Training Module on 'Audit of ULBs' Session 7 Part II1 This part deals with accounting system of : stores; Health and sanitation; Special Fund; Financial.

Training Module on 'Audit of ULBs' Session 7 Part IITraining Module on 'Audit of ULBs' Session 7 Part II 11

•This part deals with accounting system This part deals with accounting system of :of :stores;stores;Health and sanitation;Health and sanitation;Special Fund;Special Fund;Financial statement;Financial statement;Balance Sheet; andBalance Sheet; andAudit points.Audit points.

Session 7: Part (ii)Session 7: Part (ii)


Accounting system Accounting system of Stores of Stores


IntroductionIntroduction

Municipalities / corporations Municipalities / corporations empower respective Departments to empower respective Departments to maintain their own stores viz.maintain their own stores viz. Public Works,Public Works, Health-Sanitation,Health-Sanitation, Health-Medical,Health-Medical, Water Works,Water Works, Workshop for Vehicles and Machinery Workshop for Vehicles and Machinery

repairs andrepairs and Public Lighting.Public Lighting.

Next


IntroductionIntroduction

The financial transactions carried out The financial transactions carried out by Stores will arise on account of:by Stores will arise on account of: Receipt and refund of Earnest Money Receipt and refund of Earnest Money

Deposit (EMD) Deposit (EMD) Payment of advance to the contractor Payment of advance to the contractor Delivery of material and its documentation Delivery of material and its documentation Consumption of materialsConsumption of materials Payments to SuppliersPayments to Suppliers Adjustments of Security DepositsAdjustments of Security Deposits Write-off / disposal of obsolete, scrap and Write-off / disposal of obsolete, scrap and

unusable materials. unusable materials.


Accounting records and procedures for Stores- Accounting records and procedures for Stores- accounting of receipt of EMDaccounting of receipt of EMD

The Stores shall prepare a Summary of The Stores shall prepare a Summary of Daily Collection which shall be Daily Collection which shall be forwarded to the Accounts Department.forwarded to the Accounts Department.

On receipt of Summary of Daily On receipt of Summary of Daily collections, the Accounts Department collections, the Accounts Department shall pass the following entry:shall pass the following entry: (figures are (figures are illustrative)illustrative)

Code of Account

Accounting Entry Dr./ Cr. Debit Amt. (Rs.)

Credit Amt. (Rs.)

Books to be entered into

450-21-(a)340-10-(a)

Bank Account * To From Contractors / Suppliers – EMD Stores

Dr.Cr.

500500

Cash Book, Ledger

Next


Accounting procedures for receipt of Accounting procedures for receipt of EMDEMD

The Stores shall prepare a Summary of The Stores shall prepare a Summary of Daily Collection which shall be Daily Collection which shall be forwarded to the Accounts Department.forwarded to the Accounts Department.

On receipt of Summary of Daily On receipt of Summary of Daily collections, the Accounts Department collections, the Accounts Department shall pass the following entry: shall pass the following entry: (figures are (figures are illustrative)illustrative)

Code of Account

Accounting Entry Dr./ Cr.

Debit Amt. (Rs.)

Credit Amt. (Rs.)


450-21-(a)340-10-(a)

Bank Account * To From Contractors /Suppliers – EMD Stores

Dr.Cr.

500500

Cash Book, Ledger


Accounting procedures forAccounting procedures foradditional Security Deposit receivedadditional Security Deposit received

Where the terms of agreement Where the terms of agreement

entered into provide forentered into provide for collection of a certain percentage of collection of a certain percentage of

Security Deposit in advance,Security Deposit in advance,

a receipt shall be issued to the a receipt shall be issued to the

successful bidder for the amount successful bidder for the amount

collected. collected.


Recording of advance paid to Recording of advance paid to supplierssuppliers

As per the terms of agreement, As per the terms of agreement,

advance may be provided to the advance may be provided to the

supplier.supplier.

On receipt of an application for grant On receipt of an application for grant

of advance, the Stores shall prepare of advance, the Stores shall prepare

a Payment Order and forward it to a Payment Order and forward it to

the Accounts Department. the Accounts Department.


Receipt of materialsReceipt of materials As per the terms of the agreement As per the terms of the agreement

with the Supplier, the materials shall with the Supplier, the materials shall be delivered to the ULBs.be delivered to the ULBs.

The Stores shall prepare a Material The Stores shall prepare a Material Receipt Note.Receipt Note.

From the Material Receipt Note, the From the Material Receipt Note, the Stores shall record the receipt of Stores shall record the receipt of materials in the Stores Ledger.materials in the Stores Ledger.


Receipt of materialsReceipt of materials

On receipt of bill, the Stores shall On receipt of bill, the Stores shall verifyverify the bill received with the Material the bill received with the Material

Receipt Note andReceipt Note and record it in the Register of Bills for record it in the Register of Bills for

Payment. Payment.


Recording of liability due in respect ofRecording of liability due in respect ofmaterials purchasedmaterials purchased

On acceptance and approval of the On acceptance and approval of the material supplied and on receipt of material supplied and on receipt of the processed bill from the Stores the processed bill from the Stores Department, the Accounts Department, the Accounts Department shall pass the entry Department shall pass the entry shown in the next slide:shown in the next slide:


Recording of liability due in respect Recording of liability due in respect ofof

materials purchasedmaterials purchased

Code of Account


Debit Amt. (Rs.)

Credit Amt. (Rs.)


430-10-(a)

350-10-(a)

460-40-(a)

Stock in Hand -Purchase of Materials Stores To Creditors – Suppliers/Contractors Stores To Advance to Suppliers & Contractors Stores

Dr.

Cr.

Cr.

4,000

3,800

200

Journal Book, Ledger

(figures are illustrative) (figures are illustrative)


Recording of payment made to Recording of payment made to suppliersupplier On receipt of Payment Order On receipt of Payment Order

together with the supporting together with the supporting

documents and on making documents and on making

payment and passing of requisite payment and passing of requisite

entries the Accounts Department entries the Accounts Department

shall intimate the Stores of the shall intimate the Stores of the

payment made.payment made.


Valuation of Closing stock at Valuation of Closing stock at period-endperiod-end At the end of every accounting At the end of every accounting

period, the Stores shall send a period, the Stores shall send a Statement of Closing Stock.Statement of Closing Stock.

Next


Valuation of Closing stock at Valuation of Closing stock at period-endperiod-end Such a statement shall consist of Such a statement shall consist of

two parts:two parts: Part A showsPart A shows

the items for which the invoices/bills the items for which the invoices/bills received from the suppliers have already received from the suppliers have already been sent by the Stores to the Accounts been sent by the Stores to the Accounts Department.Department.

