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

iii

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 CAG’s (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.

v

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.

Audit Report (LSGIs) for the year ended March 2012

vi

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

Overview

vii

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 test-

checked 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 of Municipal Solid Waste Disposal Facility at

Brahmapuram

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. Kochi Municipal Corporation failed to repair the building at the

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


viii

` 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 non-

operational 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)

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. Kerala’s rate of population growth is India’s lowest and Kerala’s


2

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 Kerala’s economy.

Table 1.1: Important statistics of the State

Sl. No. Indicator Unit State value National value

1 Population Crore 3.34 121.02

2 Population density Per Sq Km 859 382

3 Urban population Per cent 47.72 31.16

4 GDP from primary sector Per cent 14.94 20.4

5 Gender ratio Females per 1000 males 1084 940

6 Population below poverty line Per cent 11.4 21.8

7 Literacy Per cent 93.91 74.04

8 Birth rate Per 1000 population 14.8 22.1

9 Infant mortality rate Per 1000 population 13 47

10 Unemployment rate Per cent 16.7 6.6

11 Gross Domestic Product (2011-

12) at current prices ` in crore 326693 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) 14

16680

2651.70 1903357

Block Panchayats (BPs) 152 244.24 175309

Grama Panchayats (GPs) 978 37.16 26674

Municipal Corporations 5 359 95.60 491240

Municipalities 60 2216 23.65 51664

Total 1209 19255 - -

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

Chapter I – Organisation, Devolution and Accountability Framework of LSGIs

3

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

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

KSUDP

Local

Self-Government

Department

Minister,

Panchayats

Minister,

Rural Development

Minister,

Municipalities & Corporations

Principal Secretary

Secretary

Panchayat

Director

Urban Affairs Director

Director

Chief Town Planner Rural Development

Commissioner

Chief Engineer

(LSGD)

State Performance Audit

Officer

KREWS

IKM

Kudumba

shree

Suchitwa

Mission

SRRDA

Development

Authorities

KLGSDP

KILA

SIRD

KLGDF

KURDFC


4

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, Vice-

Chairperson/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 Decentralised Planning

1.5.1 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


5

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

Draft

Development Plan

In terms of Article 243 ZD

of the Constitution and

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.

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.

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.

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


6

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

District Collector

in DPC meeting

The District Collector being

the Member Secretary of the

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.


7

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/non-

implementation of the projects.

Thus, the functioning of Thiruvananthapuram DPC was not effective during 2011-

12, 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 Government’s

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:


8

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


9

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 India’s (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


10

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.

11

CHAPTER II

FINANCES AND FINANCIAL REPORTING ISSUES OF

LOCAL SELF-GOVERNMENT INSTITUTIONS

2.1 Financial Profile of LSGIs

2.1.1 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 2007-

08 to 2011-12. Pie-chart 2.1 shows the source-wise receipts during 2011-12.


12

Table 2.1: Time series data on Resources of LSGIs

(` in crore)

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

Own Revenue:

(i) Tax Revenue

(ii) Non Tax Revenue

334.42

385.36

450.76

952.97#

561.79

315.08 349.37 377.43 376.69

Total Own Revenue 649.50 734.73 828.19 952.97 938.48 4103.87

State Grant:

(i) Traditional Functions

329.98

363.98

399.31

440.47

644.98

2178.72

(ii) Maintenance Expenditure

(Road Assets and Non-Road

Assets)

404.98 397.52 448.04 440.58 713.94 2405.06

(iii) Expansion and Development 1538.44 1670.23 1842.29 2277.72 2021.52 9350.20

(iv) Funds for State Sponsored

Schemes & State share of

Centrally Sponsored Schemes

976.71 807.44 840.80 1358.24 1358.45 5341.64

Total State Grant 3250.11 3239.17 3530.44 4517.01 4738.89 19275.62

GOI grants:

(i) Centrally Sponsored

Schemes

(ii) Development and expansion

454.68

--

811.12

--

832.49

--

1163.79

--

1280.72

622.84*

4542.80

622.84

Total GOI grant 454.68 811.12 832.49 1163.79 1903.56 5165.64

Receipts from loans & other

sources

23.14 7.81 72.35 812.36 39.16 954.82

Total Receipts 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

*includes Road Renovation Scheme Fund of ` 14.44 crore received from GOI during 2010-11 released by the

State Government during 2011-12

Chapter II – Finances and Financial Reporting Issues of LSGIs

13

Chart 2.1: Source-wise receipts of LSGIs (figures in per cent)

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.

12

8

9

27

18

25

1

Own revenue

Traditional Functions

Maintenance of Assets

Expansion and Development

State Sponsored Schemes

GOI grant

Loans


14

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)

Release mechanism

1

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

3450.56 Routed through Public

Account

3054-Roads and Bridges 507.68

5054-Capital Outlay on

Roads and Bridges

14.44

Total 3972.68

2 State Sponsored Schemes 13 Major Heads 1212.75 Routed through State

Level Nodal Agencies 3 /

Poverty Alleviation

Units 3 State share for CSSs 4 Major Heads 145.70

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.

1 Kerala Local Government Service Delivery Project 2 Asian Development Bank 3 Kudumbashree, KSUDP, Suchitwa Mission


15

Diagram 2.2: Transfer/Fund flow process

Transfer Process Fund Flow Process

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)

Transfer credit

• Consolidated Fund

Reduction from total allocation

• Public Account of State

Providing Matching Fund

• Deposit Accounts of LSGIs

Type of LSGIs Development

Expenditure Fund

Maintenance

Expenditure

Fund

General

Purpose Fund

Total

Corporations 154.00 55.16 81.03 290.19

Municipalities 179.84 79.74 99.13 358.71

District Panchayats (DPs) 337.90 147.74 17.50 503.14

Block Panchayats (BPs) 357.57 21.56 22.80 401.93

Grama Panchayats(GPs) 992.21 409.74 424.52 1826.47

Total 2021.52 713.94 644.98 3380.44

Sanction Order

• Finance Department• Finance Secretary issues sanction orders for

transfer credit of fund

Letter of Authority

• Controlling Officers Issue Letter of Authority to LSGIs and mark copy of it to District Treasury Thiruvananthapuram and Transacting Treasuries of LSGIs

Adjustment in accounts

• District Treasury Thiruvananthapuram 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


16

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 2011-

12, 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.


