taken to levy tax on the building from the second half of 2005-06 onwards. Unaided educational institutions
Unaided educational institutions were not assessed
As per amendment made to Section 235 of KM Act with effect from 07 October 2009 (Act 30 of 2009), unaided educational institutions are not exempt from Property tax. There were 27 unaided educational institutions in the Corporation area but TMC was levying tax in respect of only four institutions. TMC stated (February 2013) that the Government had issued direction to levy Property tax from unaided educational institutions only from January 2011 and the tax assessment shall be done for the remaining 23 unaided institutions from the second half of 2010-11 onwards.
3.2.4.3 Collection and Accounting (i)

Short levy of Property tax of ` 57.82 lakh
Short levy of Property tax
Construction of building where validity of permit expired

In January 1990, TMC issued permit for construction of a two storied building in Survey No.1226 of Thycaud village. The construction of the building was neither completed within the prescribed time nor was the permit renewed. The owner of the building (assessee) submitted (December 2008) an application for regularisation of the building constructed without valid permit. In the application, the assessee had stated that the building was completed in November 1998 and
28
Up to 06 October 2009 actual amount of tax, and thereafter, actual amount of tax together with twice the amount (amended by Act 30 of 2009)
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rented out to Indian Bank, Thycaud Branch. Since TMC did not take any action, the assessee submitted (January 2011) another application to TMC for regularisation. TMC assessed the building as unauthorised construction fixing the annual tax at ` 71057 and demanded ` 2.13 lakh (three times of ` 71057 on account of penalty) per year from the second half of 2010-11 onwards under Section 242 of KM Act. On account of not assessing the building from its date of completion (i.e., November 1998), TMC had incurred loss of ` 10.45 lakh29 for the period from 1998-99 (second half) to 2010-11 (first half). TMC replied (February 2013) that action has been initiated to assess the building from 1998-99 onwards.
Levy of Service charge instead of full Property tax

Some of the buildings of Postal and Telegraph Department were transferred to BSNL while the Public Sector Undertaking was formed in October 2000. The Government had clarified (December 2004) that unlike other Central Government Institutions, Property tax at full rate was to be realised in respect of buildings owned by BSNL. TMC had not yet identified all the buildings owned by BSNL (buildings already in existence at the time of incorporation of the company, as well as new constructions) till date and assessed them to tax. TMC has levied only Service charge (75 per cent of normal Property tax) in respect of BSNL buildings already identified by it. Revenue loss on account of not levying full Property tax in respect of 10 categories of BSNL buildings already listed by TMC amounted to ` 47.37 lakh as detailed in Table 3.9.
Table 3.9: Revenue loss due to non-levy of full Property tax
Sl. No. 1 2 3 4 5 6 7 8 9 10 Institution Property tax leviable (`) 2,46,464 2,50,368 2,55,072 8,35,520 1,60,288 14,77,024 1,05,376 6,46,080 1,04,56,708 45,13,152 Service charge actually levied (`) 1,84,848 1,87,776 1,91,304 6,26,640 1,20,216 11,07,768 79,032 4,84,560 78,42,531 33,84,864 Revenue loss (` ) 61,616 62,592 63,768 2,08,880 40,072 3,69,256 26,344 1,61,520 26,14,177 11,28,288 47,36,513
Coaxial Maintenance Exchange (TC 29/685 to 700) Central Telegraph Office (TC 26/118 to 120) Telegraph Exchange (26/1283 to 1289) General Manager, Telecom, Poojappura TC 17/2046(2) Barton Hill Quarters-12/1126 (146) Telecom Circle Office 12/1151 (1) Vivekananda Nagar Quarters 2/3622 to 3708 Divisional Engineer, Central Telephone Exchange- 26/1532 Principal General Manager, BSNL Telecom District, Thiruvananthapuram 26/123 TOTAL
TMC stated (November 2012) that action would be taken to levy Property tax on BSNL buildings as observed by Audit.
@ ` 71057 from 1998-99 (II half) to 2009-10 (I half) and @ ` 2.13 lakh thereafter plus Library Cess of ` 49741
29
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(ii) Irregular exemptions/deductions allowed Remission of Service charge given on GOI buildings
Remission of Service charge of ` 38.21 lakh
By virtue of Article 285(1) of the Constitution, Property tax is not leviable on GOI buildings. As per Section 230 (4) of KM Act, the Municipality may levy Service cess on sanitation, water supply, street light and drainage as fixed by the Council, subject to the limits prescribed in the Act30. However, GOI has specified Service charges at the rates of 33.33 per cent, 50 per cent and 75 per cent of normal Property tax depending on the quantum of service availed by them. Honble Supreme Court of India confirmed31 this fact in November 2009. But it was noticed that TMC Council had given remission of Service charge in respect of the GOI buildings as given in Table 3.10 on the basis of the direction (December 2004) of the State Government.
Table 3.10: Remission of Service charge given to GOI buildings
Sl. No. 1 2 3 4 5 Name of Office VSSC Garage, Kesavadasapuram P&T Quarters, Muttada Central Excise Building Regional PF Commissioner, Pattom Income Tax Commissioner Office Total Half yearly tax (`) 1,621 390 1,78,552 72,900 16,609 Amount of arrears (`) 22,694 5,850 23,21,176 9,47,700 2,32,526 35,29,946 Period 2005-2012 2004-2012 2005-2012 2005-2012 2005-2012
Audit also noticed that TMC had levied only Service charge instead of full Property tax for the building owned by International Airport Authority (a Statutory Corporation) and gave remission for ` 2.91 lakh based on the direction of the Government. The Corporation Council has not taken any action to reverse its decision based on the latest ruling of the Honble Supreme Court. TMC stated (June 2012) that action would be taken to levy Service charge on GOI buildings.
Exemption allowed on demolished buildings

As per Section 241 of KM Act which existed up to 06 October 2009, if any building in a Municipal area is demolished or destroyed, the owner shall, until notice thereof is given to the Secretary, be liable to pay Property tax thereon which would have been leviable had the building not been demolished/destroyed.
Irregular exemption of ` 27.39 lakh allowed
In two Divisions test-checked - Medical College (Division 1) and Secretariat (Division 26) - Audit noticed that the Bill Collectors were not collecting tax on buildings reportedly demolished, even though notices of demolition were not given to the Secretary and exemption obtained from the Secretary by owners in those cases. Tax not collected by the Bill Collectors in 108 such reportedly demolition cases (pertaining to 1991-2009 first half) amounted to ` 27.39 lakh32. TMC stated (February 2013) that instructions had been issued to Revenue Inspectors to ascertain the factual position in these cases.
30
As per provision 235(5) of KM Act, which existed up to 06 October 2009, the Municipality is entitled to claim the cost of services covered by Service charge (towards cost of services like water supply, sewerage, sanitation, waste disposal, road access, lighting etc., provided to the buildings). 31 Judgment dated 19 November 2009, relating to Civil Appeal No.9458-63/2003- Rajkot Municipal Corporation & Others vs. UOI & Others 32 Secretariat Ward : 52 buildings, arrears: ` 25.82 lakh (period 1993-2012) Medical College Ward : 56 buildings, arrears: ` 1.57 lakh (period 1991- 2012)
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As the recordings made by Bill Collectors were not verified by any higher authority, Audit noticed deficiencies in the internal controls in not ensuring complete authenticity in the recordings.
Lack of transparency in allowing deduction in appeal

Deductions were allowed in appeal in a routine manner
Under Section 509 of the KM Act, any person aggrieved by an order of assessment of Property tax issued by the Secretary of the Municipal Corporation can file appeal before the Appeal Standing Committee. Verification of the minutes of Appeal Standing Committee revealed that during 2010-11, deductions ranging from five per cent to 20 per cent on tax amount were allowed in 2226 out of 2319 appeals filed (96 per cent). In majority of the cases, the Committee allowed these deductions without citing any specific reasons. The Appeal Standing Committee considered (4 August 2010) 186 appeal petitions without personal hearing, as the petitioners did not turn up for the hearing despite the intimations sent to them in this regard. The Committee, however, decided 160 cases in favour of the appellants on the basis of their applications and statements. Decision of the Appeal Standing Committee in favour of the assessees in majority of the cases indicates that the original assessments were done without thoroughly examining the cases.
Deduction allowed on appeal in the case of Mascot Hotel

Construction of the new building and extension of the existing building of Mascot Hotel in Nanthancode division of TMC was completed in January 2004. The annual Property tax of these buildings was fixed (August 2004) at ` 14.55 lakh. The assessee filed (September 2004) Revision Petition before the Secretary who reduced the annual value by 22 per cent. Even against this, the assessee again filed appeal before the Appeal Standing Committee. The Appeal Standing Committee fixed the monthly rental value of the building on the date of completion (January 2004) as ` 40 per square metre. Based on this, the annual tax of the building was reduced to ` 7.83 lakh. In this connection, following points were noticed: (a) Mascot Hotel falls under zone II and the monthly rental value (as of January 2004) approved by the Council for commercial buildings in this zone was in the range of ` 60 to ` 75 per square metre. The rate fixed by the Appeal Standing Committee (` 40 per square metre) was less than the rate fixed by the Council. The action of the Appeal Standing Committee in fixing a rate less than the one approved by the Corporation Council was not justifiable. Loss of revenue on account of adopting lesser rate amounted to ` 32.12 lakh. (b) As per Section 509 (11) of KM Act, an appeal or revision petition can be admitted only after the assessee has remitted the tax payable as per demand notice. In this case, the assessee did not remit the tax payable as per demand notice, and hence admitting the appeal itself was not in order. TMC stated (February 2013) that the matter would be brought to the notice of the Appeal Standing Committee.
(iii)
Substantial amount was in arrears
Slackness in collection of arrears of Property tax
Sections 538(2)/538A of KM Act provide for levy of penalty, initiation of revenue recovery procedures, etc., for realising arrears. As on 31 March 2012, TMC records showed arrears of Property tax of ` 20.80 crore. Of this, ` 3.56 crore represented dues relating to previous years. Substantial amount of ` 1.17 crore relating to Medical College Hospital building and ` 59.81 lakh relating to Self Financing Educational Institutions in Mar Ivanios College Campus
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was pending collection. Even though penalty was being levied in delayed remittance cases, no stringent action including revenue recovery procedures was taken in any of the arrear cases. Some of the major cases of arrears that came to the notice of Audit are mentioned below: BSNL Buildings Test check of the Property tax records relating to Ward 26 and Ward 2 revealed that TMC was not realising tax from 85 buildings owned by Telecom/BSNL, and listed by it. Property tax dues for the period 2000-01 to 2011-12 in respect of these buildings amounted to ` 1.26 crore as detailed in Table 3.11.
Table 3.11: Property tax arrears of BSNL buildings
Sl. No. 1 2 Building No. 26/1532 26/123 Name of Office Divisional Engineer, Central Telephone Exchange Principal General Manager, BSNL Telecom District, Thiruvananthapuram Post &Telegraph Staff Quarters Total Amount of arrears (`) 78,42,531 33,84,864 Period 2000-2012 2000-2012
2/3622 to 3704
13,23,971 1,25,51,366
2007-2012
TMC stated (June 2012) that action would be taken to realise the arrears of Property tax relating to the above buildings.
Buildings of Railways
TMC assessed the half-yearly Service charge in respect of the buildings owned by Railways in the Corporation area at ` 77079. The Service charge amounting to ` 34.42 lakh due from Railways for the years 1988-89 to 2011-12 is still pending collection (September 2012). Even though the Corporation Council decided (February 2001) to take legal action against Railways, the issue was not pursued further. Subsequently, based on the clarification issued by the Deputy Director, Local Fund Audit that Service charge was not realisable from Railways, the Corporation Council decided (27 April 2006) to give remission of ` 25.18 lakh from the demand, being the Service charge realisable from Railways up to 2005-06. The decision of the Council was not in conformity with the latest Supreme Court rulings33 as well as GOI orders on the subject. Action has to be initiated for realising the Service charge due from Railways. In addition to this, penalty at the rate of two per cent per month up to 23 August 2005 and at one per cent per month thereafter is also to be realised from Railways, under Section 538(2) of KM Act. TMC stated (June 2012) that action would be taken to collect the arrears of Service charge from Railways.
Regional Cancer Centre

Regional Cancer Centre (RCC), Thiruvananthapuram was established in 1981 as a Society registered under the Travancore Cochin Literary Scientific and Charitable Societies Registration Act, 1955, and is situated in the Medical College Campus.
33
Judgment dated 19 November 2009, relating to Civil Appeal No.9458-63/2003- Rajkot Municipal Corporation & Others vs. UOI & Others.
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TMC assessed annual Property tax at ` 5,18,130 and Library cess at ` 25,907 on RCC buildings from the second half of 1989-90 onwards, after excluding portions exclusively utilised for educational purposes. Total Property tax due from RCC up to the end of 2011-12 amounted to ` 1.22 crore (` 1.16 crore + Library cess ` 5.83 lakh). RCC did not pay the tax due on the plea that they wanted exemption from payment of Property tax, being an educational institution. The Government issued (January 2011) orders exempting portions of RCC buildings from payment of Property tax, which were used exclusively for educational purposes. The Government also exempted RCC from payment of penal interest on Property tax due. However, the Finance Standing Committee decided (June 2011) to conduct a joint inspection of RCC buildings to ascertain the present area used for educational purposes and to refix the tax accordingly. The joint inspection was not conducted due to lapse of the Engineering Wing of TMC.
Military properties at Pangode Military Camp

In respect of the buildings at Pangode Military Camp, TMC was levying Property tax on buildings constructed prior to 01 April 1950 and Service charge on buildings constructed after 01 April 1950. Based on the direction issued by Army Headquarters, the Property tax/Service charge was not being paid from 1990-91 onwards. Subsequently, the Army Headquarters clarified (November 1994) that though no property tax was payable to the Municipal Corporation, Service charges were obligatory payments to the Municipal Corporation as clarified by Ministry of Finance (March 1967) and subsequently upheld (November 2009) by Honble Supreme Court. The Service charge pending collection (relating to the period 1990-91 to 2011-12) from the Military amounted to ` 1.99 crore. In addition to this, penalty at the rate of two per cent per month up to 23 August 2005 and at the rate of one per cent per month on the defaulted amount was also realisable from the military. No effective steps were seen taken by TMC for realising the arrears of Service charge due from military. TMC stated (February 2013) that a team had been entrusted to ascertain the details of buildings in Pangode Military Camp and collect the tax due from them.
Arrears relating to unauthorised constructions