Part B consists ofPart B consists of the items for which the materials have the items for which the materials have

been received and accepted but for which been received and accepted but for which the invoices/bills have not been processed the invoices/bills have not been processed as yet.as yet.

This Statement shall be drawn from the This Statement shall be drawn from the entries made in the Stores Ledger. entries made in the Stores Ledger.

Next


Valuation of Closing stock at Valuation of Closing stock at period-endperiod-end

At the end of the financial year, a At the end of the financial year, a reconciliation shall be carried out by reconciliation shall be carried out by the Stores-in-charge to match the the Stores-in-charge to match the physical stock with the book stock.physical stock with the book stock.

Discrepancies identified shall be Discrepancies identified shall be incorporated in the Statement of incorporated in the Statement of Closing Stock. Closing Stock.

Balances in various accounts of the Balances in various accounts of the item-wise Stores Ledger shall be item-wise Stores Ledger shall be extracted and valued as per First-in-extracted and valued as per First-in-first Out (FIFO) Method.first Out (FIFO) Method.


Recording of Closing stockRecording of Closing stock On the basis of Statement of Closing Stock On the basis of Statement of Closing Stock

in prescribed form received from Stores, in prescribed form received from Stores, for recording closing stock, the Accounts for recording closing stock, the Accounts Department shall pass the following entry:Department shall pass the following entry:(figures are illustrative)(figures are illustrative)

Code of Account


Debit Amt. (Rs.)

Credit Amt. (Rs.)


230-30-(a)230-(b)412-(b)460-40-(a)430-10-(a)430-10-(a)430-10-(a)

Consumption of Stores(1)Repairs and Maintenance (2)Capital work in progress(3)Advance to Contractors- Material Issued to Contractors/Stores (4)Stock in Hand –Stores Closing Stock To Stock in Hand–Purchase of Materials Stores To Stock in Hand - Stores Opening Stock

Dr.Dr.Dr.Dr.

Dr.Cr.

Cr.

1,4003,2002,200 400

1,7008,500

400

Journal Book, Ledger


Recording of Closing stockRecording of Closing stock

The closing stock at the end of an The closing stock at the end of an

accounting period shall beaccounting period shall be the opening stock of the subsequent the opening stock of the subsequent

accounting period for which the accounting period for which the

Accounts Department shall pass the Accounts Department shall pass the

necessary entry on the first day of the necessary entry on the first day of the

subsequent accounting period.subsequent accounting period.


Disposal of material Disposal of material The unutilised / unusable material in The unutilised / unusable material in

the Stores of the municipalities / the Stores of the municipalities / corporations may be disposed of as corporations may be disposed of as per the principles framed by the per the principles framed by the concerned municipalities / concerned municipalities / corporations.corporations.

An entry for the material disposed An entry for the material disposed shall be made in the records shall be made in the records maintained at the Stores.maintained at the Stores.


Recording of receipt of sale Recording of receipt of sale proceeds proceeds

The Stores shall prepare a Summary of The Stores shall prepare a Summary of Daily Collection for sale proceeds and Daily Collection for sale proceeds and forward it along with the collection to forward it along with the collection to the Accounts Department.the Accounts Department. An example is given in the next slide: An example is given in the next slide:


Recording of receipt of sale Recording of receipt of sale proceeds proceeds

(an amount of Rs 600 realised against the sale of stores (an amount of Rs 600 realised against the sale of stores with a recorded value of Rs 500). On receipt of Summary with a recorded value of Rs 500). On receipt of Summary of Daily Collections, the Accounts Department shall pass of Daily Collections, the Accounts Department shall pass the entry as shown in the following example:the entry as shown in the following example:

Say, an amount of Rs 600 is realised against the sale of Say, an amount of Rs 600 is realised against the sale of stores with a recorded value of Rs 500) (figures are stores with a recorded value of Rs 500) (figures are illustrative)illustrative)

Code of Account


Debit Amt. (Rs.)

Credit Amt. (Rs.)


450-21-(a)350-90-(a)

Bank AccountTo Sale Proceeds from Stores

Dr.Cr.

600600

Cash Book, Ledger


Write-off of materialWrite-off of material

The pilfered / damaged material in The pilfered / damaged material in

the Stores of the the Stores of the

municipalities/corporations may bemunicipalities/corporations may be written-off as per the principle framed written-off as per the principle framed

by the concerned by the concerned

municipalities/corporations.municipalities/corporations.


Recording of write-off of materialRecording of write-off of material An entry for the material written-off An entry for the material written-off

shall be made in the records shall be made in the records maintained at the Stores. The maintained at the Stores. The Accounts Department shall record the Accounts Department shall record the entry as shown in the table below :entry as shown in the table below :

Code of Account

Accounting Entry Dr./ Cr. Debit Amt. (Rs.)

Credit Amt. (Rs.)


270-40-(a)

430-10-(a)

Assets Written off -Stores To Stock in Hand –Stores Opening Stock

Dr.

Cr.

50

50

Journal Book, Ledger & Stores Register


Procedure followed in West Bengal* Procedure followed in West Bengal* MunicipalitiesMunicipalities

** (This is to be adopted as per State Specific Scenario) (This is to be adopted as per State Specific Scenario) For Stock and Stores Account, For Stock and Stores Account,

register shall be kept in prescribed register shall be kept in prescribed form with any additional details or form with any additional details or columns which may be found columns which may be found requisite.requisite.

A separate set of pages shall be A separate set of pages shall be assigned to each description of assigned to each description of stock.stock.

Next


Procedure followed in West Bengal* Procedure followed in West Bengal* MunicipalitiesMunicipalities

** (This is to be adopted as per State Specific Scenario) (This is to be adopted as per State Specific Scenario) The figures entered in column The figures entered in column

‘balance’ shall be certified half-‘balance’ shall be certified half-yearly by the competent authority.yearly by the competent authority.

If any excess or deficiency be If any excess or deficiency be found the register shall be found the register shall be corrected accordingly. corrected accordingly.


Internal ControlInternal Control

Budget monitoring shall be on Budget monitoring shall be on

accrual basis rather than payment accrual basis rather than payment

basis.basis. The Head of the Accounts The Head of the Accounts

Department shall ensure that all Department shall ensure that all

the purchase bills/invoices were the purchase bills/invoices were

journalised before release of the journalised before release of the

payments. payments. Next


Internal ControlInternal Control At the end of the financial year,At the end of the financial year,

the Stores-in-charge,the Stores-in-charge, the Head of the Accounts Department the Head of the Accounts Department

andand the Municipal Chief Auditor shallthe Municipal Chief Auditor shall

physically verify the stock lying in physically verify the stock lying in stores andstores and

compare it with the stock as per the compare it with the stock as per the book records.book records.