17

Table 2.4: State Plan vis-à-vis Development Expenditure of LSGIs (` in crore)

Year State Plan Outlay Development

Expenditure Fund

Percentage to State

Plan Outlay

2007-08 6950.00 1538.44 22.13

2008-09 7700.47 1670.23 21.69

2009-10 8920.00 1842.29 20.65

2010-11 10025.00 2277.72 22.72

2011-12 11030.00 2563.76 23.24

Total 44625.47 9892.44 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

The category-wise release of fund by GOI during 2011-12 is given in Table 2.5.

Table 2.5: Category-wise release of GOI fund

Category Amount (` in crore)

Thirteenth Finance Commission grant4 409.46

Additional Central Assistance for Externally Aided projects for

KLGSDP

148.94

ADB assisted KSUDP 50.00

Centrally Sponsored Schemes 1280.72

Road Renovation Scheme Fund (received from GOI during

2010-11 released by the State Government during 2011-12)

14.44

Total 1903.56

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.

4 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)


18

Table 2.6: Release of GOI grants during 2011-12

Sl.

No.

Authority/Agency

through which the grant

was released

Details of Scheme

Amount

(` in crore)

1 State Budget Jawaharlal Nehru National Urban Renewal Mission

–Urban Infrastructure and Governance (JNNURM-

UIG)

67.86

2 Directly to State Level

Nodal Agencies

Integrated Housing and Slum Development

Programme (IHSDP)

6.75

National Rural Livelihood Mission (NRLM) 1.00

Swarna Jayanti Shahari Rozgar Yojana (SJSRY) 13.77

Total Sanitation Campaign (TSC) 1.59

Urban Infrastructure Development Scheme for

Small and Medium Towns (UIDSSMT)

0.06

3 Directly to Poverty

Alleviation Unit

Swarnajayanti Gram Swarozgar Yojana (SGSY) 36.93

Indira Awaas Yojana (IAY) 181.60

Integrated Wasteland Development Programme

(IWDP)/ Hariyali

20.11

4 By online transfer to the

Joint Bank Account of

District Programme Co-

ordinator and Joint

Programme Co-ordinator

Mahatma Gandhi National Rural Employment

Guarantee Scheme (MGNREGS)

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

5 Release during 2010-11 : ` 25.99 crore 6 Release during 2010-11 : ` 704.23 crore 7 Property tax, Profession tax, Entertainment tax, Advertisement tax, etc. 8 Licence fee, Registration fee, etc.


19

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 Loan availed Loans outstanding as at the end of

March 2012

State Government - 21.94

Co-operative Banks

(EMS housing scheme) 27.00 278.49

HUDCO 4.34 22.65

KURDFC 7.82 44.70

TOTAL 39.16 367.78

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.

9 Housing and Urban Development Corporation Limited


20

Table 2.8: Application of resources (` in crore)

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

Productive Sector 411.79 443.94 511.49 447.69 595.77 2410.68

Infrastructure Sector 548.84 589.58 656.11 936.05 1343.41 4073.99

Service Sector 1336.56 1463.55 1842.91 2139.26 2306.59 9088.87

Total Development

Expenditure

2297.19 2497.07 3010.51 3523.00 4245.77 15573.54

Other Expenditure 1607.70 1951.94 2125.96 1798.26 2618.88 10102.74

Total Expenditure 3904.89 4449.01 5136.47 5321.26 6864.65 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 2011-

12 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


21

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 (` in crore)

Year Total

expenditure

Development

Expenditure

(DE)

Percentage of

DE to total

expenditure

Social Sector

Expenditure

(SSE)

Percentage of

SSE to total

expenditure

2007-08 3904.89 2297.19 58.83 1334.89 34.19

2008-09 4449.01 2497.07 56.13 1461.28 32.85

2009-10 5136.47 3010.51 58.61 1841.65 35.85

2010-11 5321.26 3523.00 66.21 2139.26 40.20

2011-12 6864.65 4245.77 61.85 2306.59 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


22

Table 2.10: Details of projects taken up and expenditure incurred

Type of LSGIs

No. of projects Amount (` in crore)

Percentage of

total

expenditure to

total outlay

Formulated Taken up Completed Outlay of

projects

formulated

Total

expenditure

on projects

Expenditure

on completed

works

Grama Panchayat 141589 103940 28368 4775.57 2384.43 675.32 49.93

Block Panchayat 15519 12168 3489 1173.82 707.06 242.23 60.24

District Panchayat 8462 5850 1311 1051.07 563.28 129.49 53.59

Municipality 13647 9189 2943 663.05 325.69 103.81 49.12

Corporation 4148 2805 855 636.56 265.31 83.93 41.68

Total 183365 133952 36966 8300.07 4245.77 1234.78 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 2006-

07. 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.


23

Table 2.11: Outstanding liabilities of LSGIs

Nature of liability Amount (` in crore)

Salary and DA arrears 5.74

Work bills 21.98

Electricity charges of street lights 0.90

Water charges of public taps 6.25

Library Cess 10.46

EMS housing Loan - Co-operative Banks 278.49

KURDFC 44.70

Pension Contribution 11.71

Pension payable to retired employees 2.39

River Management Fund 0.81

IT/VAT, Sales Tax, etc. 1.78

Loan from State Government 21.94

HUDCO 22.65

Other items 0.64

Total 430.44

Source: Details furnished by LSGIs & Controlling officers

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

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

Corporations 1.25 (1) 1.42 (1) 0.42 (1) - 0.82 (1) 3.91 (4)

Municipalities 4.13 (1) - - 3.92 (1) - 8.05 (2)

Block Panchayats - 16.82 (6) 15.72 (9) 2.31 (3) 22.14 (5) 56.99 (24)

Grama Panchayats 14.10 (5) 0.10 (2) 0.50 (1) 0.37 (2) 0.19 (1) 15.26 (11)

KSUDP - - - - 13.78 (2) 13.78 (2)

Total 97.99 (43)


24

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 Commission’s

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.


25

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 India’s (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 10th day

of every month. Monthly Accounts were not prepared in 20 GPs and one BP

(Appendix VI).