According to Section 242 of KM Act, in respect of unauthorised constructions, the assessee has to remit thrice34 the normal rate of tax payable on them until the buildings are regularised or demolished. Test-check of the assessment files relating to unauthorised constructions revealed that in 16 cases assessed during 2011-12, total Property tax due amounted to ` 37.78 lakh. The details are given in Appendix XVII.
3.2.5
Profession tax
As per Section 245 of KM Act, local bodies levy Profession tax on institutions/individuals transacting business or performing duty in the municipal area for not less than 60 days in aggregate during a half year. As per Kerala Municipality (Profession Tax) Rules, 2005, Profession tax can be levied from:
34
Up to 06 October 2009 only actual tax was payable
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(i)
Those persons who have been appointed, working or holding office for salary or wages in any office or company or firm or enterprise or establishment or institution or receiving income from deposits and those having half-yearly income not less than ` 12,000. Those engaged in self employment, companies and those transacting business.
(ii)
The Government has prescribed slab rates of tax ranging from ` 120 to ` 1,250 per half year in respect of employees, and ` 1,250 per half year in respect of Traders/Professionals. The onus of assessing and remitting tax is on the tax payer or on the employer. Every head of office or employer or self drawing officer is bound to recover Profession tax and remit it along with details of income.
3.2.5.1
TMC did not have comprehensive database of all categories of assessees liable to pay Profession tax
Absence of comprehensive database of all assessees/ institutions/ professionals
TMC was not having a comprehensive list of all categories of assessees liable to pay Profession tax, on account of which various categories of assessees had escaped assessment. TMC could have utilised the information available in its various sections for creating the database. For example, the list of registered contractors available in the Engineering wing and the list of traders doing business in the Corporation area available in Dangerous and Offensive Licence Register in the Health Section of the Corporation were not being made use of for creating database. Audit also noticed that though the details of advocates practising in Thiruvananthapuram, ration dealers and institutions working in Technopark Campus were available in Bar Council, City Rationing Office and website respectively, the information had not been utilised by TMC. Profession tax that escaped assessment for the period 2007-08 to 2011-12 amounted to ` 1.39 crore as detailed in Table 3.12.
Table 3.12: Categories of assessees who escaped Profession tax assessment
No. of assessees escaped assessment Tax loss for the period 2007-08 to 2011-12 (` in lakh) Remarks
Category
Contractors registered in TMC Traders working in Corporation area
280
28.76
235
29.38
Institutions functioning in Technopark
164
20.50
Details of contractors were taken from the records of TMCs Engineering Section. TMC stated (June 2012) that the arrears of Profession tax due from the contractors would be collected while making payments against their bills. Comparison of the D&O Registers of Ward 1 (Medical College) and Ward 26 (Secretariat) maintained in Health Section with the list of traders for Profession tax maintained in Revenue Section revealed that 235 traders were not listed for payment of Profession tax. TMC stated (June 2012) that action had been initiated to realise Profession tax from all traders pointed out in audit. Out of the 261 institutions functioning in the Technopark Campus only 97 institutions have paid Profession tax for the year 2011-12. TMC had not demanded Profession tax from the remaining 164 companies. Tax loss from 2007-08 to 2011-12 was estimated at ` 20.50 lakh. Details of employees of aforesaid institutions were not available with the Zonal Office. In certain cases where tax was collected it was seen that Profession tax was realised based on the net salary of employees, instead of gross salary. TMC stated that action would be taken to collect the details of employees working in Technopark and to realise the Profession tax due from them.
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Category No. of assessees escaped assessment Tax loss for the period 2007-08 to 2011-12 (` in lakh) Remarks
Ration dealers in the Corporation area
285
35.63
Advocates practising in the Corporation area Total
201
25.13
There were 145 Authorised Ration Dealers in City Rationing Office (South) and 140 dealers in City Rationing Office (North), in the Corporation area. Test check of the records of two Wards (Secretariat & Medical College) showed that none of the ration dealers were paying Profession tax. Short levy in respect of 285 ration dealers worked out at ` 2500 per year. TMC stated that instructions would be issued to all Revenue Inspectors to collect Profession tax due from the Ration dealers. As per the details furnished by TMC, 201 advocates were practising in the Corporation area for more than five years from whom Profession tax was not being collected. TMC stated that action would be taken to realise Profession tax from all advocates.
139.40
In this connection Audit observed the following: (i) Section 253 of KM Act stipulates that the Secretary shall, during the month of April every year, by notice, require heads of offices or persons liable to recover Profession tax, to furnish the name and addresses of the offices/ institutions under their control; may require any employers, heads of institutions, hotels, clubs, etc., to furnish a list of all persons employed by them, along with details of their salary/ income and also to furnish the names and profession of all persons occupying such places.
In the absence of comprehensive database, no notices were being issued each year by the Secretary. (ii) Section 254 of KM Act stipulates that the Secretary of the Municipal Corporation shall, during the month of May and November in every half year, by notice, require every Head of Office or employer to assess every employee in his institution liable to Profession tax and every Self Drawing Officer to remit the Profession tax due in accordance with the Schedule to the said notice. Even in cases listed in the Profession tax register, notices as stated above were being issued only in very few cases. (iii) Section 257 of KM Act stipulates that the Municipality shall maintain a Ward wise Demand Register, by providing separate pages for each institution. Audit found that the Register maintained in Central Zone was incomplete without full particulars of all institutions, as well as details of employees together with their half-yearly income, amount of tax demanded and collected, etc. On a test check, it was found that in Attipra Zonal Office of TMC, Ward wise Demand Register was not maintained, and notices as specified in Sections 253 & 254 were not being issued. Cheque Register maintained in the Zonal Office for noting the details of cheques received, was the only record available for verifying Profession tax collection.
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3.2.5.2 Raising of demand Profession tax relating to Defence Personnel

Section 3 of Municipal Taxation Act, 1981 provides for exemption of Municipal or Cantonment taxes on salaries in respect of persons who are subject to the Army Act, 1950, Navy Act, 1957 and Air Force Act, 1950, who are compelled by the exigencies of Army/Navy/Air Force duty to reside within the limits of a Municipality or Cantonment. But GOI is to compensate the loss suffered by the Municipality from Defence Services Estimates35. In accordance with the above Act and Rules, the employees of Southern Air Command Headquarters were not paying Profession tax to TMC. But TMC had not taken any action to get the loss made good from Defence Services Estimates. As per the details obtained from Unit Account Section, HQ SAC (U) AF, Akkulam, there were 467 employees working in Southern Air Command An amount of ` 41.51 lakh was Headquarters, Thiruvananthapuram. Though Profession tax is calculated based on to be got the gross salary of the employees, the Southern Air Command Headquarters reimbursed furnished details of net salary to Audit. Even based on the net salary drawn by the from Defence employees the amount to be got reimbursed from Defence Services Estimates for Services the period 2007-08 to 2011-12 worked out to ` 41.51 lakh. Estimates TMC stated (February 2013) that action would be taken to realise the Profession tax of employees of Southern Air Command from Defence Services Estimates.
3.2.5.3
Collection and accounting
Details of Profession tax income during 2007-08 to 2011-12 were as given in Table 3.13.
Table 3.13: Profession tax income during 2007-12 (` in lakh)
Yearly increase/decrease Amount Percentage 2007-08 1361.46 2008-09 1635.18 273.72 20 2009-10 2101.49 466.31 29 2010-11 1972.16 (-)129.33 (-)6 2011-12 2522.09 549.93 28 Source: Annual Financial Statements for the years 2007-08 to 2011-12 Year Profession tax
During 2008-09, Profession tax income showed an increase of 20 per cent, whereas in 2009-10 and 2011-12, the increase was 29 per cent and 28 per cent respectively, when compared to previous years. During 2010-11, Profession tax income showed a decrease of six per cent when compared to the previous year. Such wide variations are unlikely because all assessees who paid Profession tax for a year are liable to pay more or less the same amount the next year also. Since slab rates have been prescribed for Profession tax, minor variations in income will not affect the tax amount. Also, the effect of additions/deletions in the list of assessees can only be marginal. Thus, these huge variations indicate the deficiencies in accounting of Profession tax.
35
Financial Regulations of GOI- Part I (Volume I)
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3.2.6
Entertainment tax
As per Kerala Local Authorities Entertainment Tax Act, 1961, local bodies levy Entertainment tax on entertainments including cinemas, exhibitions, amusements, sports, games, etc., as a percentage (33.33 per cent in TMC) of the price for admission tickets. Entertainment tax constituted approximately five per cent of the tax revenue of TMC during 2011-12.
3.2.6.1
The Government exempted shows from payment of Entertainment tax without consulting TMC
Exemptions allowed by the Government on Entertainment tax
Audit noticed that out of 27 shows/exhibitions conducted in different venues in the Corporation area during 2010-11, 16 shows were conducted by issuing free tickets, on which Entertainment tax cannot be levied. Out of the balance 11 shows conducted by issuing priced tickets, the Government exempted five shows (45 per cent) from payment of Entertainment tax by virtue of Section 7A of Kerala Local Authorities Entertainment Tax Act, 1961. The details of the shows are given in Table 3.14. The total tax exemption allowed in four of these cases amounted to ` 5.07 lakh.
Table 3.14: Shows in respect of which the Government granted exemption
Particulars of show Period Amount of Entertainment tax given exemption (`) 4,12,500 Remarks
Sl. No.
1.
2.
International Horticorp Expo 2010 Chandrasekharan Nair Stadium Matsyotsavam 2011Putharikandam Ground Government Engineering College Cultural FestivalKanakakunnu Palace Flower Show- Animation Hall, Vellayambalam M.G. College Film FestivalKalabhavan TOTAL
2 December 2010 to 6 December 2010 24 February 2011 to 28 February 2011 4 March 2011 to 6 March 2011 8 September 2010 to 12 September 2010 24 January 2011 to 25 January 2011
60,225
3.
31,152
4.
3,052 .. 5,06,929
5.
Exemption given as per G.O No.3757/2010/LSGD dated 30 November 2010 Exemption given as per G.O No.547/2011/LSGD dated 23 February 2011 Exemption given as per G.O No.680/2011/LSGD dated 03 March 2011 Exemption given as per G.O No.284/2010/LSGD dated 27 August 2010 Details of the show not furnished
As per Section 7 (1) of Kerala Local Authorities Entertainment Tax Act, 1961, it is for the local body to decide whether a particular show has to be exempted from Entertainment tax or not, depending on the type and category of show conducted. Even though as per Section 7(3) of the said Act, the Government may exempt any particular entertainment or class of entertainment from payment of Entertainment tax, the exemption can only be with the consent of the local body concerned. In the above cases, the Government had exempted individual shows, and not any particular type or class of show, and that too without consulting TMC.
3.2.6.2
Entertainment tax realisable from Soorya Film Society amounted to ` 61.41 lakh
Entertainment tax realisable from Soorya Film Society
Rule 41 of Kerala Local Authorities Entertainment Tax Rules, 1962 stipulates that when the payment for admission to an entertainment or a series of entertainments is a lump sum paid as subscription or contribution to an institution, the local body shall levy Entertainment tax in respect of the shows conducted by such institutions.
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The proprietor shall apply to the local authority concerned in this regard, and the local authority shall fix the tax payable, based on the amount representing right of admission, number of subscriptions, etc. Soorya Stage and Film Society, which had been functioning in Thiruvananthapuram for the past 37 years, is one such institution which conducts a 111 day long Soorya Festival (entertainment programmes including cinema, dance, music, folk show, etc.) to members every year. But TMC had not collected any Entertainment tax from the Society so far. The annual subscription payable by members was ` 400 up to 2007, ` 1200 from 2008 to 2010 and ` 1600 from 2011 onwards, and the main venue was Tagore Theatre where the seating capacity was 1245. Entertainment tax realisable from the Society for the period up to 2012 worked out to ` 61.41 lakh (approx.). On this being pointed out (February 2011 and August 2012), TMC issued (September 2012) demand notice for ` 58.09 lakh being the Entertainment tax arrears for the past 35 years up to 2010. The Society stated that the Government had exempted (August 1988) film societies affiliated to the Federation of Film Societies of India from payment of Entertainment tax, subject to the condition that such Societies should register themselves with the concerned local authority, by furnishing the required particulars in this regard. But in the case of Soorya Film Society, the exemption was not allowable, since they had not so far been registered with TMC.
3.2.7
Advertisement tax
As per Section 271 of KM Act, local bodies levy Advertisement tax on advertisements displayed over any land, building, wall, hoarding or structure, in its area of jurisdiction. The rates applicable to various types of advertisements are fixed by the Corporation Council with the approval of the Government. TMC was collecting Advertisement tax directly from parties, and during 2011-12 Advertisement tax constituted two per cent of the tax revenue of TMC.
3.2.7.1
TMC lacked proper system for levying tax on hoardings
Lack of control in levying tax on hoardings
In the case of hoardings erected at various locations of the Corporation area, tax was collected annually from the parties concerned. However, TMC did not have an exhaustive list of all hoardings. TMC followed a system of entering the details of applications (fresh as well as renewal) chronologically in a register maintained for each year. There was no link between the registers for different years and hence it could not be ensured whether renewals were being effected in all cases. Audit observed that instead of opening separate registers for various years, TMC could have used single register for recording details of hoardings and date of its renewals by providing separate columns for each year. Through this method non-renewal in a particular year can be easily detected and tax evasion can be controlled.
3.2.7.2
TMC was not levying tax on advertisements displayed on vehicles
Non-levy of tax on advertisements displayed on motor vehicles
Rules provide for levy of Advertisement tax at the rate of ` 50 per day in respect of advertisements displayed on motor vehicles plying in Corporation area. Even though advertisements were being displayed on large number of buses operating in the Corporation area, TMC was not levying any tax on advertisements displayed on vehicles. TMC did not have any data regarding the number of vehicles on which
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advertisements were displayed. Audit could not quantify the loss of revenue in this regard due to non-availability of details regarding the number of buses on which advertisements were displayed. TMC stated that Advertisement tax is not leviable on public transport vehicles as per Government Order issued in January 2009. The reply is not acceptable since as per note (1) under serial number 4 of the above Government Order read with Section 271 of KM Act, Advertisement tax is leviable on public transport vehicles which commence its operation in the Corporation area and also which commence operation in a non-Municipal area and pass through the local limits of the Corporation.
3.2.7.3
Short levy of tax on banners
In TMC, Advertisement tax was payable at the rate of ` 100 per month on banners exhibited on roads up to six meters wide and at the rate of ` 150 per month in the case of roads where the width is more than six meters. Audit noticed that TMC was collecting Advertisement tax on banners at the rate of ` 100 per month, irrespective of the width of roads. Majority of roads in TMC area are more than six meters wide and banners are normally displayed only by the side of prominent roads. The Advertisement tax collected by TMC was, therefore, one-third less than the applicable rates. Loss of revenue incurred by TMC in this regard during the period 2008-09 to 2011-12 has been estimated at ` two lakh (collection of Advertisement tax during 2007-08 was made through auction). TMC stated that due to large number of banners presented for authorisation it was not practicable to mention the site of exhibition and therefore charges at uniform rate of tax were levied in all cases. It was also stated that action would be taken to note the site of exhibition in the applications in future.
3.2.8
Monitoring
TMC had set individual target for Revenue Inspectors/Zonal Offices for collection of revenue and the achievement against the target was stated to be reviewed in the monthly meeting convened by the Additional Secretary. However, no records were made available to Audit to show that the meetings were being held regularly. Scrutiny of the only minutes of the meeting held on 08 February 2010 made available to Audit revealed that individual cases relating to persistent defaulters were not being discussed and no steps taken to realise the arrears from them. The review can be effective only if meetings are conducted regularly and long pending cases in each division are discussed in detail, and effective steps taken for collecting arrears pending for longer periods. TMC did not have a definite system for detecting unauthorised constructions. On a scrutiny of the files relating to unauthorised constructions, it was seen that in most of the cases, the fact of completion was brought to the notice of TMC by assessees themselves and none of the cases were detected by TMC. Even though it was stated that detection squads have been formed for identifying unauthorised constructions, no records relating to their formation, functioning or details of cases detected by them were made available to Audit.
3.2.9
Conclusion
TMC does not have a definite system to identify and list all buildings liable for Property tax assessment. An amount of ` 8.81 crore was not levied due to not bringing all assessees in the tax net/not collecting tax at the appropriate rate . Lack
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of comprehensive database relating to profession tax has affected tax collection to a great extent. Non-levy of Entertainment tax on films screened and programmes conducted by Film Societies, have adversely affected revenue collection. Delay in collection of revenue has an adverse impact on the development and welfare projects of TMC.
3.2.10