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In case of any difference,In case of any difference, appropriate remedial steps as appropriate remedial steps as

prescribed by the concerned prescribed by the concerned municipalities / corporations shall be municipalities / corporations shall be taken.taken.

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Internal ControlInternal Control The Stores-in-charge shall ensureThe Stores-in-charge shall ensure

availability of adequate budget availability of adequate budget allocation before procuring any allocation before procuring any material,material,

after considering all commitments after considering all commitments made against the budget allocation.made against the budget allocation.

Next


Internal ControlInternal Control At the time of issue of any material At the time of issue of any material

to the Departments, the Stores-in-to the Departments, the Stores-in-charge shall ensure thatcharge shall ensure that

there is an adequate budget provision there is an adequate budget provision in respect of that department. in respect of that department.

Next


Internal ControlInternal Control The Head of the Accounts The Head of the Accounts

Department shall ensure thatDepartment shall ensure that all the dues recoverable including all the dues recoverable including

advance provided to supplier has advance provided to supplier has been recoveredbeen recovered

before making the final payment to before making the final payment to the supplier.the supplier.

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Further, it should be ensured thatFurther, it should be ensured that only net amount has been paid to the only net amount has been paid to the

supplier, as may be applicable to the supplier, as may be applicable to the materials actually received or materials actually received or accepted.accepted.

Next


Internal ControlInternal Control It shall be ensured thatIt shall be ensured that

the Payment Order provides reference the Payment Order provides reference to the Stores Ledger.to the Stores Ledger.

The Stores-in-charge shall ensure The Stores-in-charge shall ensure thatthat materials for which bills have been materials for which bills have been

received but not forwarded to the received but not forwarded to the Accounts Department are stated Accounts Department are stated separately in the Statement of Closing separately in the Statement of Closing Stock.Stock.

Next


Internal ControlInternal Control The Chief Executive Officer/Head of The Chief Executive Officer/Head of

the concerned ULB shallthe concerned ULB shall specify appropriate calendar of specify appropriate calendar of

returns / reports for monitoring.returns / reports for monitoring. All Reconciliation Statements shall All Reconciliation Statements shall

bebe certified by the Head of the Accounts certified by the Head of the Accounts

Department andDepartment and verified by the concerned Municipal verified by the concerned Municipal

Chief Auditor. Chief Auditor.


Presentation in the financial Presentation in the financial statementsstatements

The various heads of accounts used The various heads of accounts used for the accounting of Stores shall befor the accounting of Stores shall be reflected in the Financial Statementsreflected in the Financial Statements

All such Financial Statements and All such Financial Statements and schedules should beschedules should be affixed with signature and seal of affixed with signature and seal of

designated authorities.designated authorities.


Accounting System Accounting System of Health and of Health and

SanitationSanitation


Introduction Introduction

The Health Department isThe Health Department is primarily involved in operating the primarily involved in operating the

hospitals, dispensaries & maternity hospitals, dispensaries & maternity homes andhomes and

in monitoring sanitation and other in monitoring sanitation and other public health related activities, within public health related activities, within the limits of the ULBs.the limits of the ULBs.

Next


Main sources of incomes earned Main sources of incomes earned by the Health Departmentby the Health Department

Fees and User Charges:Fees and User Charges: Fees from Medical Institutions Fees from Medical Institutions Registration Fees for PatientsRegistration Fees for Patients Recovery of Cost of MedicinesRecovery of Cost of Medicines Examination Charges Examination Charges Ambulance Charges Ambulance Charges License fees from Butchers and License fees from Butchers and

Traders of MeatTraders of Meat Disposal Charges (Solid Waste) etc.Disposal Charges (Solid Waste) etc.

Sale & Hire Charges:Sale & Hire Charges: Sale of Garbage/Manure Sale of Garbage/Manure


Expenses incurred by Health Deptt.Expenses incurred by Health Deptt.

Following is an illustrative list of the Following is an illustrative list of the expenses incurred in respect of the expenses incurred in respect of the Health Department:Health Department: Sanitation related expenses e.g.Sanitation related expenses e.g.

Solid Waste Management related Solid Waste Management related expenses.expenses.

Own Programmes Own Programmes Consumption of Health Stores – Solid Consumption of Health Stores – Solid

Waste Management, etc.Waste Management, etc.Next


Expenses incurred by Health Expenses incurred by Health Deptt.Deptt.

Medical related expenses, repairs and Medical related expenses, repairs and

maintenance – Medical/Health related maintenance – Medical/Health related

assets.assets.

Family welfare expenses, pulse polio Family welfare expenses, pulse polio

vaccination expenses, aids awareness vaccination expenses, aids awareness

expenses, etc.expenses, etc.


Accounting Principles for health and Accounting Principles for health and sanitationsanitation

Revenue in respect of the following Revenue in respect of the following shall be recognised on actual shall be recognised on actual receipt: receipt: Hospital fees, diagnostic centre fees Hospital fees, diagnostic centre fees

and dispensaries fees and dispensaries fees Hospital training fees Hospital training fees Rent and/or hire charges in respect of Rent and/or hire charges in respect of

ambulance etc.ambulance etc. Sale of fertilisers and waste etc.Sale of fertilisers and waste etc. Next



Revenue in respect of Trade License Revenue in respect of Trade License Fees shall be accrued in the year to Fees shall be accrued in the year to which it pertains. which it pertains.

Revenue in respect of rent of Revenue in respect of rent of equipment provided to the equipment provided to the contractors, deducted from their contractors, deducted from their bills, shall be recognised as and bills, shall be recognised as and when the deductions are made. when the deductions are made.

Next



All revenue expenditures incurred All revenue expenditures incurred shall beshall be recognised on admission of the bills recognised on admission of the bills

for payment by the concerned ULB.for payment by the concerned ULB.

Provision shall beProvision shall be made at the year-end for all bills made at the year-end for all bills

received up to a cut off date (30th received up to a cut off date (30th April of the next financial year).April of the next financial year).

Next


Accounting Procedure for health and Accounting Procedure for health and sanitationsanitation

The collection in respect of the The collection in respect of the medical fees shall be made at the medical fees shall be made at the respective units.respective units.

A Receipt shall be issued to the A Receipt shall be issued to the person making the payment at the person making the payment at the respective units.respective units.

Next



The amount collected by the units The amount collected by the units shall beshall be

deposited in a Designated Bank deposited in a Designated Bank Account orAccount or

forwarded to the Ward Office orforwarded to the Ward Office or

to the Accounts Department.to the Accounts Department.