26

2.3.2.3 Maintenance of primary financial records

(a) Cash Book

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


27

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


28

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 2011-

12 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. DLFA’s 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 Surcharge Certificate Amount

recovered (` in

lakh)

Number Amount

(` in lakh)

Number Amount

(` in lakh)

2007-08 3 0.25 60 20.88 0.35

2008-09 18 20.83 111 54.06 1.59

2009-10 23 18.42 164 53.34 2.64

2010-11 37 20.98 223 71.02 2.36

2011-12 5 0.44 28 5.91 1.60

Total 86 60.92 586 205.21 8.54


29

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-à-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.

31

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


32

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.


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.


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.


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, Kerala’s 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

Chapter III – Performance/Thematic Audits

33

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 Co-

ordinator (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

2 Thiruvananthapuram, Kollam, Alappuzha, Idukki, Thrissur, Palakkad, Kozhikode and Wayanad


34

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


35

Government response on the audit observations have been incorporated in this

report, wherever applicable.

Audit findings

3.1.6 Physical and financial performance

3.1.6.1 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)

Period

Number of

households

registered

Number of

households

issued Job

card

Number of

households

demanded

employment

Number of

households

provided

with

employment

Person

days

generated#

Number of

households

completed

100 days

2007-08 5.30 4.79 1.88 1.82 59.69 0.09

2008-09 21.35 18.98 6.99 6.92 153.74 0.14

2009-10 26.34 26.26 9.60 9.57 340.35 0.43

2010-11 29.23 29.16 11.95 11.85 492.73 0.69

2011-12* 18.79 18.60 14.18 14.16 631.94 1.24

*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.


36

Table 3.2: Receipt and utilisation of fund during 2006-07 to 2011-12 (` in crore)

Year

Amount released

Expenditure OB GOI State

Misc.

receipts Total

2006-07 11.02 31.82 4.76 0.17 47.77 27.90

2007-08 19.87 58.11 7.57 1.72 87.27 83.37

2008-09 3.90 198.87 23.60 55.24 281.61 224.41

2009-10 57.20 467.71 40.00 9.73 574.64 470.68

2010-11 103.96 704.23 17.25 2.47 827.91 701.62

2011-12 126.29 951.05 25.10 8.75 1111.19 1003.83

Total - 2411.79 118.28 78.08 - 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 2006-

07 (` 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

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

DPP was not

finalised in

Malappuram


37

(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. Non-

preparation/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:

(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.

Further, 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.

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 Palakkad: Centre for Management Development, Kottayam: Centre for Rural Management,

Malappuram: Maithri, Thiruvananthapuram: Loyola Extension Centre 4 Elakamon, Kanjiramkulam & Karumkulam GPs

Survey was not

conducted for

preparation of

DPP

Grama Sabhas

were convened

belatedly

Beneficiaries of MGNREGS attending Grama

Sabha meeting


38

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.

(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-à-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 162206 56833 65

Neendoor 158181 37115 77

Bharananganam 67125 54938 18

Moorkanad 127390 74826 41

Urangattiri 1316525 116080 91

Edava 153071 66653 56

Elakamon 316900 225502 29

Peringammala 725796 386535 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.

The number of works and expenditure projected by all the GPs in the four test-

checked districts were unrealistic and were based on inflated figures. During 2011-

12, 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.

Estimated

demand for work

was highly

inflated

Labour budgets

prepared by

GPs were

inflated


39

Table 3.4: Projected figures in Labour Budget vis-à-vis actuals

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 Financial Management

3.1.8.1 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

wages of skilled/semi-skilled workers

25 per cent of cost of materials and wages of

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

Name of GPs

Number of works Amount (` in lakh)

Included

in Labour

budget

Completed Variation

(per cent)

Provision Actual

expenditure

Variation

(per cent)

Arpookkara 83 83 0 75.6 41.59 45

Neendoor 284 94 67 74.98 33.35 56

Mankada 277 83 70 106.49 75.70 29

Nediyiruppu 263 72 73 2319.79 63.41 97

Urangattiri 386 113 71 200.18 60.64 70

Edava 113 54 52 89.60 66.64 26

Elakamon 89 17 81 276.00 9.15 97

Peringammala 359 192 47 752.9 264.20 65

Kottoppadam 262 161 39 235.15 78.39 67

Vallapuzha 369 71 81 173.34 22.79 87


40

the Scheme was passed on to the GPs as shown in the Flow Chart given in

Appendix XI.

3.1.8.2 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 Malappuram5 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 Areacode, Mankada and Perinthalmanna 6 Lalam and Kanjirappally 7 Edava, Kallara, Karumkulam and Peringammala GPs

SEGF was

constituted only

in May 2012

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


41

GPs to report MGNREGS payments both in the Standing Committee and the

Panchayat Committee.

(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.

(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 Varkala, Vamanapuram and Athiyannoor BPs 9Ambalappara, Nellaya and Vallapuzha GPs in Palakkad District, Peringammala and Pullampara

GPs in Thiruvananthapuram District

Funds were

transferred to

GPs without

verification of

expenditure

statements/VMC

Reports

Monthly

reconciliation of

bank accounts

was not

conducted

Bank charged

` 50 to

` 100 from the

workers for

opening bank

accounts


42

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 Registration and Employment

3.1.9.1 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

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 Varkala, Vamanapuram and Athiyannoor BPs 11 Urangattiri, Mankada, Karimba, Kottoppadam and Thachampara GPs 12 Elamkulam GP:23, Keezhattur GP:14 and Nediyiruppu GP:47

Awareness

programmes

were not

effective

GPs violated the

provision for

issuing Job cards


43

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:

(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

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

Application for

work was not

acknowledged

The objective to

provide fall-back

employment

source, when

other

employment

opportunities

are scarce, was

not achieved

Unemployment

allowance due

was not paid


44

(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.

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.

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.