Recommendations
TMC should adopt innovative methods like GIS mapping to identify and list all properties and tax all eligible properties. Proper control should be exercised in respect of building permits by maintaining the Permit Register in complete form and there should be proper follow up in respect of lapsed permits. There should be effective co-ordination between Revenue Section and Town Planning Section to ensure that assessments have been completed in all cases where Occupancy Certificates were issued. Cases relating to non-assessment of properties need to be investigated and remedial action taken. Action should be taken to realise Profession tax from all firms in Technopark, based on gross salary. Entertainment tax should be realised in respect of shows conducted by Film Societies functioning in the Corporation area.
The above observations were referred to the Government in November 2012; reply has not been received (February 2013).
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3.3 3.3.1
TOTAL SANITATION CAMPAIGN Introduction
The Government of India (GOI) launched the Total Sanitation Campaign (TSC) in 1999 for sustainable reforms in the rural sanitation sector through a time bound campaign mode. The State Suchitwa Mission is the nodal agency of the State Government for the implementation of the Scheme. In each district the Scheme is implemented by the District Co-ordinators with the participation of Block Panchayats (BPs), Grama Panchayats (GPs) and voluntary organisations. Audit undertook assessment of the five components of TSC viz., Individual Household Latrines, Community Sanitary Complexes, Institutional Toilets, Rural Sanitary Marts/Production Centres and Solid/Liquid Waste Management. Audit was conducted during May 2011 to August 2011 and July 2012, covering the period 2006-07 to 2011-12. Out of the 14 districts in the State, four36 were selected by statistical sampling method, viz., Probability Proportional to Size Without Replacement (PPSWOR). Twenty five per cent of the BPs37 in each District and twenty five per cent of the GPs38 in each selected BP were selected by Simple Random Sampling method. In addition to the above, eleven GPs which did not receive Nirmal Gram Puraskar39 were also selected for audit. Audit methodology included scrutiny of records of the Suchitwa Mission/Commissionerate of Rural Development, TSC District Co-ordinators' Offices, Poverty Alleviation Units (PAUs), Anganwadis and Child Development Project Offices in the selected GPs, discussion with officials, inspection of sites, etc. Audit findings on the various components of the scheme are mentioned below:
3.3.2
Individual Household Latrines
The programme was aimed to cover all the rural families with completed household latrines to eliminate open defecation. According to the guidelines of TSC the start-up activities included conducting of preliminary survey and a baseline survey to assess the status of sanitation and hygiene practices, peoples attitude and demand for improved sanitation, etc., with the aim to prepare the district TSC project proposals for seeking GOI assistance. The construction of household toilets was to be undertaken by the BPL household itself and on completion and use of the toilet by the household, the cash incentive was to be given to the BPL household in recognition of its achievement. In the State, the Individual Household Latrines (IHHL) component was implemented at GP level. Up to 31 March 2012, 11.21 lakh IHHLs were constructed all over the State under TSC, incurring a total expenditure of ` 131.75 crore. In the four districts testchecked, 3.75 lakh IHHLs were constructed incurring ` 46.28 crore. Audit noticed the following shortcomings:
36 37
Ernakulam, Kasaragod, Kollam, Alappuzha Vazhakkulam, North Paravur, Alangad, Vypin, Kasaragod, Kanhangad, Mukhathala, Chittumala, Kottarakkara, Pattanakkad, Kanjikkuzhy, Champakkulam 38 Vengola, Choornikkara, Kottuvally, Chendamangalam, Varappuzha, Alangad, Pallippuram (Ernakulam District), Kuzhuppilly, Mogral Puthur, Kumbla, Ajanur, Pallikkara, Elampalloor, Monroethuruthu, Kundara, Kottarakkara, Ezhukone, Pattanakkad, Kuthiathodu, Thuravoor, Kanjikkuzhy, Thanneermukkam, Mararikulam North, Champakkulam, Kainakari 39 Award given to PRIs and institutions considering their significant contribution towards ensuring full sanitation coverage in their areas of operation
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Comprehensive assessment of beneficiaries was not conducted
The baseline surveys conducted (2002-04) for assessing the requirement of IHHL in rural areas were not effective as the surveys failed to include a number of BPL households eligible for financial assistance for construction of IHHL. Joint verification by audit team with the officials of the PRIs revealed that 1976 BPL households residing in colonies were not provided with IHHLs. Audit noticed that the omission in the baseline survey in respect of the households residing in colonies was en-bloc. The Government stated (October 2012) that the gap in providing IHHL was due to division of families and shifting of households. The reply is not acceptable in the context of en-bloc omission of colonies in the baseline surveys. Even in Ernakulam, Alappuzha and Kollam Districts, 1551 toilets with open outlets to waterways and canals were neither included in the survey nor replaced by IHHL.
3.3.3
Community Sanitary Complexes
Community Sanitary Complexes (CSCs) comprising appropriate number of toilets with washing platforms, wash basins, etc., were to be constructed at public places, markets, etc., where large scale congregation of people takes place. Maximum unit cost prescribed for a CSC was ` two lakh. As of March 2012, 664 CSCs were constructed all over the State incurring expenditure of ` 10.70 crore. In the four Districts test-checked, 267 CSCs were constructed at a total cost of ` 4.10 crore. Following shortcomings were noticed in audit: CSCs are stand-alone facility to provide unhindered access to public. However, out of 267 CSCs constructed (as of March 2012) in the four districts testchecked, 161 numbers (60 per cent) were constructed at locations like beedi company, Weavers' Co-operative Society, educational institutions, GP/BP Office compound, hospitals, coir societies, Cashew Development Corporation which were not covered under GOI guidelines. All these institutions have restrictions on timings and access and hence these would not provide unhindered access to public. Moreover, the above establishments are statutorily bound to provide latrines to their staff. The Government stated (October 2012) that the facility of CSCs had been provided to public institutions as the availability of public land was a grave issue in the State. The fact, however, remains that the public is not benefitted by constructing CSCs in public institutions. GPs have the ultimate responsibility for the maintenance of CSCs. As per guidelines the users could be asked to contribute a reasonable user charge for its cleaning and maintenance. Many of the CSCs constructed were not maintained properly due to lack of initiative on the part of PRIs. Joint verification of 68 CSCs by audit team with the officials of PRIs revealed that in the absence of proper upkeep and maintenance, 18 CSCs were not being used by the public for the last one to seven years and two CSCs were being used occasionally. The Government stated (October 2012) that the GPs and user groups would be motivated for the upkeep and maintenance of CSCs wherever the same was lagging.
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Chapter III Performance/Thematic Audits Good practices in the State - Neatly maintained CSCs
(i) A CSC was established under TSC at Nadakkavu Junction in Thrikkarippur GP (Kasaragod District). The CSC is located at an ideal place and is being used by several people. It is well maintained with a service motive by the local unit of the Kerala Auto Drivers' Union without levying any user fee from the public.
(ii) The CSC at Karunagappally Junction (Kollam District) operated by M/s Sulabh International on 'pay and use' basis is extremely useful to the public.
There was no comprehensive assessment of locations where CSCs were to be constructed. Large number of lorries passing daily through the check post at Walayar, in Palakkad District had to halt for six to eight hours for checking by the Commercial Tax/ Motor Vehicles/ Excise/ Forest authorities. As there is no facility in the locality for meeting the basic human needs, the drivers of vehicles resort to open defecation in the nearby area. Likewise, thousands of Sabarimala pilgrims and tourists from Tamil Nadu passing through the check post also find it difficult to meet their basic needs. The GP could not provide CSCs at Walayar as the land was owned by the Forest Department. As it was the responsibility of the GP to provide toilet facilities at public places, the matter should have been taken up with Forest Department/the Government in the interest of public. The Government stated (October 2012) that District Collector was exploring the possibility for demarking land from Forest and Animal Husbandry Departments for the construction of CSCs. Construction of four CSCs (Alappuzha & Kollam Districts) proposed for four hospitals remained incomplete for more than five years after incurring expenditure of ` 10.25 lakh. No specific reasons were adduced for noncompletion of these CSCs. The Government stated (October 2012) that the Block Panchayats concerned had initiated action for completion of the CSCs. The maximum unit cost prescribed for a CSC was ` two lakh to be shared by the Centre, State and Community in the ratio of 60:20:20. As such, the maximum amount payable for a CSC from the TSC fund was only ` 1.60 lakh. However, in Kasaragod and Kollam Districts against the admissible amount of
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` 20.80 lakh, the PRIs had utilised ` 49.49 lakh for construction of 13 CSCs resulting in excess payment of ` 28.69 lakh. The increase in cost was attributed to the low unit cost fixed for CSCs.
3.3.4
Institutional Toilets
Shortage of School toilets
As per TSC guidelines, toilets in all types of Government schools with emphasis on toilets for girls are to be constructed. As of March 2012, 3675 school toilets were constructed in the State at a total expenditure of ` 7.65 crore. Audit noticed that there was shortage of 17759 toilets/ urinals in 3080 schools in the State. Girl Friendly Toilets (GFTs) were not available in 2912 (94 per cent) out of 3087 Girls/ mixed schools in the four districts test-checked in audit. Further, the suggestion (April 2008) of the Review Mission for TSC, appointed by the Government to provide facility for disposal of sanitary napkins/cloths in GFTs, was not being implemented. The Government stated (October 2012) that it has been decided to assess the gap vis--vis the strength of boys and girls in the schools and to revise the target of constructing institutional toilets under the scheme. The Government further added that the provision of attaching facility to girls toilets for disposing the sanitary napkins would be made mandatory in the design for the toilets to be constructed in future as part of revised project. The TSC guidelines stipulate that each Anganwadi should be provided with Baby Friendly Toilets (BFTs). The unit cost fixed at ` 5000 was subsequently increased to ` 8000 and the incentive to be given was raised from ` 3000 to ` 5600. The unit cost for hilly and difficult area was ` 10000 with incentive of ` 7000. As of March 2012, 4719 Anganwadi toilets were constructed incurring ` 2.31 crore. Audit noticed the following: Though the target fixed for construction of toilets in Anganwadis was achieved in many districts, it was not ensured that the toilets constructed were of BFTs. Out of 4234 Anganwadis functioning in Government buildings in the four districts test-checked, only 1539 Anganwadis had BFTs, 2641 Anganwadis (62 per cent) had no BFTs and 54 Anganwadis did not have any toilet at all (March 2012). Out of 2656 Anganwadis functioning in rented buildings only three had BFTs, 1923 (72 per cent) had no BFTs and 730 (27 per cent) had no toilet at all. Despite availability of sufficient funds, the districts failed to provide BFTs in all the Anganwadis. Further, PRIs have not found out a mechanism for providing BFTs in Anganwadis functioning in 2653 private buildings. The Government stated (October 2012) that the concept and design of BFTs have been evolved over a period of time and hence many of the toilets constructed in Anganwadis were of conventional design, but have been used by children. The Government added that efforts for providing amounts from revolving fund for construction of BFTs in private Anganwadi buildings did not succeed due to field level complexities in the implementation. Authorities should ensure that BFTs are included as an important component of TSC to change the behaviour of the children as well as the mothers attending the Anganwadis.
BFTs were not provided in Anganwadis
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3.3.5
Rural Sanitary Marts and Production Centres
Rural Sanitary Marts (RSMs) are outlets dealing with materials required for construction of sanitary latrines as well as other sanitary facilities while Production Centres (PCs) are the means to improve production of cost effective, affordable sanitary materials. These provide materials, services and guidance needed for constructing different types of latrines and other sanitary facilities which are technologically and financially suitable to the area. RSMs and PCs were required to be established as commercial ventures with a social objective. As per GOI norms, a maximum of ` 3.5 lakh per unit was allowed for setting up RSM/PC and as revolving fund for the Non-Governmental Organisations (NGOs)/ Self Help Groups (SHGs) for construction of sheds and for imparting training to masons. After the RSMs / PCs attained a level of sustainability, the revolving fund was to be refunded to the District Implementing Agency. As of March 2012, 98 RSMs were established in the State after incurring expenditure of ` 1.51 crore. In the four districts test-checked, 22 RSMs were established at a cost of ` 32.50 lakh which included revolving fund of ` 28 lakh. Audit observed the following shortcomings in the performance of the RSMs. RSMs were established based on the proposals from BPs / GPs without any need assessment. As a result, half of the RSMs had become non-functional and the functional ones were financially non-viable due to poor turnover. In the absence of a clause stipulating financial contribution from the agencies for the establishment of RSMs, no proper assessment of the financial viability of the RSMs was carried out by the agencies. The utility of RSMs/PCs in a State like Kerala where good quality sanitary materials are easily available in private shops within the reach of rural people itself was not considered. The bona fides of the expenditure of ` 32.50 lakh on the establishment of 22 RSMs could not be verified in audit as no documentation was maintained by the SHGs/NGOs for items of expenditure incurred in the establishment of the RSMs. The District Co-ordinators had not insisted the SHGs/NGOs to maintain the documents properly. Many of the SHGs, after receiving revolving funds (Ernakulam: ` seven lakh; Kollam: ` 12 lakh), did not establish RSMs/PCs. The Government stated (October 2012) that there were many private sanitary marts at the reach of the rural people and they sold materials at competitive rates and extended credit facility. The Government also added that the inbuilt limitations of RSMs made them unsustainable. While the Government has admitted the unsustainability of the RSMs, Audit would like to mention that the basic objective was to ensure availability of retail outlets for selling sanitary products in any area. The disbursement of financial assistance to retail outlets should have been restricted to areas where there was no existing private retail outlet for sanitary products. The fulfilment of these conditions was not insisted upon. Further, there were two flaws in disbursement of financial assistance, viz., (a) no control over end utilisation of money which meant risk of diversion of fund and (b) no effective recovery mechanism. As a result, there was no assurance that the money was invested for the bona fide purpose of setting up and running RSMs.
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3.3.6
Solid and Liquid Waste Management
GOI introduced Solid and Liquid Waste Management as a component of TSC with effect from 01 April 2006. Out of ` 15.90 crore earmarked for 14 districts, only ` 5.54 crore (35 per cent) was utilised as of March 2012. In the four districts test-checked, out of ` 4.81 crore earmarked for the component, only ` 1.35 crore (28 per cent) was utilised (March 2012) for 16 Biogas plants. Audit observed the following during site visit:
Waste management was not carried out in professional manner
As per guidelines for TSC, Information, Education and Communication campaign should motivate the GPs to evolve institutional mechanisms for collection and disposal of biodegradable and nonbiodegradable waste separately. However, there was no door-todoor collection of garbage, separation of waste into biodegradable and nonbiodegradable and proper sewerage in any of the 25 GPs test-checked. In order to ascertain the gravity of non-disposal of waste in proper manner, Audit conducted joint inspection with Waste being burnt at dumping ground in Ugrankunnu the officials of Kottarakkara BP and noticed that in Kottarakkara GP, solid waste was being dumped without segregation in the dumping ground at Ugrankunnu. In the absence of treatment plant, the waste was being burnt daily, polluting the atmosphere and causing hardship to the residents. Failure on the part of the implementing agencies in establishing sufficient number of solid and liquid waste treatment plants has defeated the intention of including solid and liquid waste management component in TSC. The Government stated (October 2012) that the State Suchitwa Mission was making efforts to educate the GP personnel and to impart to them skill for planning, designing and execution of Solid and Liquid Waste Management projects. Detailed action taken by the Government in this regard is awaited (December 2012). About 800 houseboats with an average of 4000 tourists pass through the backwaters of Kainakari, Alappuzha District daily. These discharge annually about 29 metric tonne of solid waste and 5.8 metric tonne of human excreta into the backwaters. No plant for treatment of discharges from the houseboats has been installed there so far (December 2012). Audit observed that the discharges from many household latrines directly to the backwaters also pollute the water. Analysis of water samples (May 2009) from open wells of the GP and Pamba river by Kerala Water Authority showed presence of Coliform bacteria ranging from 27 to 1100 and e-coli ranging from 11 to 460 per 100 ml. The residents of GP were more prone to waterborne and communicable diseases. The Government stated (October 2012) that Suchitwa Mission had initiated a pilot project through Centre for Water Resource Development and Management, Kozhikode in the sector of sewerage treatment and also decided to address sewerage management of house boats of Alappuzha as part of sanitation component under Kuttanad package.
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Discharge of Solid Waste in backwaters
3.3.7
Conclusion
As there was no comprehensive assessment of beneficiaries/requirement of latrines in rural and tribal areas, a number of BPL households were not provided with IHHLs. Many of the CSCs constructed were not properly maintained due to lack of initiative of PRIs. A large number of CSCs were constructed in locations which do not provide unhindered access to public. There was shortage of 17759 toilets/ urinals in 3080 schools in the State. GFTs were not available in 2912 (94 per cent) out of 3087 Girls/ mixed schools in the four districts test-checked. Out of 4234 Anganwadis functioning in Government buildings in the four districts testchecked, 2641 Anganwadis (62 per cent) had no BFT and 54 numbers did not have any toilet at all. There was poor utilisation of funds earmarked for solid and liquid waste management. Out of ` 15.90 crore earmarked for 14 districts, only ` 5.54 crore (35 per cent) was utilised. Poor performance in implementation of the component relating to establishment of RSMs/PCs was observed. In the testchecked districts half of the established ones had become non-functional and the functional ones were financially non-viable with very low sales.
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3.4 3.4.1
IMPLEMENTATION Introduction
OF MUNICIPAL DISPOSAL FACILITY AT BRAHMAPURAM
SOLID
WASTE
The estimated waste generation in Kochi Municipal area was 420 tonnes per day, of which 40 to 45 per cent was collected and transported (169 tonnes per day) to the disposal site. With a view to addressing the problems connected with waste disposal, Kochi Municipal Corporation (KMC) formulated (January 2005) a project for construction of a Municipal Solid Waste Disposal Facility (MSWDF) at Brahmapuram. The project consisted of setting up of a Solid Waste Processing Plant of capacity 250 tonnes per day, vermi compost pits, leachate drainage collection and treatment plant, Quality Control laboratory, sanitary landfill, compound wall, green belt, internal roads, etc. M/s FACT Engineering and Design Organisation (FEDO) was appointed (March 2005) as the consultant of the project. KMC awarded (July 2005) the work to M/s Andhra Pradesh Technology Development and Promotion Centre (APTDC) on lump sum turnkey basis for ` 19.63 crore including the cost of operation of the plant for one year. The project was subsequently included (March 2007) under JNNURM launched by Government of India (GOI). Audit noticed the following deficiencies in the implementation of the project.
3.4.2 3.4.2.1
Item-wise expenditure was not prepared
Pre-award stage Preparation of estimates
Preparation of estimates facilitates evaluation of the reasonableness of the bid and regulation of the payments to the contractor. Further, it helps to ascertain whether the payments made to M/s APTDC justify the assets created and transferred to KMC. However, KMC did not take action to get the item-wise estimates prepared through FEDO (based on PWD Schedule of Rates showing the total quantity of the work to be executed under each item of work).
3.4.2.2
Contract conditions were deficient to address the risks involved
Flaws in the agreement
KMC appointed FEDO as their consultants as KMC had no technical know-how regarding the setting up and running of the plant. There were flaws in the agreement between KMC and FEDO, as highlighted below: (i) The agreement did not contain any guarantee clause regarding successful running of the plant. As a result, FEDO was relieved of all liabilities relating to the operation of the plant after receiving an amount of ` 83.71 lakh as consultancy fees. (ii) As per Section 30 (1) of Kerala Municipality Act, 1994, Solid Waste Treatment is a mandatory function of the Corporation. As such, the scope of the contract should have covered successful running of the plant for a fairly long period as available in Build, Own, Operate and Maintain40 (BOOM) contracts. But, FEDO suggested lump sum turnkey contract with M/s APTDC in the place of BOOM contract which would have been more appropriate in view of inadequate technical know-how of KMC to run the plant. Thus, the contract conditions were deficient to address the risk involved in the performance of the plant set up by the contractor.
40
The contractor has to construct, own, operate and maintain the plant for the contract period
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3.4.3
Execution of project
KMC was in possession of 37.33 acres of land at Brahmapuram. In the above land (consisting of both hard soil and marshy area), KMC identified an area with hard soil for setting up the solid waste management plant. KMC, however, changed the site of the plant from the initially proposed area to a nearby marshy land, due to non-availability of sufficient dry land and public protest. Earth filling with red soil was done (May 2007) at the new site through M/s APTDC, without inviting competitive tenders. Shifting of the site from the initial hard soil to adjacent marshy area necessitated earth filling at a cost of ` 1.66 crore. Following points were noticed in the execution of the projects:
Design of the plant was not changed to suit the marshy land
Warranty clause was not invoked consequent on the damages to the floor
Liquidated damages were not recovered
(i) KMC handed over the filled up site to M/s APTDC for construction of MSWDF in July 2007. Consequent on the change of site from dry land to wet land, the plan and design for construction of the plant was required to be revised. Neither FEDO nor M/s APTDC changed the design of the plant to suit the marshy land. (ii) During construction of the plant (March 2008) the centre portion of the tipping floor of the compost plant settled down and cracks developed in the building. However, the plant was inaugurated in June 2008. Due to damages to the floor, the leachate collected in the plant drained into the nearby river. The cost of damages was initially estimated at ` 2.50 crore. KMC failed to repair the plant and machinery at the risk and cost of the contractor as stipulated in Clause 25 of the agreement, for effective functioning of the plant. (iii) National Institute of Technology, Calicut (NITC) recommended (July 2009) remedial measures such as earth filling of the marshy land around the plant, reconstruction of the cracked floor to the original line and levels, repairing of defective drains for leachate, etc. KMC had not carried out the rectification works. Instead, as a temporary measure, KMC spent (April 2010) ` 29.70 lakh for running the plant. The plant is now being operated by M/s Environ Green, Kochi, which reportedly processes an average of 150 tonnes per day. (iv) The earth filling work entrusted to M/s APTDC was directly supervised by the Engineers of KMC. In order to accelerate consolidation of clayey soil M/s APTDC and FEDO had made suggestion for providing PVD drains. But KMC did not approve the suggestion. Further, compacting using power roller was also not carried out, even though it was provided in the earth filling contract. Failure to do these items during earth filling led to inadequate consolidation of soil and consequent damage to civil structures. (v) Contract conditions (Clause 26) stipulated that a minimum of 0.5 per cent of the contract amount subject to a maximum of 7.5 per cent was to be recovered towards liquidated damages. The contractor did not execute the essential components forming part of the plant, viz., leachate treatment plant, sanitary land fill, green belt, compound wall, roads, etc. KMC has not taken any action to recover the liquidated damages from the contractor.
3.4.4
Purchase of pre-sorting machine
Pre-sorting equipment (mechanical segregator) in the treatment facility at Brahmapuram proposed by KMC was turned down by GOI while sanctioning the project with the objective of promoting segregation at source. M/s APTDC, however, purchased (January 2008) a pre-sorting equipment for ` 1.66 crore and KMC paid the amount from JNNURM fund. The machine has not been put to use
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even as of March 2012. Payment of ` 1.66 crore towards the purchase of a machine not approved by GOI was irregular.
3.4.5
RDF plant was remaining idle since its purchase
Purchase of RDF plant without assessing requirement
GOI approved the installation of a Refuse Derived Fuel (RDF) plant with a capacity of 110 metric tonne per day for processing and conditioning of dry recyclables. A plant costing ` 2.39 crore was purchased and installed in the vermicomposting area at Brahmapuram Solid Waste Processing plant and ` 1.44 crore, being 60 per cent of the value, was paid to the contractor. In order to check the working of the RDF plant, KMC along with the manufacturers and the Mechanical Engineering Division of Cochin University of Science and Technology (CUSAT), conducted an inspection of the machinery in August 2010. CUSAT, after inspecting the machine, suggested several modifications and recommended continuous running of the plant for a day in order to assess the performance of the plant and machinery. KMC, however, could not conduct the trial run due to nonavailability of dry recyclables in sufficient quantity. The machine is still kept idle along with the untreated waste materials. The failure of KMC to assess the requirement of RDF plant resulted in the available resources (` 1.44 crore) being tied up on an idle asset.
3.4.6
Vermi-Compost facility costing ` 2.92 crore had become unfruitful
Idle investment on vermi-compost facility
GOI, while sanctioning the proposal for Solid Waste Management under JNNURM, had stated (March 2007) that decentralised waste treatment such as vermi-composting and bio-converter should be tried in areas wherever possible. Though vermi-composting facility with a processing capacity of 50 tonnes per day was constructed at a cost of ` 2.92 crore, the area was not used for vermicomposting. This area has been used for installing RDF plant. This had resulted in idle investment of ` 2.92 crore.
3.4.7
Non-maintenance of records of vehicles and machinery
Machinery/vehicles valuing ` 96.41 lakh were supplied by M/s APTDC during February and April 2008, for various activities at Brahmapuram plant site. It was noticed that many of the vehicles such as tractors, tippers, etc., were placed along with the accumulated waste without proper care. Machine parts, tyres, etc., had been removed from many of these vehicles. Scrutiny of records revealed that details of these vehicles were not entered in the asset register. KMC had not conducted annual physical verification of these vehicles. In the absence of stock registers and annual physical verification report, audit could not ensure that all the vehicles purchased by M/s APTDC for the plant were available with KMC.
3.4.8
Non-utilisation of workshop materials
As per the appraisal report of Central Public Health and Environmental Engineering Organisation, a workshop facility was envisaged in the waste treatment site. Project Implementation Unit, JNNURM had purchased (January 2009) workshop equipment such as six compressors, six vehicle washing equipment, 10 grease pumps, six tyre inflators and one eight-tonne lift worth ` 10.40 lakh. These equipment were not used so far. Further, these equipment were not entered in the asset register of KMC as well.
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3.4.9
Expenditure on hire charges of vehicles for transportation of waste
An amount of ` 9.06 crore was provided in the Detailed Project Report for the purchase of 120 covered tipper trucks (cost: ` 7.55 lakh per truck). KMC purchased (February 2010) four closed trucks and two tipper trucks at a cost of ` 78.60 lakh. KMC reported that these vehicles are being used for transportation of waste. The Empowered Committee had given approval (May 2010) for the purchase of remaining 25 high body covered tippers with steel body. But KMC had not purchased the vehicles so far (March 2012) as they had not taken any decision on the specification of the body of the vehicles to be purchased. KMC was carrying out the waste removal process by hiring vehicles. The expenditure incurred on transportation of waste during June 2010 to December 2011 amounted to ` 4.25 crore. Audit noticed that KMC was incurring expenditure on hiring of vehicles without conducting cost benefit analysis. When 80 per cent of the fund for the purchase of the vehicles was available under JNNURM, there was no justification in continuing the hiring of the vehicles without doing the cost benefit analysis.
3.4.10
Conclusion
Implementation of the project was deficient in many respects. Lapse on the part of the consultant/contractor in revising the plan and design of the building caused severe damages to the building rendering it unfit for operation. KMC failed to repair the building at the risk and cost of the contractor. Pre-sorting machine, RDF plant and vermi-compost plant were idling in the plant premises. The machinery, vehicles and workshop materials purchased for various activities were not taken to stock and these were dumped along with accumulated waste. The above observations were referred to the Government in December 2012; reply has not been received (February 2013).
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CHAPTER IV TRANSACTION AUDIT