Next



Recording of collection of medical Recording of collection of medical fees.fees. On the basis of the Summary of Daily On the basis of the Summary of Daily

Collection received from the various Collection received from the various Units, Ward Offices, Health Department, Units, Ward Offices, Health Department, etc., the Accounts Department shall etc., the Accounts Department shall pass entry as shown in the table below: pass entry as shown in the table below: (figures are illustrative)(figures are illustrative)Code of

AccountAccounting Entry Dr./

Cr.Debit Amt.(Rs.)

Credit Amt.(Rs.)


450-21-(a)140- (b)

Bank AccountTo_____ Charges

Dr.Cr.

10,00010,000

Cash Book, Ledger

Next


Accounting Procedure for health & Accounting Procedure for health & sanitationsanitation

The income in respect of trade The income in respect of trade license fees shall belicense fees shall be recognised on accrual basis.recognised on accrual basis.

It shall beIt shall be accrued in the year to which it pertains accrued in the year to which it pertains

andand where the demand is raised based on where the demand is raised based on

applicable Acts of the concerned State.applicable Acts of the concerned State.


Accounting Procedure for health & Accounting Procedure for health & sanitationsanitation

The procedure and accounting The procedure and accounting entries in respect ofentries in respect of demand raised for trade license fees,demand raised for trade license fees, collections made,collections made, provisioning for unrealised fees, etc.provisioning for unrealised fees, etc.

shall be similar to the Accounting shall be similar to the Accounting procedure for Incomes.procedure for Incomes.


Expenditures pertaining to health & Expenditures pertaining to health & sanitationsanitation

The accounting for expenditures The accounting for expenditures pertainingpertaining to hospitals,to hospitals, dispensaries,dispensaries, sanitation,sanitation, scavenging, etc.,scavenging, etc.,

shall be same as Public Works and shall be same as Public Works and Stores.Stores.



A quarterly reconciliation shall beA quarterly reconciliation shall be carried out in respect of the amount carried out in respect of the amount

collected under the various heads based collected under the various heads based

onon the Functional Income Subsidiary Ledger the Functional Income Subsidiary Ledger

andand

the Collection Registerthe Collection Register

maintained at the Health Department.maintained at the Health Department.Next


Internal ControlInternal Control The officers designated by the ULB The officers designated by the ULB

for operating the Designated for operating the Designated Hospital Bank Account shallHospital Bank Account shall co-ordinate with the banks on a daily co-ordinate with the banks on a daily

basis andbasis and ascertain the status of the cheques ascertain the status of the cheques

deposited by them.deposited by them.

Next



The Chief Executive Officer/Head of The Chief Executive Officer/Head of the ULB shallthe ULB shall specify appropriate calendar of returns specify appropriate calendar of returns

for monitoring.for monitoring. All Reconciliation Statements shall All Reconciliation Statements shall

bebe certified by the Head of the Accounts certified by the Head of the Accounts

Department andDepartment and verified by the Municipal Chief Auditor. verified by the Municipal Chief Auditor.


Special FundSpecial Fund

Illustrative list of the Special Funds Illustrative list of the Special Funds that may be created by the ULB:that may be created by the ULB:

Development Funds Development Funds Fire Brigade FundFire Brigade Fund Road Fund Road Fund Water Supply Reserve Fund Water Supply Reserve Fund Tree Authority Fund, etc.Tree Authority Fund, etc. City Development FundsCity Development Funds Solid Waste Management FundSolid Waste Management Fund

Next


Special FundSpecial FundEmployee FundsEmployee Funds::

Pension Fund Pension Fund General Provident Fund / General Provident Fund /

Contributory Provident Fund Contributory Provident Fund Welfare Fund, etc. Welfare Fund, etc. Gratuity / Leave encashment Fund Gratuity / Leave encashment Fund

Sinking Funds:Sinking Funds: Asset Replacement FundAsset Replacement Fund Sinking Fund etc Sinking Fund etc


Accounting Principles for Special Accounting Principles for Special Fund Fund

Special Funds shall be Special Funds shall be treated as a liability on their creation.treated as a liability on their creation.

Income on investments made from Income on investments made from Special Fund shall beSpecial Fund shall be recognised and credited to Special recognised and credited to Special

Fund, whenever accrued.Fund, whenever accrued.

Next


Accounting Principles for Special Accounting Principles for Special FundFund

Any expenditure of a revenue Any expenditure of a revenue nature incurred specifically on nature incurred specifically on scheme/project for which a Special scheme/project for which a Special Fund has been created, shall beFund has been created, shall be charged to that Special Fund.charged to that Special Fund.


Accounting procedure for Creation Accounting procedure for Creation ofof

Special FundSpecial Fund Special Funds are created as an Special Funds are created as an

appropriation from the Municipal appropriation from the Municipal Fund.Fund.

Each of the Special Funds shall be Each of the Special Funds shall be represented by a separate Bank represented by a separate Bank Account.Account.

Next


Accounting procedure for Creation of Special Accounting procedure for Creation of Special FundFund

On creation of the fund,On creation of the fund, money shall be transferred from the money shall be transferred from the

Main Bank Account to Special Fund Main Bank Account to Special Fund Bank Account.Bank Account.

The Accounts Department shallThe Accounts Department shall maintain a Special Fund Register maintain a Special Fund Register

where details of transactions are where details of transactions are recorded.recorded.


Recording of contribution to Recording of contribution to Special funds from earmarked Special funds from earmarked

collection collection The accounts department shall The accounts department shall

transfer the earmarked collection transfer the earmarked collection accounted as revenue to the special accounted as revenue to the special funds.funds.

Accounting entry for transfer of these Accounting entry for transfer of these amounts to Special fund is shown in amounts to Special fund is shown in the next slide: the next slide:


Recording of contribution to Recording of contribution to Special funds from earmarked Special funds from earmarked

collection collection Code of Account


Debit Amt. (Rs.)

Credit Amt. (Rs.)


290-(a)

311-(a)

Transfer to -------- Fund To ----------- Special Fund

Dr.

Cr.

1,00,000

1,00,000

Journal BookLedger, Special Fund Register


Utilisation of Special Funds Utilisation of Special Funds

Special Funds shall beSpecial Funds shall be utilised for the purpose for which they utilised for the purpose for which they

are created.are created.

The expenditure incurred could beThe expenditure incurred could be either revenue oreither revenue or

capital expenditure.capital expenditure.


