Public Finance Theory and

Practice
LAW1223
Module 6
Shahid Zaman
VITBS VIT, Chennai
Financial Administration
• Financial administration refers to the management of finance of
government.

• Deals with the preparation of budget, methods of administration of

revenue resources, procedures in expending money and keeping of
financial records.

• Principles of Financial Administration

• No tax shall be levied or collected except by authority of law

• No money out of Consolidated Fund of India shall be appropriated except in

accordance with the with law

• The executive spends the money exactly in the manner as passed by the
parliament
Agencies involved in Financial Administration
 The Legislature
 Parliament of India
 Enact Laws and Approve Bills.
 The Executive
 The Prime Minister and his council of ministers
 Implement Laws and Present the Bills
 The Ministry of Finance
 Plays central role in the financial administration of the country
 1. Department of Economic Affairs 2. Department of Expenditure 3. Department of
Revenue 4. Department of Financial Services
 Responsible for preparing budget on the behalf of government.
Agencies involved in Financial Administration
 State Finance Departments
 State finance ministry is responsible for preparing the budget of the
respective states
 The Audit and Accounting Department
 Its primary purpose is to ensure in the process of expending government
funds, the expenditure is incurred in the manner as passed by the
parliament

 Comptroller and Auditor General of India maintains the accounts of

government and conducts the audit of all public money drawn from
Consolidated Fund of India
Agencies involved in Financial Administration
 Parliamentary Committees
 Estimates Committee
 To scrutinise the functioning of government ministries and departments
in terms of expenditure and utilisation of funds
 Estimates Committee oversees the economic and administrative policy
as a whole. It may suggest improvements/policy alternatives
 Estimates committee gives policy suggestions

 Public Accounts Committee

 To audit the revenue and the expenditure of the Government of India
 Public Accounts committee scrutinises the audit reports done by CAG
 Public Accounts committee deals with accounts
Budgetary Procedure and Financial Administration
1 Preparation of Budget
 Financial year starts from 1st April to 31st March
 Ministry of Finance
 1st February
 Revenue Budget
 Revenue Receipts
 Revenue Expenditure
 Capital Budget
 Capital Receipts
 Capital Expenditure
Budgetary Procedure and Financial Administration
2. Enactment of Budget
 Presentation of budget in the parliament
 In the Lok Sabha, the finance minister presents the budget
 Following the presentation of the budget, the finance bill is
presented to parliament
 General discussion
 MPs of opposition have the opportunity to present the grievances
of taxpayers before the house
 Consolidated Fund
 All revenue received by government, loans raised are credited to
this fund and expenditure of government will be incurred from
that fund
Budgetary Procedure and Financial Administration
 Votable and non-votable expenditure
 Votable: Refers to demand of various ministers for funds
 Speaker allots two or three days for discussion and voting of demand
 Non – votable: Salary and allowances of President, Chairman of Raj
Sabha, Speaker and deputy speaker of Lok Sabha, Judges of supreme
courts, CAG
 Passing of Appropriation Bill
 Appropriation bill has to passed otherwise government is not
legally authorised to use any amount out of consolidated fund of
India
 Passage of Financial Bill
 The passage of Finance Bill allows the government to levy new
taxes, changes to current taxes, or the repeal of previous taxes
Budgetary Procedure and Financial Administration
3. Execution of Budget
 Proper distribution of funds
 Proper collection of revenue
 Proper custody of collected funds

4. Parliamentary Control over Expenditure

 Direct control by the parliament
 Control by parliamentary committees
 Comptroller and Auditor General of India