4.1 Misappropriation of money
Failure to exercise proper internal checks led to misappropriation of ` 1.77 lakh in Kerala Sustainable Urban Development Project, Thiruvananthapuram. Kerala Sustainable Urban Development Project (KSUDP) is an Asian Development Bank assisted Project for the improvement, upgradation and expansion of existing urban infrastructure facilities and basic urban environmental services in the Municipal Corporations and Municipalities in the State. During the course of audit of the accounts of KSUDP, Audit noticed (January 2012) a case of misappropriation of ` 1.77 lakh, as mentioned below: The Project Director, KSUDP, Thiruvananthapuram issued (March 2011) sanction for drawal of pension contribution of ` 6.41 lakh pertaining to the period between October 2006 and December 2010 in respect of six employees on deputation and remittance into Sub Treasury, Vellayambalam. Accordingly, Deputy Director (Finance) drew ` 6.41 lakh from the project fund vide cheque number 525350 dated 25 March 2011. In the Day Book of 25 March 2011, the amount (` 6.41 lakh) was shown as payment of Salaries and Wages. However, only ` 4.64 lakh relating to five employees was remitted into Treasury on 30 March 2011, and the balance amount of ` 1.77 lakh was neither remitted into treasury nor returned to KSUDP. Financial rules require the Head of the Institution or some other responsible subordinate other than the writer of the cash book to verify the entries in the cash book corresponding to all remittances into treasury/bank/post office with reference to the chalan or pay-in-slip and attest all the entries. Audit observed that the Deputy Director (Finance), KSUDP failed to discharge his responsibility in the maintenance of cash book, which led to this misappropriation. Project Director, KSUDP stated (November 2012) that the required cash book was not maintained during the period audited. Failure of the Head of the Institution in discharging his responsibility towards proper maintenance of cash book as well as chalan register, along with absence of monthly reconciliation with Treasury, led to misappropriation of money remaining unnoticed until it was pointed out by Audit in April 2012. Proper internal checks would have averted such a situation. The Government stated (January 2013) that the Project Assistant who was entrusted with the charge of accounts was placed under suspension (October 2012) on the recommendation of enquiry committee constituted by the Project Director. The Government further added that steps are being taken to recover the misappropriated amount from the officials concerned.
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4.2
Non-collection of service tax from the tenants of shopping complexes
Three Local Self-Government Institutions created a liability for payment of service tax of ` 42.98 lakh from own resources due to non-collection of the same from the tenants. Service tax introduced by the Government of India from July 1994 through the Finance Act, 1994 (Act) is levied on specified services and the responsibility for payment of the tax rests generally on the service provider except for certain specified services. Section 65 (105) (zzzz) of the Act, introduced by Government of India in May 2007 through a notification, stipulates levying of service tax in respect of renting of immovable property or any other service in relation to such renting for use in the course of, or furtherance of business or commerce with effect from 01 June 2007. The notification further stipulates that if the total rent received exceeds ` eight lakh per year (from 01 April 2007)/ ` 10 lakh per year (from 01 April 2008), the service provider is liable to pay service tax at the rates prescribed to Central Excise Department. If service tax is not paid within the prescribed time, interest at the rate of 13 per cent (31 March 2011)/ 18 per cent (from 01 April 2011) of service tax up to the date of payment along with penal interest have to be paid (Section 75). During the course of audit (May 2011 and August 2012) of three Local SelfGovernment Institutions (LSGIs) it was noticed that the LSGIs had neither collected service tax from the tenants of various shopping complexes and other immovable properties rented out for commercial purposes nor paid the amount to Central Excise Department. Details are given in Table 4.1.
Table 4.1: Service tax not paid by three LSGIs test-checked
(in `)
Name of LSGI Particulars Total income Service tax leviable Total income Service tax leviable Total income Service tax leviable June 2007 to March 2008# April 2008 to February 2009# March 2009 to March 2010& 2010-11& 2011-12& Total
Kadakkal Grama Panchayat Pathanamthitta Municipality Varkala Municipality
2954796 266333
+
3582804 442835 2242384 277159 * *
3441395 354464 3128996 322287 * *
3544929 365128 5706592 587779 1437434 45056++
4271106 439924 8580701 883812 1172734 120792
17795030 1868684 22011706 2262992 2610168 165848
2353033 191955+ * *
Total service tax leviable 4297524 Service tax @ 12.36 per cent; & Service tax @ 10.30 per cent; + Tax has been calculated on the amount in excess of ` eight lakh; *Annual Income was below ` eight lakh/ ` 10 lakh during these years; ++ Tax has been calculated on the amount in excess of `10 lakh.
#
Varkala Municipality failed to collect service tax from the tenants though there was specific clause in the agreement for collection of such taxes. In Pathanamthitta Municipality and Kadakkal Grama Panchayat no clause for collection of statutory dues from the tenants was included in the agreement. Thus, due to failure of the LSGIs to collect or levy the service tax from the tenants, the liability for payment of ` 42.98 lakh was upon the LSGIs. Further, due to delay in payment of service tax, the LSGIs have created an additional liability towards the payment of interest and penalty.
90
Chapter IV Transaction Audit
Such failures, resulting in avoidable expenditure towards interest and penalty, have to be viewed in the context of dependence of LSGIs on Government grants for their day to day expenditure. The Director of Panchayats intimated (January 2013) that Kadakkal Grama Panchayat was not aware of levying service tax if the total rent receipt during a financial year exceeds ` 10 lakh, until it was pointed out by the Central Service Tax Commissioner, Thiruvananthapuram in July 2012. The Director further assured that levy of service tax would be included in the tender agreement for 2013-14. The matter was referred to the Government in December 2012; reply had not been received (February 2013).
4.3
Excess payment of electricity charges due to incorrect application of tariff
Sulthan Bathery Grama Panchayat made excess payment of ` 27.92 lakh towards electricity charges for 94 Sodium Vapour Lamps due to its failure to verify the demands raised by Kerala State Electricity Board. The monthly street light charges payable for Sodium Vapour Lamp (SVL) put to use for 12 hours per day as per the Kerala State Electricity Board (KSEB) Low Tension Public Lighting Tariff Order 2002 (effective from 01 October 2002) were ` 100 for one 250 watt SVL and ` 375 for one 250 watt SVL on semi-high mast. Mention was made in paragraph 4.4 of the Report of the Comptroller and Auditor General of India (Local Self-Government Institutions) for the year ended 31 March 2010 about the excess payment of street light charges made by three Grama Panchayats due to incorrect application of tariff for SVLs. Test check of the payments of street light charges made during the period October 2002 to September 2011 by Sulthan Bathery Grama Panchayat (SBGP) also revealed that monthly electricity charges were being levied and paid for at the higher rate of ` 375 per lamp applicable for SVL on semi high mast instead of ` 100 per lamp applicable for SVL. This had resulted in excess payment of street light charges of ` 27.92 lakh by SBGP for 94 SVLs. On this being pointed out by Audit in March 2011, Secretary, SBGP requested KSEB to charge rates as per Tariff Order 2002 and reimburse accordingly the excess amount already paid by SBGP. Though the KSEB thereupon charged at the rate of ` 100 for 250 watt SVL as notified in Tariff Order 2002 from October 2011 onwards, the excess amount already paid by SBGP from October 2002 to September 2011 has not been reimbursed/adjusted in subsequent bills. Excess payment made over a long period of time indicated weak internal control mechanism of the GP. The Director of Panchayats stated (January 2013) that as the KSEB did not reimburse/adjust the excess amount, the SBGP decided (November 2012) to initiate legal action against KSEB. The matter was referred to the Government in November 2012; reply had not been received (February 2013).
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4.4
Loss due to non-utilisation of foodgrains received from Government of India
One hundred and eighty six Local Self-Government Institutions of Ernakulam and Kottayam Districts lifted 4013.499 MT of foodgrains during 2007-08 under Sampoorna Gramin Rozgar Yojana Scheme, of which foodgrains worth ` 7.38 crore remained unutilised/deteriorated in quality in various godowns for the past four years. Sampoorna Gramin Rozgar Yojana (SGRY) was launched by Government of India (GOI) with the objective of providing additional wage employment in rural areas and thereby providing food security, along with creation of durable social, economic and community assets and infrastructure development. The programme was implemented by the Panchayat Raj Institutions in the State District Panchayats, Block Panchayats and Grama Panchayats. To ensure food security to the rural workers, a part of the wage was to be paid in foodgrains at the rate of five kilograms per day for each worker. The cost of the foodgrains was to be borne by GOI. The balance cash component of the wage was to be shared between GOI and State Government in the ratio 75:25. The system devised was such that the Project Directors of Poverty Alleviation Units (PAUs) would issue indents to Secretaries of Local Self-Government Institutions (LSGIs) enabling them to lift foodgrains from the godowns of Food Corporation of India (FCI) and store foodgrains in the godowns of Authorised Wholesale Dealers (AWDs)/State Warehousing Corporation (SWC). The SGRY scheme was wound up with effect from 01 April 2008. During 2007-08, PAUs of Ernakulam and Kottayam District Panchayats issued indents to 186 LSGIs to lift 4013.499 MT of foodgrains from FCI godowns under SGRY scheme. Test check (June 2011 and July 2012) of the records of the PAUs revealed that the foodgrains lifted by 94 LSGIs were not distributed to rural workers as envisaged in the scheme but were reportedly stored in the godowns of AWDs/SWC. The details of foodgrains remaining unutilised in the godowns of AWDs/SWC are given in Table 4.2.
Table 4.2: Details of foodgrains remaining unutilised
Quantity remaining in godowns1 of AWDs/SWC (in MT) Value2 (` in lakh)
Ernakulam (64 LSGIs) Rice Wheat Kottayam (30 LSGIs) Rice Wheat Total
1
3887.70 289.99 239.67 89.91
646.91 39.15 39.88 12.14 738.08
this includes foodgrains lifted during 2007-08 and prior years 2 at ` 16.64 per kg for rice and ` 13.50 per kg for wheat
Secretaries of District Panchayats, Ernakulam and Kottayam stated that the foodgrains were lifted and kept in the godowns of AWDs/SWC as per Government order issued in March 2008, according to which if the foodgrains were not lifted by LSGIs within the month, the financial loss to State would be taken as the personal
92
liability of the Secretary of concerned LSGI. The Government orders, however, did not give clear instructions to LSGIs till July 2012, on how to utilise the foodgrains after the scheme was discontinued. As a result, foodgrains worth ` 7.38 crore remained unutilised in various godowns without any benefit to the targeted beneficiaries in rural areas. As the Government had not given any direction regarding its utilisation, foodgrains had to be stored in godowns for a prolonged period. The storage over a long period deteriorates its quality. The Food Inspector, Kanjirappally Circle certified (April 2012) that the rice and wheat stored1 in Koruthode Grama Panchayat in Kottayam District is unfit for human consumption. The Government issued orders to all LSGIs in July 2012 to the effect that the foodgrains declared unfit for human consumption be auctioned off for purposes other than human consumption, or removed from the godowns. The matter was referred to the Government in November 2012; reply had not been received (February 2013).
4.5
Avoidable expenditure on procurement of buses under JNNURM
Absence of safeguard clause in the agreement for purchase of buses in the event of delayed delivery led to avoidable payment of Excise Duty of ` 1.93 crore and non-utilisation of VTS facilities resulted in unfruitful expenditure of ` 7.27 crore. A budget of ` 124.40 crore was approved (February 2009) by Government of India (GOI) under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for purchase of buses for Kochi (` 71 crore) and Thiruvananthapuram (` 53.40 crore). The percentage share of fund by GOI, State Government and Urban Local Bodies was 80:10:10 for Thiruvananthapuram and 50:30:20 for Kochi. The GOI share was in the form of Additional Central Assistance. Kerala State Road Transport Corporation (KSRTC) placed (March 2009) orders for purchase of 240 Type I buses 2 for ` 61.94 crore and 80 Type II buses3 for ` 63.76 crore. KSRTC made advance payment of ` 11.81 crore for the two types of buses. As of July 2012, the suppliers delivered 236 Type I buses and 66 Type II buses. The objective of JNNURM was to encourage the commuters to use public transport system so as to reduce traffic congestion and air pollution. The implementation mechanism for achieving the objectives was procurement of buses. Audit carried out an assessment of the implementation mechanism and noticed the following: (i) While placing the purchase orders with the suppliers, the Controller of Purchase and Stores for KSRTC did not make any provision in the contract for Liquidated Damages (LD) for the delayed delivery of buses. Although the timeline for the delivery of buses was prescribed, there was no LD clause to enforce timely delivery. As per the terms and conditions, the delivery of the buses was to be
Rice: Quantity-21.5 MT, Value- ` 3.54 lakh; Wheat: Quantity-11 MT, Value - ` 1.49 lakh Semi Low-floor buses of Ashok Leyland 3 Low-floor buses of Volvo Buses India Private Limited
1 2
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completed by June 2009. The suppliers for both Type I and Type II buses did not supply any bus up to June 2009. There was enormous delay in supplying the buses. Four Type I buses and 14 Type II buses are yet to be supplied (July 2012) in spite of grant of extension of time up to February 2011. Due to delay in delivery of buses, KSRTC had to incur an avoidable extra payment of Excise Duty of ` 1.93 crore towards increase in Excise Duty from April 2010. (ii) Another policy objective was to have an Intelligent Transport System (ITS) and Vehicle Tracking System (VTS). The projected benefit was ensuring timely arrival and departure of the buses, replacement of buses in case of emergency, tracking of vehicles round the clock, electronic ticketing system, etc. The mechanism adopted for the achievement of this objective involves two activities, viz., (i) installation of infrastructure for VTS at bus stops/ bus stands, etc. and (ii) installation of equipment for Global Positioning System (GPS) in the buses. Without creation of external infrastructure like installing VTS at bus stations, orders were placed on the suppliers for installation of GPS enabled control units in the buses at a cost of ` 2.66 lakh per Type I bus and ` 1.5 lakh per Type II bus. The investment involved in installing the equipment worked out to ` 7.27 crore, which remained unfruitful for the past three years. The Project Director, Kerala Sustainable Urban Development Project 4, in his reply stated that (i) the supply was delayed as the Companies could not meet the requirements from all the cities in India for the supply of buses and (ii) ITS and VTS could not be avoided as it was included in the specification issued by GOI. The reply was not acceptable as the contract did not contain a clause to protect the interest of the purchaser stipulating that any increase in taxes and duties beyond the stipulated date of delivery shall be borne by the supplier. Nor was there any stipulation in the contract to the effect that liquidated damages would be charged on the suppliers in case of delayed delivery. Further, there was failure to synchronise the activities of installation of infrastructure for VTS outside the buses with the installation of equipment for GPS in the buses. The public was thus deprived of the benefit of increased safety, operational efficiency, quality services, etc. Apart from this, the scientific management of transport system was defeated. The matter was referred to the Government in June 2012; reply had not been received (February 2013).
4.6
Unfruitful expenditure on non-functional slaughter house
A modern slaughter house constructed at a cost of ` 22.08 lakh in Chelakkara Grama Panchayat by Pazhayannoor Block Panchayat remained nonoperational for the past three years due to non-handing over of the slaughter house to the Grama Panchayat. As per Kerala Panchayat Raj (KPR) Act, 1994, regulation of slaughtering of animals and sale of meat, fish and other easily perishable food stuffs etc., is one of the mandatory functions of Grama Panchayats. With a view to providing hygienic and pure meat to public, and to prevent environmental pollution, Block Panchayat (BP), Pazhayannoor took up a project for construction of a modern slaughter house behind the existing agricultural market in Grama Panchayat (GP), Chelakkara under Peoples Plan Programme 1998-99. Public Works Subject Committee of the
4
Nodal Agency for implementation of JNNURM
94
Block Panchayat accorded (January 2000) technical sanction for the work. The work of construction of building for slaughter house awarded (March 1999) to a contractor was completed in March 2001 at the cost of ` 9.05 lakh. District Planning Committee approval (November 2002) and Technical Sanction (February 2004) were accorded for purchase of machinery and equipment for slaughter house as well as for construction of meat stall. A private firm supplied machinery and equipment costing ` 5.29 lakh. Construction of meat stall was completed in January 2005 at ` 1.49 lakh. Expenditure on construction of slaughter house was shared between BP, View of idling slaughter house and its surroundings Pazhayannoor and GP, Chelakkara, whereas expenditure on machinery and equipment and meat stall was shared by BP, Pazhayannoor and District Panchayat, Thrissur. GP, Chelakkara constructed (March 2009) a biogas plant of capacity 68 cubic metre, alongside the slaughter house, at ` 6.25 lakh, for management of solid waste at the slaughter house. The total expenditure on the project amounted to ` 22.08 lakh. Even though all the works including electrification were completed by 2009 and the slaughter house was ready, no action was taken by the Secretary of BP, Pazhayannoor to hand over the slaughter house to GP, Chelakkara. Reasons for not handing over the slaughter house were neither available on records nor elucidated by the Secretary of BP, Pazhayannoor. Audit noticed that there were no circumstances preventing the Secretary of BP, Pazhayannoor from handing over the project to GP, Chelakkara so as to make it functional. Further, as per Section 231 of KPR Act, 1994, no person shall slaughter within the Grama Panchayat area except in a public or licensed slaughter house any cattle, horse, sheep, goat or pig for sale as food. A joint verification (October 2012) by audit team and Block Panchayat officials revealed that unauthorised slaughtering of animals for food was being done in houses and the meat was being sold in the market place in violation of the Act, against which no action was taken. Thus, due to failure on the part of the Secretary of BP, Pazhayannoor in handing over the project to GP, Chelakkara, a project on which ` 22.08 lakh was expended, with intention to provide hygienic and pure meat to the public, remained idle for the past three years without any plausible reasons. Income to be derived from the slaughter house as well as meat stall for the past three years had also to be foregone, due to non-functioning of the slaughter house. Moreover, unauthorised slaughtering of animals continued and meat sold in the market place much in violation of the KPR Act, as slaughtered meat could be sold only after inspection by the prescribed officers, as laid down in KPR Act (Section 231). The Director of Panchayats stated (January 2013) that though BP, Pazhayannoor had been asked to hand over the plant to GP, Chelakkara, no action was taken for handing over the same and hence the slaughter house with the machinery and equipment were remaining idle. The Director added that the biogas plant
