(a) whether Comptroller and Auditor General (C&AG) has observed that the accounting system followed by urban local bodies is faulty and due to this development schemes of the local bodies are affected leading to misappropriation of large funds;
(b) if so, whether the Government is taking any action to replace the present accounting system; and
(c) if so, the details thereof?
THE MINISTER OF STATE IN THE MINISTRY OF URBAN DEVELOPMENT ( SHRI AJAY MAKEN )
(a)to(c): Most of the urban local bodies (ULBs) are following
cash-based single entry accounting system in which neither do
they prepare an income and expenditure statement nor a
balance-sheet. The annual account prepared by them reflects
only cash flow, i.e. money actually received and spent during a
financial year without taking into account the accrual income
and outstanding liabilities pertaining to the year. The
Eleventh finance Commission in its report had, therefore,
recommended that the Comptroller and Auditor General (C&AG) of
India should exercise control and supervision over proper
maintenance of accounts of ULBs and their audit. The C&AG, in
turn, constituted a Task Force under the chairmanship of Deputy
C&AG of India in February 2002 to recommend budget and
accounting formats for ULBs in India.
In their report submitted in December, 2002, the Task
Force recommended accrual based accounting system and suggested
budget and accounting formats along with significant accounting
policies, cost of important utilities and services and MIS
reports. Ministry of Urban Development (MoUD) circulated the
report to all States for implementation in April, 2003.
Further, MoUD in cooperation with C&AG has developed and
circulated a National Municipal Accounts Manual in January, 2005
to help the States prepare their State-specific municipal
accounts manual to adopt accrual based accounting system. MoUD
has also been organizing national and regional workshops to help
the States adopt recommended accounting system for their ULBs.
Adoption of this accounting system would ensure proper financial
reporting and assist ULBs access capital markets to meet their
fund requirements. Moreover, the recommended accounting system
would ensure transparency and accountability in ULBs. Most of
the States have initiated action to adopt the accrual based
accounting system for their ULBs. It is worth mentioning that
Public Entry Accounting System has been made as one of mandatory
reforms for ULBs under Jawaharlal Nehru National Urban Renewal
Mission (JNNURM) for accessing central assistance.