Earnest Money Deposit under Earnest Money Deposit under Special FundSpecial Fund

Transactions on Earnest Money Transactions on Earnest Money under Special Fund shall beunder Special Fund shall be deposited in or refunded from the deposited in or refunded from the

respective Designated Special Fund respective Designated Special Fund Bank Account.Bank Account.

The accounting procedure is same The accounting procedure is same as it is for Public Works.as it is for Public Works.


Security Deposit under Special Security Deposit under Special FundFund

Transactions on Security Deposit Transactions on Security Deposit under Special Fund shall beunder Special Fund shall be deposited in or refunded from the deposited in or refunded from the

respective Designated Special Fund respective Designated Special Fund Bank Account.Bank Account.

The accounting procedure is same The accounting procedure is same as it is for Public Works.as it is for Public Works.


Investment of Special Funds Investment of Special Funds Investments on Special Fund shall beInvestments on Special Fund shall be

entered in a Special Fund Investment entered in a Special Fund Investment Register.Register.

The accounting procedures is similar The accounting procedures is similar to those followed in other to those followed in other investments.investments.

Interest earned on Investments, Interest earned on Investments, profit/ loss on disposal of profit/ loss on disposal of Investments shall be updated in the Investments shall be updated in the Special Fund Register. Special Fund Register.


On Closure of FundsOn Closure of Funds

Unutilised balance in the Special Fund, shall be Unutilised balance in the Special Fund, shall be transferred to Municipal Fund by transferring the transferred to Municipal Fund by transferring the money from the Special Fund Bank Account to the money from the Special Fund Bank Account to the Main Bank Account.Main Bank Account.

Entries to be passed by the Accounting Entries to be passed by the Accounting Department is shown in the table given below:Department is shown in the table given below:

Code of Account


Debit Amt. (Rs.)

Credit Amt.(Rs.)


311-(a)310-10- (b)

____ Special Fund To Additions to Municipal Fund

Dr.Cr.

10,000 10,000 Journal Book, LedgerSpecial Fund Register

460-21-(b)460-41-(b)

Main Bank Account To Designated Special Fund Bank Account

Dr.Cr.

10,000 10,000 Cash BookSpecial Fund Cash Book


Internal controlsInternal controls

Before transferring the money from Before transferring the money from Main Bank Account to the Main Bank Account to the respective designated special fund respective designated special fund bank accountbank account the Head of the Accounts Department the Head of the Accounts Department

shall ensure thatshall ensure that the fund created is recorded in the Special the fund created is recorded in the Special

Fund Register.Fund Register.

Next


Internal controlsInternal controls The Head of the Accounts The Head of the Accounts

Department shall ensure thatDepartment shall ensure that the amount of Special Fund shall not the amount of Special Fund shall not

be utilised for the purpose other than be utilised for the purpose other than for which the fund it is created. for which the fund it is created.

Bank reconciliation of Special Fund Bank reconciliation of Special Fund Bank Accounts shall beBank Accounts shall be carried out on a monthly basis.carried out on a monthly basis.

Next


Internal controlsInternal controls

At the end of every month, the At the end of every month, the Head of the Accounts Department Head of the Accounts Department shall reconcileshall reconcile the ledger balance of the Special Fund the ledger balance of the Special Fund

Account withAccount with the Special Fund Register andthe Special Fund Register and the Special Fund Bank Account balance.the Special Fund Bank Account balance.

All Reconciliation Statements shall All Reconciliation Statements shall be certified and verified.be certified and verified.


Reconciliation Procedures - Reconciliation Procedures - IntroductionIntroduction

The objective of the reconciliation The objective of the reconciliation

procedures is to ensure thatprocedures is to ensure that if an accounting information is recorded at more if an accounting information is recorded at more

than one place,than one place, there are no discrepancies between the different sets there are no discrepancies between the different sets

of records.of records.

For example, property tax transactions are recorded For example, property tax transactions are recorded

both at the Tax Department and at the Accounts both at the Tax Department and at the Accounts

Department. Department. Next



This will ensure thatThis will ensure that the receivables figure is the same at both the the receivables figure is the same at both the

sets of records.sets of records. In case of differences,In case of differences,

necessary adjustments may need to be carried necessary adjustments may need to be carried out either by the Accounts Department or the out either by the Accounts Department or the Tax Department.Tax Department.

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The reconciliation procedures are to be The reconciliation procedures are to be carried out bycarried out by the Accounts Department,the Accounts Department, Internal Audit Department andInternal Audit Department and the concerned departments. the concerned departments.

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The procedures will include the The procedures will include the following:following: Bank Reconciliation,Bank Reconciliation,

Inter-unit reconciliation,Inter-unit reconciliation,

Reconciliation of deposits,Reconciliation of deposits,

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Reconciliation of receivables and collections Reconciliation of receivables and collections in respect of Water supply, Property and in respect of Water supply, Property and other taxes, Cess, Other heads of revenues.other taxes, Cess, Other heads of revenues.

Reconciliation of advances to Contractors / Reconciliation of advances to Contractors / suppliers, Departments of the ULB; and suppliers, Departments of the ULB; and Employees of the ULB.Employees of the ULB.

• Reconciliation of loans received Reconciliation of loans received (borrowings).(borrowings).

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• Reconciliation of payables including Reconciliation of payables including contractors’ payables, contractors’ payables,

• Reconciliation of balances with Government, Reconciliation of balances with Government, quasi-Government agencies, Government quasi-Government agencies, Government Corporations, and Corporations, and

• Reconciliation of loans given to others Reconciliation of loans given to others


Bank ReconciliationBank Reconciliation It is a procedure which aims atIt is a procedure which aims at

reconciling the bank balance as shown in the reconciling the bank balance as shown in the Cash BookCash Book

with the bank balance as per the pass book / with the bank balance as per the pass book / statement received from the bank.statement received from the bank.

It shall be carried out on a monthly basis.It shall be carried out on a monthly basis.