Only 8.76 per

cent of the

registrants were

provided with

100 days of

employment

No durable

assets created


45

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 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 Kondotty, Kavannur, Keezhattur, Angadippuram and Elamkulam GPs 14 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

Works not

permissible

under the

Scheme were

taken up


46

Earthen road constructed under MGNREGS

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

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

15 Edava, Elakamon, Ottoor, Peringammala, Pullampara, Venganoor, Karumkulam and

Kanjiramkulam GPs 16 Elakamon, Kanjiramkulam, Karumkulam and Ottoor GPs

Majority of

works selected

related to

clearance of

bush/jungle/

grass

Works were

taken up in

private land

without

observing GOI

instructions


47

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

(` in lakh) Name of GP 2010-11 2011-12

Total

expenditure

Expenditure on private

land (percentage of

expenditure in bracket)

Total

expenditure

Expenditure on private

land (percentage of

expenditure in bracket)

Elamkulam 43.89 26.08 (59) 52.58 50.56 (96)

Kavannur 35.95 27.67 (77) 77.30 68.66 (89)

Makkaraparamba 55.43 47.11 (85) 65.53 64.24 (98)

Moorkanad 37.88 32.57 (86) 49.56 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.

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

Genuineness of

rates applied for

execution of

works could not

be ascertained


48

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.

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

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

measurement of works. In

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 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 test-

checked districts, Audit did not come across any instance of productive

convergence of MGNREGS with other Rural Development Schemes.

Unique identity

numbers, to

prevent

duplication,

were not

provided to

works

Line

Departments

were not

involved in the

execution of

MGNREGS

works

No fruitful

convergence of

MGNREGS

with other

Government

programmes/

schemes

Site of anti-sea erosion works which did not

give the desired result


49

3.1.10.4 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 Edava, Elakamon, Ottoor, Peringammala, Pullampara, Venganoor and Kanjiramkulam GPs 19 Edava, Elakamon, Kallara, Ottoor, Peringammala, Pullampara, Venganoor, Karumkulam and

Kanjiramkulam GPs

Muster Rolls

were defective in

many respects


50

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 test-

checked 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.

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

Payment of

wages was

delayed in

majority of test-

checked GPs


51

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 test-

checked GPs.

(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

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.

Payment of

` 12.86 lakh was

made without

measurement of

works

Women at work


52

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 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

The objective of

sustainable

development by

strengthening

the natural

resource base of

rural livelihood

was not met


53

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 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 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.

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 test-

checked 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

Huge shortfall in

conducting

physical

verification of

works

Constitution of

Social Audit

forums were not

as per the Act

Social Audit

teams had not

undertaken any

preparatory

work before the

public hearing at

the Grama

Sabha


54

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, non-

prioritisation 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.

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

Staff structure

was not

commensurate

with the volume

of works and

magnitude of

funds provided


55

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


56

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 women’s 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) non-

provision 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


57

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.


58

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


59

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 (` in lakh)

Year Property tax Profession tax Entertainment

tax

Advertisement

and other taxes

2007-08 1773.11(51) 1361.46(39) 291.98(9) 27.01(1)

2008-09 2137.88(52) 1635.18(40) 273.86(7) 37.18(1)

2009-10 2438.64(50) 2101.49(43) 316.76(6) 65.11(1)

2010-11 2672.62(53) 1972.16(39) 303.13(6) 77.53(2)

2011-12 4056.68(57) 2522.09(36) 343.27 (5) 124.09(2)

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


60

(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

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 Raising of demand

(i) 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

TMC lacked

comprehensive

database of

taxable units


61

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 non-

revision 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)


62

KHRWS Building in Medical College Campus

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.

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 Rooms for accommodating patients on rental basis

TMC’s failure

to assess

buildings

identified by it,

resulted in loss

of revenue of

` 4.13 crore


63

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.

Building No. Details of building Year of

completion

Annual tax (` )

1 TC 14/7 (1) Legislature Secretariat

(Assembly Building)

1998-99 18,89,284

2 TC 14/7 (2) Legislature Secretariat

(Administrative Building)

1992-93 4,54,758

3 TC 14/7(3) Hon’ble Speaker’s official

residence

1990-91 14,188

4 TC 14/7(4) Hon’ble Deputy Speaker’s

official residence

1995-96 23,886

5 TC 14/7(5) Speaker’s staff quarters 1995-96 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.

27Based on the data (area of one room: 25.58 M2; rental value: ` 50 per M2 per month) adopted by

TMC for assessment of KHRWS pay wards attached to Government Hospital, Peroorkada


64

Malayala Manorama Building

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

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

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

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 28Up 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)

Unaided

educational

institutions were

not assessed

Short levy of

Property tax of

` 57.82 lakh


65

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.

Institution Property tax

leviable (`)

Service charge

actually levied

(`)

Revenue loss

(`)

1 Coaxial Maintenance Exchange (TC 29/685

to 700)

2,46,464 1,84,848 61,616

2 Central Telegraph Office (TC 26/118 to 120) 2,50,368 1,87,776 62,592

3 Telegraph Exchange (26/1283 to 1289) 2,55,072 1,91,304 63,768

4 General Manager, Telecom, Poojappura -

TC 17/2046(2)

8,35,520 6,26,640 2,08,880

5 Barton Hill Quarters-12/1126 (146) 1,60,288 1,20,216 40,072

6 Telecom Circle Office 14,77,024 11,07,768 3,69,256

7 12/1151 (1) 1,05,376 79,032 26,344

8 Vivekananda Nagar Quarters – 2/3622 to

3708

6,46,080 4,84,560 1,61,520

9

Divisional Engineer, Central Telephone

Exchange- 26/1532

1,04,56,708 78,42,531 26,14,177

10 Principal General Manager, BSNL Telecom

District, Thiruvananthapuram – 26/123

45,13,152 33,84,864 11,28,288

TOTAL 47,36,513

TMC stated (November 2012) that action would be taken to levy Property tax on

BSNL buildings as observed by Audit.

29 @ ` 71057 from 1998-99 (II half) to 2009-10 (I half) and @ ` 2.13 lakh thereafter plus Library

Cess of ` 49741


66

(ii) Irregular exemptions/deductions allowed

Remission of Service charge given on GOI buildings 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. Hon’ble

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.

Name of Office Half yearly

tax (`)

Amount of

arrears (`) Period

1 VSSC Garage, Kesavadasapuram 1,621 22,694 2005-2012

2 P&T Quarters, Muttada 390 5,850 2004-2012

3 Central Excise Building 1,78,552 23,21,176 2005-2012

4 Regional PF Commissioner, Pattom 72,900 9,47,700 2005-2012

5 Income Tax Commissioner Office 16,609 2,32,526 2005-2012

Total 35,29,946

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 Hon’ble 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.