95
constructed with the intention of processing waste from the slaughter house, without any hazard to public, was not functional as the slaughter house had not started functioning. The matter was referred to the Government in December 2012; reply had not been received (February 2013).
4.7
Expenditure towards salt water flushing for mosquito eradication
Kochi Municipal Corporation incurred expenditure of ` 69.92 lakh on salt water flushing for mosquito eradication without adequate documentation on account of which the authenticity of payments could not be ensured. Kochi Municipal Corporation (KMC) has been flushing salt water into the drains in and around the Corporation areas during post monsoon months (October - May) to curb mosquito menace for more than 13 years5 through contractors using tanker lorries fitted with pump sets. The contractors are selected on the basis of the rates per trip quoted by him in response to open tenders floated each year. The Corporation incurred ` 69.92 lakh towards flushing of salt water during 2005-06 to 2011-12. The programme was not conducted during 2010-11 due to delay in finalising the tenders. KMC, however, did not receive any complaint regarding increase in mosquito menace/vector borne diseases on account of not conducting the programme during 2010-11. Nor was any assessment made on the efficacy of the programme to flush salt water into the drains. Audit further noticed the following: Preparation of list or maps of the drains, specifying the points of intake of salt water and estimation of quantity of salt water to be flushed into drains gives transparency to the execution of the programme and facilitates evaluation of the reasonableness of the payment to be made to the contractor. KMC did not make any such mention in the tender documents or the agreement. Further, no advance intimation regarding the drains and area where the flushing was to be carried out each day was given to the contractor. The Corporation stated that the Health Inspector was giving oral instructions to the contractor each time in this regard. In order to establish the bona fides of the trips having been made, the drivers/contractors have to furnish trip sheets with all details such as vehicle number, date, meter reading, time and place of flushing of salt water and number of trips and the details are to be certified by the official supervising the programme. Audit noticed that the trip sheets did not have any of the above essential details. As per the records of payments for the year 2009, the contractor had transported 2.22 lakh litre of salt water daily. Though such an enormous quantity of salt water was reported to be flushed into the drains, the trip sheets were never signed by the drivers/contractors. There was no indication that the programme was being supervised by concerned authorities.
Since the activity is being conducted in KMC alone in the whole of Kerala, Audit had pointed out many times the necessity of conducting a scientific study on the efficacy of the process. KMC had not taken any steps in this regard.
Year of commencement not available
96
The Government stated (February 2013) that the Secretary, KMC, would give instructions to the concerned officials to check the density of water and to include the time and place in the trip sheets as well as to produce log books of vehicles for verification. While the Government has agreed to institutionalise the control measures for effective documentation and delivery of services, the reply is silent about initiating any step to gauge the effectiveness in continuing the programme for curbing the mosquito menace in Kochi.
Thiruvananthapuram,
(R.N.GHOSH) The Principal Accountant General (General and Social Sector Audit), Kerala
Countersigned
New Delhi, The
(VINOD RAI) Comptroller and Auditor General of India
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Appendices
Appendix I Functions of Standing Committees (Reference: Paragraph 1.4.1; Page 4) (a) Standing Committees in a Grama Panchayat (i) Standing Committee for Finance shall deal with the subjects of finance, tax, accounts, audit, budget, general administration, appeal relating to tax and subjects not allotted to other Standing Committees. (ii) Standing Committee for Development shall deal with the subjects of development planning, socio-economic planning, spatial planning, agriculture, soil conservation, social forestry, animal husbandry, dairy development, minor irrigation, fisheries, small-scale industry, public works, housing, regulation of building construction, electricity etc. (iii) Standing Committee for Welfare shall deal with the subjects of development of scheduled caste-scheduled tribe, development of women and children, social welfare, social security activity, slum improvements, poverty eradication and public distribution system. (iv) Standing Committee for Health & Education shall deal with the subjects of public health, sanitation, water supply (drinking water), sewerage and environment, education, arts and culture and entertainment. (b) Standing Committees in a Block Panchayat (i) Standing Committee for Finance shall deal with the subjects like finance, accounts, audit, budget, general administration and subjects not allotted to other Standing Committees. (ii) Standing Committee for Development shall deal with the subjects like development planning, socio-economic planning, agriculture, animal husbandry, minor irrigation, fisheries, small scale industry, public works, housing, electricity and maintenance of water shed. (iii) Standing Committee for Welfare shall deal with the subjects like development of scheduled caste-scheduled tribe, development of women and children, social welfare, social security activity, slum improvements, poverty eradication and public distribution system. (iv) Standing Committee on Health & Education shall deal with the subjects of public health, sanitation, water supply (drinking water), sewerage and environment, education, arts and culture and entertainment. (c) Standing Committees in a District Panchayat (i) Standing Committee for Finance shall deal with the subjects like finance, accounts, audit, budget, general administration and subjects not allotted to other Standing Committees. (ii) Standing Committee for Development shall deal with the subjects like development planning, socio-economic planning, agriculture, soil conservation, animal husbandry, minor irrigation, fisheries, small scale industry, electricity, etc. (iii) Standing Committee for Public Works shall deal with the subjects like public works, housing, spatial planning and environment.
99
Appendix I (Contd) (iv) Standing Committee for Health and Education shall deal with subjects like public health and education. (v) Standing Committee for Welfare shall deal with the subjects like social welfare, development of women and children, development of scheduled castescheduled tribe and eradication of poverty. The Standing Committees of Panchayats may perform such other powers and functions of Panchayat as may be entrusted to it by the Panchayat in addition to the powers and duties conferred on it by rules made in this behalf. (d) Standing Committees in a Municipality (i) Standing Committee for Finance shall supervise the utilisation of the budget grants and watch carefully the timely assessment and collection of taxes, fees, rents and other sums due to the Municipal Council; shall inspect frequently the accounts of the Municipal Council; shall watch carefully the release of grants by the Government and its proper utilisation; shall conduct monthly audit of accounts and check the monthly demand, collection and balance and abstract of receipts and expenditure of the preceding month as furnished by the Secretary; shall scrutinise the annual accounts, demands, collection and balance; shall prepare and present the budget estimate before the council under Section 286; shall verify whether any amount proposed to be expended by the Municipal Council is within the budget provisions approved by the Council and whether there is sufficient fund for this purpose; may, subject to such rules as may be prescribed, write off such sums due to the Council as appear to the Committee as irrecoverable. (ii) Standing Committee for Development shall deal with matters of agriculture, soil conservation, social forestry, animal husbandry, dairy development, minor irrigation, fisheries, small scale industry, co-operation and institutional finance and shall prepare the development plans for the Municipal Council integrating the proposals of other Standing Committees. (iii) Standing Committee for Welfare shall deal with matters relating to the welfare of women and children, development of scheduled castes / scheduled tribes, social welfare, social security pension and financial assistance, poverty alleviation, slum improvement and public distribution system. (iv) Standing Committee for Public Works shall deal with the subjects like public works, housing, town planning including regulation of building constructions, environment, electricity, water supply, drainage and sewerage.
100
Appendices
Appendix I (Contd) (v) Standing Committee for Health shall deal with the matters of public health and health services, sanitation and control of dangerous and offensive trades. (vi) Standing Committee for Education, Arts & Sports shall deal with matters of education, arts and sports. (e) Standing Committees in a Municipal Corporation (i) Standing Committee for Finance shall supervise the utilisation of the budget grants and watch carefully the timely assessment and collection of taxes, fees, rents and other sums due to the Municipal Corporation; shall inspect frequently the accounts of the Municipal Corporation; shall watch carefully the release of grants by the Government and its proper utilisation; shall conduct monthly audit of accounts and check the monthly demand, collection and balance and abstract of receipts and expenditure of the preceding month as furnished by the Secretary; shall scrutinise the annual accounts, demands, collection and balance; shall prepare and present the budget estimate before the Council under Section 286; shall verify whether any amount proposed to be expended by the Municipal Corporation is within the budget provisions approved by the Council and whether there is sufficient fund for this purpose; shall enquire into the allegations against the employees of the Municipal Corporation if directed by the Council and bring the result of it to the notice of the Council; may, subject to such rules as may be prescribed, write off the sums due to the Council as appears to the Committee as irrecoverable. (ii) Standing Committee for Development shall deal with matters of agriculture, soil conservation, social forestry, animal husbandry, dairy development, minor irrigation, fisheries, small scale industry, co-operation and institutional finance and shall prepare the development plans for the Municipal Corporation integrating the proposals of other Standing Committees. (iii)Standing Committee for Welfare shall deal with the matters of welfare of women and children, development of scheduled castes/scheduled tribes, social welfare, social security pension and financial assistance, slum improvement, poverty eradication and public distribution system. (iv) Standing Committee for Public Works shall deal with matters of public works, housing, electricity, water supply, drainage and sewerage. (v) Standing Committee for Health shall deal with matters of public health and health services, sanitation and control of dangerous and offensive trade.
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Appendix I (Concld.) (vi) Standing Committee for Town planning shall deal with matters of town planning including regulation of building constructions, environment, urban beautification, promotion of art and culture and preservation of monuments and places and buildings of archaic importance, heritage value and natural beauty. (vii) Standing Committee for Appeal relating to Tax shall dispose of appeals on taxation and give directions to the Secretary to levy tax in respect of cases which escaped assessment and to reassess under-valued cases. (viii) Standing Committee on Education and Sports shall deal with matters connected with education and sports.
102
Appendices
Appendix II Rules and policies relating to finance, budget, personnel matters (Reference: Paragraph 1.6.1; Page 7)
Provision Authority Applicability to LSGI Gist of the provision
Accounts
Section 215 of KPR Act Sections 294 & 295 of KM Act
PRIs
ULBs PRIs ULBs &
The Panchayats and the Municipalities shall maintain such books of accounts and other books in relation to its accounts and prepare an annual statement of accounts. When any fact indicating that defalcation or loss of public moneys, stamps, stores or other property occurred and come to the notice of the Government servant, he should inform the head of office immediately. The head of office should send a preliminary report immediately to the Principal Accountant General and to the Head of the Department. A record shall be maintained for the movable and immovable fixed assets. The Panchayat and the Municipality shall have a system of conducting physical verification of fixed assets at least once in a year.
Reporting of loss due to fraud, theft or negligence
Article 297 of Kerala Financial Code
Asset register
Kerala Panchayat Accounts Rules, 1965 and Government order issued in December 2005 Kerala Municipal Accounts Manual
PRIs
ULBs PRIs ULBs Procedure for execution of public works Power of various authorities to give administrative sanction Fixing of rates for preparation of estimates Preparation of plan and estimates Invitation of tender Execution of works directly by LSGIs and through beneficiary committees Control and supervision Purchase of materials
Works manual
KPR (Execution of Public Works) Rules, 1997 KM (Execution of Public Works and purchase of materials) Rules, 1997
Budget
Section 214 of KPR Act, 1994 Section 293 of KM Act, 1994
PRIs
ULBs
Budget proposals shall be prepared by the respective standing committees before 15 January every year and shall be submitted to the Standing Committee for Finance (SCF). The SCF shall prepare a budget for the ensuing year and present the same not later than the first week of March before the Panchayat/ Municipality for approval. There shall be a Performance Audit Authority at the State Level for conducting performance audit. State Performance Audit Officer shall assist the Performance Audit Authority. The Regional Performance Audit Officers shall conduct performance audit once in three months in the LSGIs.
Internal audit
Rule 3 of KPR (Manner of Inspection and Audit System) Act, 1997 Rule 3 of KM (Manner of Inspection and Audit System) Act, 1997
PRIs
ULBs
103
Appendix II (Concld.)
Provision Authority Applicability to LSGI Gist of the provision
Inspection
Section 188A of KPR Act, 1994 Section 56(i) of KM Act, 1994
PRIs
Government or any officer empowered by Government may inspect any office under the control of any Panchayat/ Municipality.
ULBs PRIs Director of Local Fund Audit shall be the auditor of Panchayats/ Municipalities. The State Government entrusted Technical Guidance and Support for DLFA to CAG under section 20(1) of CAGs DPC Act, 1971. In addition, CAG also conducts audit under Sections 14 and 15 of the DPC Act, 1971. and There shall be an authority for LSGIs at State Level known as Ombudsman for making investigations and enquiries in respect of charges on any action involving corruption or maladministration or irregularities in the discharge of administrative functions by LSGIs and public servants working under them. Every Panchayat/ Municipality shall formulate and publish citizen charter regarding the different categories of services rendered to the citizens by the Panchayat/Municipality. Citizen charter shall be renewed and updated periodically at least once in a year.
External Audit
Section 215(3) of KPR Act, 1994 Section 295(3) of KM Act, 1994
ULBs
Ombudsman
Section 271F to R of KPR Act
PRIs ULBs
Citizen charter
Section 272A of KPR Act, KPR (Preparation of citizen charter) Rules, 2004 Section 563A of KM Act, KM (Preparation of citizen charter) Rules, 2000
PRIs
ULBs
Right Information
to
Section 271 A to E of KPR Act Section 517 A to E of KM Act
PRIs
ULBs
Every person bona fide requiring any information shall have the right to get such information from the Panchayat/ Municipality in accordance with the procedure prescribed.
104
Appendices
Appendix III Powers of State Government over LSGIs (Reference: Paragraph 1.6.2; Page 7)
Act/Rule/Authority Powers exercised by Government Power to frame rules Section 254 of KPR Act & Section 565 of KM Act Government may, by notification in Gazette, make rules to carry out all or any purpose of KPR Act and KM Act subject to approval by the State Legislature. Power to dissolve LSGIs Section 193 of KPR Act & Section 64 of KM Act Government shall by notification in the gazette dissolve the LSGIs, if the LSGIs fail to pass the budget of the LSGIs for the succeeding financial year before the end of the financial year which causes financial crisis. Government may dissolve LSGIs if the Government is of the opinion that the LSGIs persistently make default in performing the duties imposed on them by law. Power to cancel and suspend a resolution or decision taken by LSGIs Section 191 of KPR Act & Section 57 of KM Act Government may cancel a resolution or decision taken by LSGIs if Government is of the opinion that it is not legally passed or in excess of the power conferred by KPR Act /KM Act / any other law or likely to endanger human life, health, public safety or communal harmony or in violation of directions issued by Government. Power of appointment, cadre control, transfer, etc. Sections 179,180 & 181 of KPR Act and Sections 48 & 227 of KM Act The Secretaries of LSGIs and the employees of the PRIs are Government servants. The Government shall regulate the classification, method of recruitment, conditions of service, pay and allowance, discipline and conduct of the Secretaries of the LSGIs. Government may at any time transfer the Secretary from an LSGI. The Government shall lend the service of Government officers and employees of the Panchayats as may be necessary for the implementation of any scheme, project or plan assigned to the Panchayat. An appeal against any order of the Panchayat imposing any minor penalty on any officer or employee shall lie with Government. Power to issue guidelines and to conduct enquiry Sections 189 of KPR Act & 58 of KM Act Government shall have the power to issue general guidelines to the LSGIs in matters such as finance, maintenance of accounts, formulation of schemes, proper functioning of Grama Sabha, selection of sites and beneficiaries, etc. If there is any default in the implementation of the schemes or maintenance of accounts or complaint is received in the matter, Government may arrange enquiry into the matter and the Panchayat shall co-operate with such enquiry.
105
Appendix IV Surrender of funds during 2011-12 (Reference: Paragraph 2.1.1.1; Page 13)
(` in lakh)
Major Head
Budget Provision
Amount Surrendered
2202 2210 2217 2225 2230 2235 2401 2402 2403 2404 2415 2501 2851 Total
18857.04 1049.49 21051.03 5527.15 5211.79 83074.11 1146.45 2.52 0.01 1065.00 1.40 4011.12 5.00 141002.11
20.63 303.03 15375.72 814.46 1789.61 470.93 187.02 0.02 0.04 765.56 19727.02
106
Appendices
Appendix V List of LSGIs which delayed sending AFS to DLFA (Reference: Paragraph 2.3.2.1; Page 25)
Sl. No.
Name of LSGI & year of audit
Due date
Date of sending
Delay in months
Grama Panchayats 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Sulthan Bathery 2008-09 Maloor 2005-06 Kadamboor 2006-07 Payyavoor 2006-07 Vengappally 2007-08 Padinjarathara 2007-08 Karimba 2006-07 Okkal 2006-07 Pullur Periya 2009-10 Alakode 2006-07 Mayyil 2008-09 Mangalpadi 2005-06 Panathadi 2005-06 Thariyodu 2007-08 31 July 2009 31 July 2006 31 July 2007 31 July 2007 31 July 2008 31 July 2008 31 July 2007 31 July 2007 31 July 2010 31 July 2007 31 July 2009 31 July 2006 31 July 2006 31 July 2008 30 September 2009 20 February 2007 14 November 2007 23 October 2007 20 April 2009 20 January 2009 29 January 2008 27 February 2008 27 August 2010 23 May 2008 11 November 2009 11 December 2007 08 November 2008 15 July 2009 2 7 3 3 9 6 6 7 1 10 3 16 27 11
Source: Supplementary Audit Report on the accounts of LSGIs
107
Appendix VI List of LSGIs which did not prepare monthly accounts (Reference: Paragraph 2.3.2.2; Page 25)
Sl. No. Name of LSGI & year of Audit
Grama Panchayats Vadanappally 2004-05 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Thalikkulam 2005-06 Thenkurussi 2007-08 Kadamboor 2006-07 Payyavoor 2006-07 Kariyad 2006-07 Vengappally 2007-08 Karimba 2006-07 Eruthenpathy 2007-08 Ancharakandy 2007-08 Cheranallore 2007-08 Pullur Periya 2009-10 Alakode 2006-07 Kulukallor 2007-08 Peralassery 2007-08 Mayyil 2008-09 Kolachery 2006-07 Maloor 2005-06 Puthunagaram 2008-09
Kannadi 2006-07 20 Block Panchayat Taliparamba 2006-07 1 TOTAL 21