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Bank ReconciliationBank Reconciliation The bank balances as per the Cash Book and the Pass The bank balances as per the Cash Book and the Pass

Book may not tally for the reasons listed in the Table Book may not tally for the reasons listed in the Table given below:given below:

Reconciliation factorsEffect on Cash Book bank

balanceEffect on bank balance

as per Pass Book

Cheques issued but not presented for payment

Bank balance reduces by that amount

No effect

Cheques deposited but not cleared

Bank balance increases by that amount

No effect

Cheques received but not deposited

Bank balance increases to the extent of cheque received but not deposited

No effect

Debit of charges by bank for any services rendered

No effect Bank balance reduces to the extent of charges levied


Bank ReconciliationBank Reconciliation The bank balances as per the Cash Book and the Pass The bank balances as per the Cash Book and the Pass

Book may not tally for the reasons listed in the Table Book may not tally for the reasons listed in the Table given below:given below:

Direct deposit of amount in the bank account

No effect Bank balance increases to the extent of deposit

Interest allowed and credited by the Bank

No effect Bank balance increases to the extent of interest credited

Payment by the bank in respect of standing instructions given to the bank

No effect Bank balance reduces to the extent of the payment made

Fixed Deposit or any other sum directly credited by bank to the account

No effectBank balance increases to the extent of money credited

Any other reason which may result in difference between bank balance as per Cash Book and Pass Book


The procedure for reconciling the bank The procedure for reconciling the bank balance as per the Cash Book with the balance as per the Cash Book with the

balance balance

The Bank Reconciliation shall be carried out The Bank Reconciliation shall be carried out on a monthly basis or at such shorter time on a monthly basis or at such shorter time intervals as the ULB may decide.intervals as the ULB may decide.

In case the Bank Reconciliation is carried In case the Bank Reconciliation is carried out monthly, it shall be completed within the out monthly, it shall be completed within the first week of the next month. first week of the next month.

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The procedure for reconciling the The procedure for reconciling the bank balance with the Cash Book bank balance with the Cash Book

balancebalance The credit entries in the Bank Pass Book The credit entries in the Bank Pass Book

shall be comparedshall be compared with the entries in the Receipt Register andwith the entries in the Receipt Register and

the entries appearing in both shall be ticked.the entries appearing in both shall be ticked. The date when the cheques have been The date when the cheques have been

realised shall berealised shall be recorded in the Cheque Receipt Register. recorded in the Cheque Receipt Register.

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The procedure for reconciling the bank The procedure for reconciling the bank balance with the Cash Book balancebalance with the Cash Book balance

The daily total of cheques realised in the The daily total of cheques realised in the bank shall bebank shall be derived from the Cheque Receipt Register andderived from the Cheque Receipt Register and the total shall be tallied with the entry in the the total shall be tallied with the entry in the

Cash Book. Cash Book.

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The procedure to be followed for reconciling the The procedure to be followed for reconciling the bank balance with the Cash Book balancebank balance with the Cash Book balance

The unticked items representThe unticked items represent the cheques received and deposited in the bankthe cheques received and deposited in the bank but not cleared for payment by the bank.but not cleared for payment by the bank.

Likewise, they may also represent those cases Likewise, they may also represent those cases wherein cheques have been receivedwherein cheques have been received but may not have been deposited with the bank. but may not have been deposited with the bank.

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The procedure to be followed for reconciling The procedure to be followed for reconciling the bank balance with the Cash Book balancethe bank balance with the Cash Book balance

The unticked items shall appear in the Bank The unticked items shall appear in the Bank Reconciliation Statement (BRS) of that Reconciliation Statement (BRS) of that period.period.

The entries appearing in the BRS shall beThe entries appearing in the BRS shall be examined for credit in the subsequent period’s examined for credit in the subsequent period’s

Bank Pass Book. Bank Pass Book.

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The procedure to be followed for reconciling The procedure to be followed for reconciling the bank balance with the Cash Book balancethe bank balance with the Cash Book balance

The debit entries in the Bank Pass Book The debit entries in the Bank Pass Book shall beshall be compared with the entries in the Cheque Issue compared with the entries in the Cheque Issue

Register andRegister and the Cash Book andthe Cash Book and

the entries appearing in both shall be ticked. the entries appearing in both shall be ticked.

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The procedure for reconciling the bank balance The procedure for reconciling the bank balance with the Cash Book balancewith the Cash Book balance

All the cheques issued but not presented for All the cheques issued but not presented for payment within six months from their date of payment within six months from their date of issueissue will become stale andwill become stale and shall be re-debited to the relevant bank account shall be re-debited to the relevant bank account

with a corresponding credit entry in the Stale with a corresponding credit entry in the Stale Cheques Account. Cheques Account.


Reconciliation of Deposits Reconciliation of Deposits Reconciliation of Deposits aims atReconciliation of Deposits aims at

reconciling the balance ofreconciling the balance of Earnest Money Deposit,Earnest Money Deposit, Security Deposit andSecurity Deposit and any other deposits received by the ULBs.any other deposits received by the ULBs.

The reconciliation shall beThe reconciliation shall be carried out between carried out between

the records maintained at other departments andthe records maintained at other departments and those maintained at the Accounts Department. those maintained at the Accounts Department.

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Reconciliation of DepositsReconciliation of Deposits

The Deposit Reconciliation shall beThe Deposit Reconciliation shall be carried out quarterly. carried out quarterly.

The receiving Department shallThe receiving Department shall prepare a Reconciliation Statement of Deposits prepare a Reconciliation Statement of Deposits

Outstanding from the Deposit Register and Outstanding from the Deposit Register and forward it to the Accounts Department.forward it to the Accounts Department.

This statement shall beThis statement shall be prepared for each type of deposit. prepared for each type of deposit.


Financial Statement - IntroductionFinancial Statement - Introduction

The provisions stipulateThe provisions stipulate for preparation of the Annual for preparation of the Annual

Administration Report and a Statement of Administration Report and a Statement of Accounts by the ULBs.Accounts by the ULBs.

The report shallThe report shall contain such information as the Standing contain such information as the Standing

Committee may from time to time direct.Committee may from time to time direct.

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Financial StatementFinancial Statement Preparation of Financial Statements isPreparation of Financial Statements is

the responsibility of the Head of the Accounts the responsibility of the Head of the Accounts Department.Department.

Other reports such as Auditor’s report and Other reports such as Auditor’s report and Municipal Commissioner’s report shall beMunicipal Commissioner’s report shall be prepared by the Municipal Auditor and Municipal prepared by the Municipal Auditor and Municipal

Commissioner respectively. Commissioner respectively.

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Financial StatementFinancial Statement The Annual Report of the ULBs shall The Annual Report of the ULBs shall

include the following:include the following:• Financial Statements consist of:Financial Statements consist of:

Balance Sheet;Balance Sheet; Income and Expenditure Statement;Income and Expenditure Statement; Statement of Cash flows (a summary of an Statement of Cash flows (a summary of an

enterprise’s cash flow over a given period of enterprise’s cash flow over a given period of time); andtime); and

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Financial StatementFinancial Statement

Receipts and Payments Account Receipts and Payments Account

(detailed as per the account heads);(detailed as per the account heads);

Notes to Accounts; andNotes to Accounts; and

Financial Performance Indicators.Financial Performance Indicators.