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)

Remission of

Service charge

of ` 38.21 lakh

Irregular

exemption of

` 27.39 lakh

allowed


67

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

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) 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

Deductions were

allowed in

appeal in a

routine manner

Substantial

amount was in

arrears


68

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.

Building No. Name of Office Amount of

arrears (`)

Period

1 26/1532 Divisional Engineer, Central

Telephone Exchange

78,42,531 2000-2012

2 26/123 Principal General Manager, BSNL

Telecom District,

Thiruvananthapuram

33,84,864 2000-2012

3 2/3622 to 3704 Post &Telegraph Staff Quarters 13,23,971 2007-2012

Total 1,25,51,366

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.


69

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 Hon’ble

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


70

(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.

(ii) Those engaged in self employment, companies and those transacting

business.

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 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

Category No. of

assessees

escaped

assessment

Tax loss for

the period

2007-08 to

2011-12

(` in lakh)

Remarks

Contractors

registered in

TMC

280 28.76 Details of contractors were taken from the records of TMC’s

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.

Traders

working in

Corporation

area

235 29.38 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.

Institutions

functioning in

Technopark

164 20.50 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.

TMC did not

have

comprehensive

database of all

categories of

assessees liable

to pay Profession

tax


71

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 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.

Advocates

practising in

the

Corporation

area

201 25.13 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.

Total 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.


72

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

Headquarters, Thiruvananthapuram. Though Profession tax is calculated based on

the gross salary of the employees, the Southern Air Command Headquarters

furnished details of net salary to Audit. Even based on the net salary drawn by the

employees the amount to be got reimbursed from Defence Services Estimates for

the period 2007-08 to 2011-12 worked out to ` 41.51 lakh.

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)

Year Profession tax 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

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)

An amount of ` 41.51 lakh was

to be got

reimbursed

from Defence

Services

Estimates


73

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 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

Sl.

No.

Particulars of show Period Amount of

Entertainment

tax given

exemption (`)

Remarks

1. International Horticorp Expo

2010 – Chandrasekharan Nair

Stadium

2 December 2010 to

6 December 2010

4,12,500 Exemption given as per G.O

No.3757/2010/LSGD

dated 30 November 2010

2. Matsyotsavam 2011-

Putharikandam Ground

24 February 2011 to

28 February 2011

60,225 Exemption given as per G.O

No.547/2011/LSGD

dated 23 February 2011

3. Government Engineering

College Cultural Festival-

Kanakakunnu Palace

4 March 2011 to

6 March 2011


No.680/2011/LSGD

dated 03 March 2011

4. Flower Show- Animation

Hall, Vellayambalam

8 September 2010 to

12 September 2010


No.284/2010/LSGD

dated 27 August 2010

5. M.G. College Film Festival-

Kalabhavan

24 January 2011 to

25 January 2011

….. Details of the show not

furnished

TOTAL 5,06,929

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

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.

The Government

exempted shows

from payment of

Entertainment

tax without

consulting TMC

Entertainment

tax realisable

from Soorya

Film Society

amounted to

` 61.41 lakh


74

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 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 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

TMC lacked

proper system

for levying tax

on hoardings

TMC was not

levying tax on

advertisements

displayed on

vehicles


75

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


76

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).


77

3.3 TOTAL SANITATION CAMPAIGN

3.3.1 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, people’s

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 test-

checked, 3.75 lakh IHHLs were constructed incurring ` 46.28 crore.

Audit noticed the following shortcomings:

36Ernakulam, Kasaragod, Kollam, Alappuzha 37Vazhakkulam, North Paravur, Alangad, Vypin, Kasaragod, Kanhangad, Mukhathala, Chittumala,

Kottarakkara, Pattanakkad, Kanjikkuzhy, Champakkulam 38Vengola, 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 39Award given to PRIs and institutions considering their significant contribution towards ensuring

full sanitation coverage in their areas of operation


78

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 test-

checked, 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.

Comprehensive

assessment of

beneficiaries was

not conducted


79

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 non-

completion 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

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.


80

` 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

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-à-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.

Shortage of

School toilets

BFTs were not

provided in

Anganwadis


81

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.


82

Waste being burnt at dumping ground in Ugrankunnu

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:

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 non-

biodegradable waste separately.

However, there was no door-to-

door collection of garbage,

separation of waste into

biodegradable and non-

biodegradable 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

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.

Waste

management

was not carried

out in

professional

manner

Discharge of

Solid Waste in

backwaters


83

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 test-

checked, 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 test-

checked districts half of the established ones had become non-functional and the

functional ones were financially non-viable with very low sales.


84

3.4 IMPLEMENTATION OF MUNICIPAL SOLID WASTE

DISPOSAL FACILITY AT BRAHMAPURAM

3.4.1 Introduction 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 Pre-award stage

3.4.2.1 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 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

Item-wise

expenditure was

not prepared

Contract

conditions were

deficient to

address the risks

involved


85

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:

(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

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


86

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 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 vermi-

composting 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 non-

availability 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 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 vermi-

composting. 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.

RDF plant was

remaining idle

since its

purchase

Vermi-Compost

facility costing

` 2.92 crore had

become

unfruitful


87

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).

89

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.


90

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 Self-

Government 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 June 2007 to

March 2008#

April 2008 to

February 2009#

March 2009 to

March 2010&

2010-11& 2011-12& Total

Kadakkal

Grama

Panchayat

Total income 2954796 3582804 3441395 3544929 4271106 17795030

Service tax

leviable 266333+ 442835 354464 365128 439924 1868684

Pathanamthitta

Municipality

Total income 2353033 2242384 3128996 5706592 8580701 22011706 Service tax

leviable 191955+ 277159 322287 587779 883812 2262992

Varkala

Municipality

Total income * * * 1437434 1172734 2610168 Service tax

leviable * * * 45056++ 120792 165848

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.