108
Appendices
Appendix VII List of LSGIs in which various deficiencies were observed in maintenance of cashbook (Reference: Paragraph 2.3.2.3(a); Page 26)
Sl. No. Name of LSGI & year of Audit Erasure & overwriting in cash book Daily closing of cash book not certified Monthly closing of cash book not certified Nonreconciliation of cash book balance with pass book balance
Nonconducting of physical verification of cash at the end of every month
Grama Panchayats
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Sulthan Bathery 2008-09 Vadanappally 2004-05 Thalikkulam 2005-06 Thenkurussi 2007-08 Kadamboor 2006-07 Payyavoor 2006-07 Chelora 2007-08 Kariyad 2006-07 Mavoor 2007-08 Vengappally 2007-08 Padinjarathara 2007-08 Karimba 2006-07 Karimpuzha 2005-06 Vellinezhi 2008-09 Eruthenpathy 2007-08 Keezhoor Chavassery 2007-08 Ancharakandy 2007-08 Cheranallore 2007-08 Pullur Periya 2009-10
1 1
1 1
1 1 1 1 1
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1 1
1 1 1 1 1 1 1 1 1 1
1 1 1 1 1 1 1 1
1 1
1 1
1 1
109
Appendix VII (Contd)
Sl. No.
Name of LSGI & year of Audit
Erasure & overwriting in cash book
Daily closing of cash book not certified
Monthly closing of cash book not certified
Non reconciliation of cash book balance with pass book balance
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
Karivalloor Peralam 2006-07 Alakode 2006-07 Kulukallor 2007-08 Peralassery 2007-08 Mayyil 2008-09 Kolachery 2006-07 Mathilakom 2006-07 Thirumarady 2005-06 Chendamangalam 2010-11 Sreemulanagaram 2005-06 Chazhoor 2007-08 Pulimath 2008-09 Velur 2006-07 Chowannur 2008-09 Nagaroor 2008-09 Mangalpadi 2005-06 Kuttikol 2007-08 Panathadi 2005-06 Omallur 2005-06 Puramattom 2004-05 Panavally 2007-08
1 1
1 1 1 1 1 1 1 1 1 1
1 1 1 1 1 1 1 1 1 1 1 1
1 1
1 1
1 1 1 1 1 1 1
1 1 1 1 1 1 1
1 1
1 1
1 1 1 1 1 1 1 1 1 1
1 1 1 1 1 1 1 1
1 1 1 1 1 1 1 1 1 1
110
Appendices
Appendix VII (Concld.)
Sl. No.
Name of LSGI & year of Audit
Erasure & overwriting in cash book
Daily closing of cash book not certified
Monthly closing of cash book not certified
Non reconciliation of cash book balance with pass book balance
41 42 43 44 45 46 47 48 49 50
Ramankari 2008-09 Thariyodu 2007-08 Veliyam 2008-09 Maloor 2005-06 Vandazhy 2004-05 Puthunagaram 2008-09 Pirayiri 2006-07 Kannadi 2006-07 Mynagapally 2009-10 Chottanikkara 2010-11 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
1 1 1
1 1 1 1
Block Panchayats
1 2
Malampuzha 2008-09 Taliparamba 2006-07 1
1 1
1 1
Municipality
1
Mattannur 2004-05
1 20 47
1 45
1 31
1 31
TOTAL
111
Appendix VIII List of LSGIs which did not maintain various registers properly (Reference: Paragraph 2.3.2.3(b)(c)(d)(e); Pages 26, 27)
Sl.No. Name of LSGI & year of Audit Name of Registers Advance Asset Stock Deposit
Grama Panchayats 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. Sulthan Bathery 2008-09 Thenkurussi 2007-08 Payyavoor 2006-07 Chelora 2007-08 Kariyad 2006-07 Mavoor 2007-08 Padinjarathara 2007-08 Vellinezhi 2008-09 Keezhoor-Chavassery 2007-08 Cheranallore 2007-08 Okkal 2006-07 Pullur Periya 2009-10 Alakode 2006-07 Kulukallor 2007-08 Peralassery 2007-08 Mayyil 2008-09 Kolachery 2006-07 Pulimath 2008-09 Chowannur 2008-09 Nagaroor 2008-09 Noolpuzha 2009-10 Mangalpadi 2005-06 Kuttikol 2007-08 Panathadi 2005-06 Panavally 2007-08 Ramankari 2008-09 Cherthala South 2007-08 Thariyodu 2007-08 Perayam 2008-09 Veliyam 2008-09 Mynagapally 2009-10 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
112
Appendices
Appendix VIII (Concld.)