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Report of the Municipal Chief Auditor;Report of the Municipal Chief Auditor;

Municipal commissioner’s Report;Municipal commissioner’s Report;

Standing Committee’s Action Taken Report on Standing Committee’s Action Taken Report on the qualifications and comments made in the the qualifications and comments made in the Report of the Municipal Chief Auditor and the Report of the Municipal Chief Auditor and the Report of the Municipal commissioner.Report of the Municipal commissioner.

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Due consideration shall be given to the Due consideration shall be given to the materiality of the itemmateriality of the item In determining the accounting treatment and In determining the accounting treatment and

manner of disclosure of an item in the Income manner of disclosure of an item in the Income and Expenditure Statement and/or the Balance and Expenditure Statement and/or the Balance Sheet. Sheet.

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Financial StatementFinancial Statement The ULBs shall prepare the financial The ULBs shall prepare the financial

statements likestatements like the Balance Sheet,the Balance Sheet, Income and Expenditure Statement,Income and Expenditure Statement, Statement of Cash flows andStatement of Cash flows and Receipts and Payments Account,Receipts and Payments Account,

at the end of each quarter.at the end of each quarter. Balance Sheet shallBalance Sheet shall

disclose figures as on a date for the current year disclose figures as on a date for the current year and the previous year.and the previous year.

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Financial StatementFinancial Statement Income and Expenditure Statement, Income and Expenditure Statement,

Statement of Cash flows and the Receipts and Statement of Cash flows and the Receipts and Payments Account shall disclose:Payments Account shall disclose: quarterly figures,quarterly figures, progressive year-to-date totals andprogressive year-to-date totals and the figures of the corresponding quarter of the the figures of the corresponding quarter of the

previous year andprevious year and the quarterly movements in various accounts.the quarterly movements in various accounts. In addition, the Income and Expenditure In addition, the Income and Expenditure

Statement shall also disclose the annual budget Statement shall also disclose the annual budget figures.figures. Next



The Annual Financial Statements shall beThe Annual Financial Statements shall be subject to audit by a Municipal Chief Auditor.subject to audit by a Municipal Chief Auditor.

The Municipal Commissioner shallThe Municipal Commissioner shall prepare a report on the qualifications and prepare a report on the qualifications and

comments made by the Municipal Chief Auditor. comments made by the Municipal Chief Auditor.

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The Annual Financial Statements :The Annual Financial Statements : shall be approved by the Municipal shall be approved by the Municipal

commissionercommissioner shall be placed along with the report of the shall be placed along with the report of the

Municipal Chief Auditor before the Standing Municipal Chief Auditor before the Standing Committee.Committee.

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Financial StatementFinancial Statement The Standing Committee shallThe Standing Committee shall

prepare an Action Taken Report on the Annual prepare an Action Taken Report on the Annual Financial Statements.Financial Statements.

The Committee shallThe Committee shall approve the Annual Financial Statements andapprove the Annual Financial Statements and place them before the General Body.place them before the General Body.


Income and Expenditure Statement Income and Expenditure Statement

The ULBs shallThe ULBs shall prepare an Income and Expenditure Statement prepare an Income and Expenditure Statement

for every accounting period.for every accounting period.

This Statement disclosesThis Statement discloses the results of the working of the ULBs during the results of the working of the ULBs during

the period covered by the statement. the period covered by the statement.

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Income and Expenditure Income and Expenditure StatementStatement

It shows:It shows: incomes and expenditures of the ULBs for an incomes and expenditures of the ULBs for an

accounting period andaccounting period and the excess of income over expenditure or vice-the excess of income over expenditure or vice-

versa for that period.versa for that period.

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Income and Expenditure StatementIncome and Expenditure Statement

The Income and Expenditure Statement The Income and Expenditure Statement

shall includeshall include

all the income earned during the year whether all the income earned during the year whether

actually received or not andactually received or not and

all the expenditure incurred whether actually all the expenditure incurred whether actually

paid or not. paid or not.

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Balance SheetBalance Sheet

The ULBs shall prepare a Balance Sheet at The ULBs shall prepare a Balance Sheet at the end of each accounting period.the end of each accounting period.

The Balance Sheet is a statement, which The Balance Sheet is a statement, which reflects the financial position of the ULBs as reflects the financial position of the ULBs as on a particular date.on a particular date.

It presents the assets, liabilities and reserves It presents the assets, liabilities and reserves of the ULBs as on a specified date. of the ULBs as on a specified date.

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Balance SheetBalance Sheet

The Balance Sheet shall be prepared in the The Balance Sheet shall be prepared in the prescribed format.prescribed format.

The details of various Balance Sheet items The details of various Balance Sheet items would be given in separate schedules would be given in separate schedules attached to the Balance Sheet. attached to the Balance Sheet.


Cash Flow StatementCash Flow Statement

This statement is prepared in order to haveThis statement is prepared in order to have information about the cash flows to assess the information about the cash flows to assess the

ability of the enterprise to generate cash andability of the enterprise to generate cash and cash equivalents andcash equivalents and

the needs of the enterprise to utilise those cash the needs of the enterprise to utilise those cash

flows. flows.

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Cash Flow Statement Cash Flow Statement

This Statement providesThis Statement provides

information that enables users to evaluate the information that enables users to evaluate the

changes in assets and liabilities of an ULB,changes in assets and liabilities of an ULB,

its financial status andits financial status and

the actual performance in terms of cash inflows the actual performance in terms of cash inflows

and outflows. and outflows.

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Cash Flow StatementCash Flow Statement

ULB shallULB shall prepare a Statement of Cash flows apart from prepare a Statement of Cash flows apart from

Income & Expenditure, Balance sheet and Income & Expenditure, Balance sheet and Receipts and Payments statements.Receipts and Payments statements.

It shallIt shall report cash flows during the period classified report cash flows during the period classified

by operating, investing and financing by operating, investing and financing activities. activities.

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Cash Flow StatementCash Flow Statement The cash flow statement shall be prepared in The cash flow statement shall be prepared in

prescribed form.prescribed form. It shall be prepared by ascertaining the cash It shall be prepared by ascertaining the cash

flow from each of the operating, investing and flow from each of the operating, investing and financing activities.financing activities.

In this module we will discuss ‘Cash flow In this module we will discuss ‘Cash flow from operating activities’ and ‘Cash flow from operating activities’ and ‘Cash flow from financing activities’.from financing activities’.

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Cash flows from operating activitiesCash flows from operating activities

Operating activities areOperating activities are the principal activities utilising the cash the principal activities utilising the cash

resources of the ULBs andresources of the ULBs and other activities that are not investing or other activities that are not investing or

financing activities.financing activities.