Chapter IV – Transaction Audit

91

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



92

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 3887.70 646.91

Wheat 289.99 39.15

Kottayam (30 LSGIs)

Rice 239.67 39.88

Wheat 89.91 12.14

Total 738.08 1 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


93

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


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 buses2 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

1 Rice: Quantity-21.5 MT, Value- ` 3.54 lakh; Wheat: Quantity-11 MT, Value - ` 1.49 lakh 2 Semi Low-floor buses of Ashok Leyland 3 Low-floor buses of Volvo Buses India Private Limited


94

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 Project4, 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


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 non-

operational 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 People’s Plan Programme 1998-99. Public Works Subject Committee of the

4 Nodal Agency for implementation of JNNURM


95

View of idling slaughter house and its surroundings

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,

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


96

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


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.

5 Year of commencement not available


97

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, (VINOD RAI)

The Comptroller and Auditor General of India

Appendices

99

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.


100

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 caste-

scheduled 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.

Appendices

101

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.


102

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.

Appendices

103

Appendix II

Rules and policies relating to finance, budget, personnel matters


Provision Authority Applicability

to LSGI

Gist of the provision

Accounts Section 215 of KPR

Act

Sections 294 & 295 of

KM Act

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.

Reporting of loss

due to fraud,

theft or

negligence

Article 297 of Kerala

Financial Code

PRIs &

ULBs

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.

Asset register Kerala Panchayat

Accounts Rules, 1965

and Government order

issued in December

2005

Kerala Municipal

Accounts Manual

PRIs

ULBs

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.

Works manual KPR (Execution of

Public Works) Rules,

1997

KM (Execution of

Public Works and

purchase of materials)

Rules, 1997

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

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.

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

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.


104

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

ULBs

Government or any officer empowered by

Government may inspect any office under the

control of any Panchayat/ Municipality.

External Audit Section 215(3) of KPR

Act, 1994

Section 295(3) of KM

Act, 1994

PRIs

ULBs

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 CAG’s DPC Act, 1971. In

addition, CAG also conducts audit under Sections

14 and 15 of the DPC Act, 1971.

Ombudsman Section 271F to R of

KPR Act

PRIs and

ULBs

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.

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

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.

Right to

Information

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.

Appendices

105

Appendix III

Powers of State Government over LSGIs


Act/Rule/Authority Powers exercised by Government

Section 254 of KPR

Act & Section 565 of

KM Act

Power to frame rules

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.

Section 193 of KPR

Act & Section 64 of

KM Act

Power to dissolve LSGIs

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.

Section 191 of KPR

Act & Section 57 of

KM Act

Power to cancel and suspend a resolution or decision taken by LSGIs

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.

Sections 179,180 &

181 of KPR Act and

Sections 48 & 227 of

KM Act

Power of appointment, cadre control, transfer, etc.

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.

Sections 189 of KPR

Act & 58 of KM Act

Power to issue guidelines and to conduct enquiry

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.


106

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 18857.04 20.63

2210 1049.49 303.03

2217 21051.03 15375.72

2225 5527.15 814.46

2230 5211.79 1789.61

2235 83074.11 470.93

2401 1146.45 187.02

2402 2.52 0.02

2403 0.01 -

2404 1065.00 0.04

2415 1.40 -

2501 4011.12 765.56

2851 5.00 -

Total 141002.11 19727.02

Appendices

107

Appendix V

List of LSGIs which delayed sending AFS to DLFA


Sl.

No.

Name of LSGI & year

of audit

Due date Date of sending Delay in

months

Grama Panchayats

1 Sulthan Bathery 2008-09 31 July 2009 30 September 2009 2

2 Maloor 2005-06 31 July 2006 20 February 2007 7

3 Kadamboor 2006-07 31 July 2007 14 November 2007 3

4 Payyavoor 2006-07 31 July 2007 23 October 2007 3

5 Vengappally 2007-08 31 July 2008 20 April 2009 9

6 Padinjarathara 2007-08 31 July 2008 20 January 2009 6

7 Karimba 2006-07 31 July 2007 29 January 2008 6

8 Okkal 2006-07 31 July 2007 27 February 2008 7

9 Pullur Periya 2009-10 31 July 2010 27 August 2010 1

10 Alakode 2006-07 31 July 2007 23 May 2008 10

11 Mayyil 2008-09 31 July 2009 11 November 2009 3

12 Mangalpadi 2005-06 31 July 2006 11 December 2007 16

13 Panathadi 2005-06 31 July 2006 08 November 2008 27

14 Thariyodu 2007-08 31 July 2008 15 July 2009 11

Source: Supplementary Audit Report on the accounts of LSGIs


108

Appendix VI

List of LSGIs which did not prepare monthly accounts


Sl. No. Name of LSGI & year of Audit

Grama Panchayats

1 Vadanappally 2004-05

2 Thalikkulam 2005-06

3 Thenkurussi 2007-08

4 Kadamboor 2006-07

5 Payyavoor 2006-07

6 Kariyad 2006-07

7 Vengappally 2007-08

8 Karimba 2006-07

9 Eruthenpathy 2007-08

10 Ancharakandy 2007-08

11 Cheranallore 2007-08

12 Pullur Periya 2009-10

13 Alakode 2006-07

14 Kulukallor 2007-08

15 Peralassery 2007-08

16 Mayyil 2008-09

17 Kolachery 2006-07

18 Maloor 2005-06

19 Puthunagaram 2008-09

20 Kannadi 2006-07

Block Panchayat

1 Taliparamba 2006-07

TOTAL 21


Appendices

109

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

Non-

reconciliation

of cash book

balance with

pass book

balance

Non-

conducting of

physical

verification of

cash at the

end of every

month

Grama Panchayats

1 Sulthan Bathery

2008-09 1 1 1 1 1

2 Vadanappally 2004-05 1 1 1

3 Thalikkulam 2005-06 1 1 1

4 Thenkurussi 2007-08 1 1 1 1

5 Kadamboor 2006-07 1 1 1

6 Payyavoor 2006-07 1 1 1

7 Chelora 2007-08 1 1 1 1

8 Kariyad 2006-07 1 1 1 1

9 Mavoor 2007-08 1 1 1 1

10 Vengappally 2007-08 1 1 1 1

11 Padinjarathara 2007-08 1 1 1

12 Karimba 2006-07 1 1 1

13 Karimpuzha 2005-06 1 1 1

14 Vellinezhi 2008-09 1 1 1 1

15 Eruthenpathy 2007-08 1 1 1

16 Keezhoor Chavassery

2007-08 1 1

17 Ancharakandy 2007-08 1 1 1

18 Cheranallore 2007-08 1 1

19 Pullur Periya 2009-10 1 1 1


110

Appendix VII (Contd…)

Sl.