Sl.No. Name of LSGI & year of Audit Pirayiri 2006-07 Name of Registers Advance Asset Stock Deposit 1
32.
Block Panchayats 1. 2. 3. Thodannur 2007-08 Malampuzha 2008-09 Taliparamba 2006-07 1 1 1 1 1
Municipalities 1. 2. TOTAL Mattannur 2004-05 Thalassery 2008-09 26 17 1 1 1 10 24 1
113
Appendix IX List of LSGIs which did not prepare budget in prescribed format/ delayed presentation of budget (Reference: Paragraph 2.3.2.3(f); Page 27)
Sl.No. Name of LSGI & year of Audit Nature of defect Budget not in prescribed format Delay in presentation of Budget Inadequate Budget discussion
Grama Panchayats 1. 2. 3. 4. 5. 6. 7. 8. 9. Sulthan Bathery 2008-09 Vatanappally 2004-05 Thalikkulam 2005-06 Thenkurussi 2007-08 Kadamboor 2006-07 Chelora 2007-08 Kariyad 2006-07 Mavoor 2007-08 Vengappally 2007-08 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
10. Padinjarathara 2007-08 11. Vellinezhi 2008-09 12. Eruthenpathy 2007-08 13. Keezhoor-Chavassery 2007-08 14. Ancharakandy 2007-08 15. Cheranallore 2007-08 16. Okkal 2006-07 17. Pullur Periya 2009-10 18. Karivalloor-Peralam 2006-07 19. Alakode 2006-07 20. Kulukallor 2007-08 21. Peralassery 2007-08 22. Mayyil 2008-09 23. Kolachery 2006-07 24. Chottanikkara 2010-11 25. Thirumarady 2005-06 26. Chendamangalam 2010-11
114
Appendices
Appendix IX (Concld.)
Sl.No. Name of LSGI & year of Audit Nature of defect Budget not in prescribed format Delay in presentation of Budget 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Inadequate Budget discussion 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
27. Sreemulanagaram 2005-06 28. Chazhoor 2007-08 29. Pulimath 2008-09 30. Velur 2006-07 31. Chowannur 2008-09 32. Noolpuzha 2009-10 33. Mangalpadi 2005-06 34. Kuttikol 2007-08 35. Panathadi 2005-06 36. Omallur 2005-06 37. Panavally 2007-08 38. Ramankari 2008-09 39. Cherthala South 2007-08 40. Thariyodu 2007-08 41. Perayam 2008-09 42. Mynagapally 2009-10 43. Maloor 2005-06 44. Vandazhy 2004-05 45. Puthunagaram 2008-09 46. Pirayiri 2006-07 47. Kannadi 2006-07 48. Payyavoor 2006-07 Block Panchayats 1. 2. 3. 4. Taliparamba 2006-07 Thodannur 2007-08 Malampuzha 2008-09 Pallom 2009-10 1 1 1
1 1 1 1
1 1 1 1
Municipality 1. Perumbavoor 2007-08 1 1
Corporation 1. TOTAL Kochi Corporation 2007-08 12 1 52 1 52
115
Appendix X List of institutions selected for review on Implementation of MGNREGS