No.


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

Non-

conducting of

physical

verification of

cash at the

end of every

month

20 Karivalloor – Peralam

2006-07 1 1 1 1 1

21 Alakode 2006-07 1 1 1 1

22 Kulukallor 2007-08 1 1

23 Peralassery 2007-08 1 1

24 Mayyil 2008-09 1 1 1 1

25 Kolachery 2006-07 1 1 1

26 Mathilakom 2006-07 1 1 1 1

27 Thirumarady 2005-06 1 1 1 1

28 Chendamangalam

2010-11 1 1 1 1

29 Sreemulanagaram

2005-06 1 1 1 1

30 Chazhoor 2007-08 1 1 1 1 1

31 Pulimath 2008-09 1 1 1 1 1

32 Velur 2006-07 1 1

33 Chowannur 2008-09 1 1 1

34 Nagaroor 2008-09 1 1 1

35 Mangalpadi 2005-06 1 1 1 1

36 Kuttikol 2007-08 1 1 1

37 Panathadi 2005-06 1 1 1

38 Omallur 2005-06 1 1 1 1

39 Puramattom 2004-05 1 1 1 1 1

40 Panavally 2007-08 1 1 1

Appendices

111

Appendix VII (Concld.)


Sl.

No.


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

Non-

conducting of

physical

verification of

cash at the

end of every

month

41 Ramankari 2008-09 1

42 Thariyodu 2007-08 1 1 1

43 Veliyam 2008-09 1 1 1 1

44 Maloor 2005-06 1 1

45 Vandazhy 2004-05 1 1 1

46 Puthunagaram 2008-09 1

47 Pirayiri 2006-07 1 1 1 1

48 Kannadi 2006-07 1 1 1

49 Mynagapally 2009-10 1 1 1 1

50 Chottanikkara 2010-11 1

Block Panchayats

1 Malampuzha 2008-09 1 1

2 Taliparamba 2006-07 1 1 1

Municipality

1 Mattannur 2004-05 1 1 1 1

TOTAL 20 47 45 31 31


112

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. Sulthan Bathery 2008-09 1 1

2. Thenkurussi 2007-08 1 1

3. Payyavoor 2006-07 1 1

4. Chelora 2007-08 1 1

5. Kariyad 2006-07 1 1

6. Mavoor 2007-08 1 1 1

7. Padinjarathara 2007-08 1 1

8. Vellinezhi 2008-09 1

9. Keezhoor-Chavassery 2007-08 1

10. Cheranallore 2007-08 1

11. Okkal 2006-07 1

12. Pullur Periya 2009-10 1 1

13. Alakode 2006-07 1 1

14. Kulukallor 2007-08 1 1

15. Peralassery 2007-08 1 1

16. Mayyil 2008-09 1 1 1

17. Kolachery 2006-07 1 1 1

18. Pulimath 2008-09 1 1 1 1

19. Chowannur 2008-09 1

20. Nagaroor 2008-09 1 1 1 1

21. Noolpuzha 2009-10 1

22. Mangalpadi 2005-06 1 1

23. Kuttikol 2007-08 1 1

24. Panathadi 2005-06 1 1

25. Panavally 2007-08 1 1 1

26. Ramankari 2008-09 1

27. Cherthala South 2007-08 1 1

28. Thariyodu 2007-08 1 1

29. Perayam 2008-09 1 1

30. Veliyam 2008-09 1 1 1 1

31. Mynagapally 2009-10 1 1 1 1

Appendices

113

Appendix VIII (Concld.)


Audit

Name of Registers

Advance Asset Stock Deposit

32. Pirayiri 2006-07 1

Block Panchayats

1. Thodannur 2007-08 1

2. Malampuzha 2008-09 1 1

3. Taliparamba 2006-07 1 1

Municipalities

1. Mattannur 2004-05 1 1 1

2. Thalassery 2008-09 1

TOTAL 26 17 10 24



114

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)


Audit

Nature of defect

Budget not in

prescribed

format

Delay in

presentation of

Budget

Inadequate Budget

discussion

Grama Panchayats

1. Sulthan Bathery 2008-09 1 1

2. Vatanappally 2004-05 1 1

3. Thalikkulam 2005-06 1 1

4. Thenkurussi 2007-08 1 1

5. Kadamboor 2006-07 1

6. Chelora 2007-08 1 1

7. Kariyad 2006-07 1 1 1

8. Mavoor 2007-08 1 1 1

9. Vengappally 2007-08 1 1

10. Padinjarathara 2007-08 1 1 1

11. Vellinezhi 2008-09 1 1

12. Eruthenpathy 2007-08 1 1

13. Keezhoor-Chavassery 2007-08 1 1

14. Ancharakandy 2007-08 1 1

15. Cheranallore 2007-08 1 1

16. Okkal 2006-07 1 1

17. Pullur Periya 2009-10 1 1

18. Karivalloor-Peralam 2006-07 1 1

19. Alakode 2006-07 1 1

20. Kulukallor 2007-08 1 1

21. Peralassery 2007-08 1 1

22. Mayyil 2008-09 1 1

23. Kolachery 2006-07 1 1

24. Chottanikkara 2010-11 1 1

25. Thirumarady 2005-06 1 1

26. Chendamangalam 2010-11 1 1

Appendices

115

Appendix IX (Concld.)