(Reference: Paragraph 3.1.5; Page 34)
Selected Block Panchayats (13) Varkala, Vamanapuram, Athiyannur (Thiruvananthapuram District) Lalam, Kanjirappally, Ettumanur (Kottayam District) Perinthalmanna, Kondotty, Mankada, Areacode (Malappuram District) Ottappalam, Mannarkkad, Thrithala (Palakkad District) Selected Grama Panchayats (39) Thiruvananthapuram District Edava, Elakamon, Ottoor, Kallara, Peringammala, Pullampara, Kanjiramkulam, Karumkulam, Venganoor Kottayam District Bharananganam, Karur, Meenachil, Erumeli, Manimala, Parathode, Arpookkara, Athirampuzha, Neendoor Malappuram District Angadippuram, Elamkulam, Keezhattur, Kondotty, Nediyiruppu, Vazhayur, Makkaraparamba, Mankada, Moorkanad, Kavannur, Urangattiri, Pulpatta Palakkad District Ambalappara, Nellaya, Vallapuzha, Karimba, Kottoppadam, Thachampara, Nagalassery, Pattithara, Thrithala
116
Appendices
Appendix XI Fund Flow Chart of MGNREGS

(Reference: Paragraph 3.1.8.1; Page 40)
State Government, Rural Development Department, releases state-share
Commissioner of Rural Development draws fund from Consolidated fund
Transferred to Assistant Development Commissioner (General) by allotment who in turn draws and releases the funds to DPC/JPC by Demand Draft
117
Appendix XII Details of Inspection conducted (Reference: Paragraph 3.1.12.2; Page 53)
Year State level No. of No. of works to be works inspected as inspected per norms 345 35 1097 2544 2982 3174 10142 110 128 212 140 625 District level No. of works to No. of be inspected as works per norms inspected 1010 7213 18234 24491 32617 83565 877 3570 7040 11542 13480 36509 Block level No. of works No. of to be works inspected as inspected per norms 10111 3552 42999 183848 247482 331181 815621 34489 151212 192816 225856 607925
2007-08 2008-09 2009-10 2010-11 2011-12 Total
Source: CRD figures
118
Appendices
Appendix XIII Deficiencies in the maintenance of registers

(Reference: Paragraph 3.1.12.4; Page 54)
Position of Non Maintenance of Records in test-checked GPs/Blocks
Sl. No.
Name of LSGI
Job Card Application Register
Job Card Register
Employment Register
Muster roll issue/receipt Register
Work Register
Assets Register
Complaint Register
1.
Blocks
13
Maintained
13
Maintained
13
13
2.
GPs
10
Maintained
10
15
Position of Improper maintenance of Records in test-checked GPs/Blocks

Name of LSGI Job Card Application Register Muster roll issue/receipt Register
Sl. No.
Job Card Register
Employment Register
Work Register
Assets Register
Complaint Register
Blocks
GPs
119
Appendix XIV Taxes levied by TMC (Reference: Paragraph 3.2.1; Page 58) Revenue items Property tax Profession tax Manner of levy Recurring tax levied on buildings based on its Annual Rental Value, payable half-yearly. Recurring tax payable by employees based on their salary, and also by professionals, traders, institutions, etc. The tax is payable half-yearly. Tax levied by Local Bodies on entertainments including cinemas, exhibitions, amusements, games, sports, etc., as a percentage of the price of tickets sold. Tax levied on advertisements displayed on boards, hoardings, banners, etc., in municipal area.
Entertainment tax
Advertisement tax
120
Appendices
Appendix XV Collection efficiency of tax revenue during 2007-08 to 2011-12 (Reference: Paragraph 3.2.3; Page 59) Budget estimate 1456.27 872.60 380.01 191.97 2400.00 1500.00 350.15 50.00 2550.00 1829.00 375.50 60.00 4400.00 2790.00 400.25 90.00 5000.00 2950.00 400.25 100.00
(` in lakh)
Year
Item Property tax Profession tax Entertainment tax Advertisement tax Property tax Profession tax Entertainment tax Advertisement tax Property tax Profession tax Entertainment tax Advertisement tax Property tax Profession tax Entertainment tax Advertisement tax Property tax Profession tax Entertainment tax Advertisement tax
Demand 3754.30 1447.18 291.98 33.46 4053.60 1700.39 273.86 40.49 4511.56 2230.31 316.62 68.42 3902.74 2340.95 303.13 80.84 5521.68 2835.98 343.45 127.22
Collection 1945.48 1443.24 291.98 30.16 2103.40 1647.77 273.86 37.18 2395.05 1861.52 316.76 65.11 2437.69 2027.05 303.13 77.53 3441.70 2601.84 343.45 99.41
2007-08
Percentage of collection 51.82 99.73 100 90.14 51.89 96.91 100 91.83 53.09 83.46 100 95.16 62.46 86.59 100 95.91 62.33 91.74 100 78.14
2008-09
2009-10
2010-11
2011-12
Source: Budget documents and DCB of the respective years
121
Appendix XVI Details of buildings identified by TMC, but not assessed to Property tax/ Service charges (Reference: Paragraph 3.2.4.2 (iii); Page 62)
Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Building details Buildings in Medical College campus (44 numbers) Buildings in Mar Ivanios College campus (13 numbers) Buildings of State Government/University (52 numbers) VSSC Staff quarters (Nos. 1/1405 to 1516, & 1/1662) 12/1490 -PMG Office 12/1491 -PMG staff office 12/1492 -PMG Office 12/1493 -PMG Office 12/1484 -P&T Employees Co-operative Society 12/1474 -Post and Telegraph Office 12/1485 -Telecommunication Canteen 12/1486 -Telecommunication Store 12/1487 -Telecommunication Office 12/1488 -Telecommunications 12/1489 -Telecommunications 11/2558 to 2596 & 2597 to 2701 - Telecommunication Quarters
122
Appendices
Appendix XVII
Details of unauthorised buildings identified by TMC, but not assessed to Property tax
(Reference: Paragraph 3.2.4.3 (iii); Page 69) Sl. No. TC Number Name of owner Annual tax payable including Library Cess (`) 22,479 27,300 3,971 1,676 31,064 22,611 13,846 6,435 2,23,830 56,377 43,484 57,162 57,162 2,599 2,605 7,914 Period Arrears up to 2011-12 (`) 44,958 2,32,050 33,754 27,654 5,12,556 45,222 2,49,228 9,653 3,35,745 5,63,771 4,34,840 5,71,620 5,71,620 28,590 22,143 94,968 37,78,372
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
24/1836 24/1036 24/1037 25/3329UA 25/3329UA1 26/571(2) 25/2848UA 25/3085UA 24/955UA 4/1602(1) 4/1602(2) 4/1602(3) 4/1602(4) 4/597(8) 4/597(8) 4/597(8)
P.S.Mohandas Sajad &Najimse Sajad &Najimse Rema Gopan Rema Gopan Telecom Tower Syamala Kurup T.Anilkumar Nirmala thankam G.Sukesh G.Sukesh G.Sukesh G.Sukesh Anand Victor P.G.Lalitha Ramesh GR & Deepa Nair Total
2010-11 I 2008-09 II 2008-09 II 2000-01 II 2000-01 II 2010-11 I 1999-00 I 2010-11 II 2010-11 II 2007-08 I 2007-08 I 2007-08 I 2007-08 I 2006-07 I 2008-09 II 2005-06 I
123

CAG Report On Local Governance in Kerala 2011-12

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CAG Report On Local Governance in Kerala 2011-12

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Report of the

Comptroller and Auditor

For the year ended 31 March 2012

(Local Self Government Institutions) Government of Kerala

Audit Report (LSGIs) for the year ended March 2012

Audit Report (LSGIs) for the year ended March 2012

` 7.38 crore remained unutilised/deteriorated in quality in various godowns

CHAPTER I ORGANISATION, DEVOLUTION AND ACCOUNTABILITY FRAMEWORK OF LOCAL SELF-GOVERNMENT INSTITUTIONS

1.1.1 Status of transfer of functions and functionaries

Audit Report (LSGIs) for the year ended March 2012

14 152 978 5 60 1209 359 2216 19255 16680

2651.70 244.24 37.16 95.60 23.65 -

1903357 175309 26674 491240 51664 -

Chapter I Organisation, Devolution and Accountability Framework of LSGIs

Local Self-Government Department

Minister, Rural Development

Minister, Municipalities & Corporations

Urban Affairs Director

Chief Town Planner

Rural Development Commissioner

Chief Engineer (LSGD)

State Performance Audit Officer

Audit Report (LSGIs) for the year ended March 2012

1.4.1 Standing Committees

Decentralised Planning District Planning Committees

Chapter I Organisation, Devolution and Accountability Framework of LSGIs

Audit Report (LSGIs) for the year ended March 2012

Chapter I Organisation, Devolution and Accountability Framework of LSGIs

1.6.1 Internal control system at the level of LSGIs

1.6.2 Authority and Responsibility of the Government with regard to LSGIs

Audit Report (LSGIs) for the year ended March 2012

1.6.3 Role of the Government of India as sanctioning authority

1.7.1 Ombudsman for LSGIs

Chapter I Organisation, Devolution and Accountability Framework of LSGIs

1.7.2 Tribunal for LSGIs

Role of State Performance Audit Authority

Quality control systems in Directorate of Local Fund Audit

Role of Comptroller and Auditor General of India

Audit Report (LSGIs) for the year ended March 2012

CHAPTER II FINANCES AND FINANCIAL REPORTING ISSUES OF LOCAL SELF-GOVERNMENT INSTITUTIONS

Resources: Trends and Composition

622.84* 1903.56 39.16

622.84 5165.64 954.82

Transfer of funds from the Government and associated audit issues

Controlling Officers Issue Letter of Authority

Public Account of State Reduction from

District Treasury Thiruvananthapuram

Providing Matching Fund

Deposit Accounts of LSGIs

290.19 358.71 503.14 401.93 1826.47 3380.44

Audit Report (LSGIs) for the year ended March 2012

2007-08 2008-09 2009-10 2010-11 2011-12 Total

6950.00 7700.47 8920.00 10025.00 11030.00 44625.47

1538.44 1670.23 1842.29 2277.72 2563.76 9892.44

22.13 21.69 20.65 22.72 23.24 22.17

Receipts from GOI

Directly to State Level Nodal Agencies

6.75 1.00 13.77 1.59 0.06 36.93 181.60 20.11 951.05

Own funds of LSGIs

Chapter II Finances and Financial Reporting Issues of LSGIs

Loans availed by LSGIs

27.00 4.34 7.82 39.16

21.94 278.49 22.65 44.70 367.78