Audit

Nature of defect

Budget not in

prescribed

format

Delay in

presentation of

Budget

Inadequate Budget

discussion

27. Sreemulanagaram 2005-06 1 1

28. Chazhoor 2007-08 1 1

29. Pulimath 2008-09 1 1

30. Velur 2006-07 1 1

31. Chowannur 2008-09 1 1

32. Noolpuzha 2009-10 1 1

33. Mangalpadi 2005-06 1 1

34. Kuttikol 2007-08 1 1

35. Panathadi 2005-06 1 1

36. Omallur 2005-06 1 1 1

37. Panavally 2007-08 1 1

38. Ramankari 2008-09 1 1

39. Cherthala South 2007-08 1 1

40. Thariyodu 2007-08 1 1

41. Perayam 2008-09 1 1

42. Mynagapally 2009-10 1 1

43. Maloor 2005-06 1

44. Vandazhy 2004-05 1 1 1

45. Puthunagaram 2008-09 1 1 1

46. Pirayiri 2006-07 1 1 1

47. Kannadi 2006-07 1 1

48. Payyavoor 2006-07 1 1

Block Panchayats

1. Taliparamba 2006-07 1 1 1

2. Thodannur 2007-08 1 1

3. Malampuzha 2008-09 1 1 1

4. Pallom 2009-10 1 1 1

Municipality

1. Perumbavoor 2007-08 1 1

Corporation

1. Kochi Corporation 2007-08 1 1

TOTAL 12 52 52


116

Appendix X

List of institutions selected for review on ‘Implementation of MGNREGS’


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

Appendices

117

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


118

Appendix XII

Details of Inspection conducted


Year State level District level Block level

No. of

works to be

inspected as

per norms

No. of

works

inspected

No. of works to

be inspected as

per norms

No. of

works

inspected

No. of works

to be

inspected as

per norms

No. of

works

inspected

2007-08 345 35 1010 877 10111 3552

2008-09 1097 110 7213 3570 42999 34489

2009-10 2544 128 18234 7040 183848 151212

2010-11 2982 212 24491 11542 247482 192816

2011-12 3174 140 32617 13480 331181 225856

Total 10142 625 83565 36509 815621 607925

Source: CRD figures

Appendices

119

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

Position of Improper 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 - - - 2 - - -

2 GPs 2 - 2 5 1 2 -

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

1

2. GPs 10 Maintained 10 2 15 6 6


120

Appendix XIV

Taxes levied by TMC


Revenue items Manner of levy

Property tax

Recurring tax levied on buildings based on its Annual

Rental Value, payable half-yearly.

Profession tax

Recurring tax payable by employees based on their

salary, and also by professionals, traders, institutions,

etc. The tax is payable half-yearly.

Entertainment tax

Tax levied by Local Bodies on entertainments including

cinemas, exhibitions, amusements, games, sports, etc.,

as a percentage of the price of tickets sold.

Advertisement tax Tax levied on advertisements displayed on boards,

hoardings, banners, etc., in municipal area.

Appendices

121

Appendix XV

Collection efficiency of tax revenue during 2007-08 to 2011-12

(Reference: Paragraph 3.2.3; Page 59) (` in lakh)

Source: Budget documents and DCB of the respective years

Year Item Budget

estimate Demand Collection

Percentage

of

collection

2007-08

Property tax 1456.27 3754.30 1945.48 51.82

Profession tax 872.60 1447.18 1443.24 99.73

Entertainment tax 380.01 291.98 291.98 100

Advertisement

tax

191.97 33.46 30.16 90.14

2008-09

Property tax 2400.00 4053.60 2103.40 51.89

Profession tax 1500.00 1700.39 1647.77 96.91


Advertisement

tax

50.00 40.49 37.18 91.83

2009-10

Property tax 2550.00 4511.56 2395.05 53.09

Profession tax 1829.00 2230.31 1861.52 83.46


Advertisement

tax

60.00 68.42 65.11 95.16

2010-11

Property tax 4400.00 3902.74 2437.69 62.46

Profession tax 2790.00 2340.95 2027.05 86.59


Advertisement

tax

90.00 80.84 77.53 95.91

2011-12

Property tax 5000.00 5521.68 3441.70 62.33

Profession tax 2950.00 2835.98 2601.84 91.74


Advertisement

tax

100.00 127.22 99.41 78.14


122

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.

Building details

1 Buildings in Medical College campus (44 numbers)

2 Buildings in Mar Ivanios College campus (13 numbers)

3 Buildings of State Government/University (52 numbers)

4 VSSC Staff quarters (Nos. 1/1405 to 1516, & 1/1662)

5 12/1490 -PMG Office

6 12/1491 -PMG staff office



9 12/1484 -P&T Employees Co-operative Society

10 12/1474 -Post and Telegraph Office

11 12/1485 -Telecommunication Canteen

12 12/1486 -Telecommunication Store

13 12/1487 -Telecommunication Office

14 12/1488 -Telecommunications

15 12/1489 -Telecommunications

16 11/2558 to 2596 & 2597 to 2701 - Telecommunication Quarters

Appendices

123

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 (`)

Period Arrears up

to 2011-12

(`)

1 24/1836 P.S.Mohandas 22,479 2010-11 I 44,958

2 24/1036 Sajad &Najimse 27,300 2008-09 II 2,32,050

3 24/1037 Sajad &Najimse 3,971 2008-09 II 33,754

4 25/3329UA Rema Gopan 1,676 2000-01 II 27,654

5 25/3329UA1 Rema Gopan 31,064 2000-01 II 5,12,556

6 26/571(2) Telecom Tower 22,611 2010-11 I 45,222

7 25/2848UA Syamala Kurup 13,846 1999-00 I 2,49,228

8 25/3085UA T.Anilkumar 6,435 2010-11 II 9,653

9 24/955UA Nirmala thankam 2,23,830 2010-11 II 3,35,745

10 4/1602(1) G.Sukesh 56,377 2007-08 I 5,63,771

11 4/1602(2) G.Sukesh 43,484 2007-08 I 4,34,840

12 4/1602(3) G.Sukesh 57,162 2007-08 I 5,71,620

13 4/1602(4) G.Sukesh 57,162 2007-08 I 5,71,620

14 4/597(8) Anand Victor 2,599 2006-07 I 28,590

15 4/597(8) P.G.Lalitha 2,605 2008-09 II 22,143

16 4/597(8) Ramesh GR & Deepa

Nair

7,914 2005-06 I 94,968

Total 37,78,372

CAG Report on local Governance in Kerala 2011-12

Documents

performance audit

supplementary audit

audit observations

categories of lsgis

transaction audit paragraphs

inclusion of audit findings

director of local fund

individual lsgis plans