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Cash flows from operating activitiesCash flows from operating activities

Identification of transactions into operating Identification of transactions into operating or other activities depends onor other activities depends on whether the result of the activity is captured in whether the result of the activity is captured in

Income and Expenditure statement andIncome and Expenditure statement and is not related to Investing or Financing activities. is not related to Investing or Financing activities.

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Cash flows from operating Cash flows from operating activitiesactivities

The amount of excess of income over The amount of excess of income over expenditure (or vice versa) as per ‘the expenditure (or vice versa) as per ‘the Income and Expenditure Account’ shall beIncome and Expenditure Account’ shall be entered in the Cash flow statement under entered in the Cash flow statement under

‘Operating activities’. ‘Operating activities’.

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The amount of excess of income over The amount of excess of income over expenditure includesexpenditure includes certain non-cash and non-operating incomes and certain non-cash and non-operating incomes and

expenditures.expenditures.

These shall beThese shall be adjusted to the Gross cash flow to determine the adjusted to the Gross cash flow to determine the

net cash flow from operating activities.net cash flow from operating activities.

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A generalised list of such adjustments under A generalised list of such adjustments under incomes and expenses are shown below:incomes and expenses are shown below: ExpenditureExpenditure

Depreciation Depreciation Write off Write off ProvisionsProvisions Decline in the value of investmentDecline in the value of investment

IncomeIncome Interest on deposits/loan received Interest on deposits/loan received Investment incomes Investment incomes Profit or sale arising out of Assets Profit or sale arising out of Assets Appreciation in the value of InvestmentsAppreciation in the value of Investments Next


Cash flows from financing Cash flows from financing activitiesactivities

Financing activities areFinancing activities are

activities that result in changes in the size and activities that result in changes in the size and

composition of Loans received by the ULBs.composition of Loans received by the ULBs.

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The steps involved in calculation of cash The steps involved in calculation of cash flow from Financing Activities areflow from Financing Activities are the movement in loans availed by the ULBs;the movement in loans availed by the ULBs;

Loans & other advances given to Loans & other advances given to employees/ others shall be shownemployees/ others shall be shown on a net basis instead of showing the amount on a net basis instead of showing the amount

of loans received / repaid during the year; of loans received / repaid during the year;

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Funds/grants received during the period Funds/grants received during the period under reporting shall beunder reporting shall be shown separately as amounts received under any shown separately as amounts received under any

fund/grant are in the nature of financing fund/grant are in the nature of financing activities.activities.

Examples of such funds/grants are:Examples of such funds/grants are: Earmarked fundsEarmarked funds Special grantsSpecial grants Specific grants Specific grants

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All items of incomes and expenditures in the All items of incomes and expenditures in the nature of ‘financing activities’ shall be nature of ‘financing activities’ shall be considered appropriately for inclusion in the considered appropriately for inclusion in the calculation of cash flows from investing calculation of cash flows from investing activities.activities.

Examples of such items are as follows:Examples of such items are as follows: Interest and finance chargeInterest and finance charge DiscountsDiscounts

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Receipts and Payments Account Receipts and Payments Account This Account showsThis Account shows

the sources of funds andthe sources of funds and the applications of funds during the accounting the applications of funds during the accounting

reporting periods.reporting periods. Following shall be noted in preparation of it:Following shall be noted in preparation of it:

receipts considered are on cash basis and do not receipts considered are on cash basis and do not take into account the receivables.take into account the receivables.

similarly, the payments considered are on cash similarly, the payments considered are on cash basis and do not take into account the payables. basis and do not take into account the payables.

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Audit points on ULB AccountsAudit points on ULB Accounts

Cashier’s Cash Book (CCB) Cashier’s Cash Book (CCB) Was the maintenance of the CCB done at Was the maintenance of the CCB done at

the direct supervision of the appropriate the direct supervision of the appropriate officer?officer?

Were the receipts in the CCB classified in Were the receipts in the CCB classified in the respective columns according to the the respective columns according to the budget heads?budget heads?

Were the receipts entered daily in the CCB? Were the receipts entered daily in the CCB?

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Could the auditor ensure that all receipts Could the auditor ensure that all receipts under the same heads were grouped together under the same heads were grouped together as far as possible for facility of accounting?as far as possible for facility of accounting?

In respect of receipts for which no separate In respect of receipts for which no separate registers were prescribed, could the auditor registers were prescribed, could the auditor ensure that full details of names and ensure that full details of names and particulars were entered in the CCB? particulars were entered in the CCB?

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Pass BookPass Book Was there any instance where any entry in Was there any instance where any entry in

the Pass Book was made by the municipal the Pass Book was made by the municipal office?office?

Could the auditor ensure that the total of the Could the auditor ensure that the total of the balance and the amount of outstanding balance and the amount of outstanding cheques of the Pass Book were checked cheques of the Pass Book were checked against the corresponding balance shown in against the corresponding balance shown in the Cash Book?the Cash Book?

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ChequesCheques Was the Cheque Book supplied by the Was the Cheque Book supplied by the

Treasury kept under the personal custody of Treasury kept under the personal custody of

the Chairman or the Finance Officer?the Chairman or the Finance Officer?

Was the practice of retaining signed cheques Was the practice of retaining signed cheques

in the office permitted?in the office permitted?

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ChequesCheques Were all payments above Rs. 2,500/- to Were all payments above Rs. 2,500/- to

persons other than the employees of the persons other than the employees of the municipality made in Cheques only? municipality made in Cheques only?

In case of cancellation of cheques, was the In case of cancellation of cheques, was the fact of cancellation noted in red ink? fact of cancellation noted in red ink?

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Appropriation RegisterAppropriation Register Was the Appropriation Register kept in the Was the Appropriation Register kept in the

prescribed form?prescribed form? Could the auditor ensure that the Could the auditor ensure that the

expenditure was posted monthly from the expenditure was posted monthly from the Register of Works or other appropriate Register of Works or other appropriate register?register?

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Appropriation RegisterAppropriation Register Was there any case of appropriation of Was there any case of appropriation of

funds, even temporarily, without prior funds, even temporarily, without prior approval of the government to any other approval of the government to any other object other than that for which it was object other than that for which it was intended?intended?

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Were separate pages or sets of pages set Were separate pages or sets of pages set apart for endowment or fund?apart for endowment or fund?

Was there any case of use of unspent balance Was there any case of use of unspent balance of government grant made for expenditure in of government grant made for expenditure in a particular year beyond the subsequent year a particular year beyond the subsequent year without prior sanction of the State without prior sanction of the State Government? Government?

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Audit points on Public WorksAudit points on Public Works

Did the municipality/corporation have a Did the municipality/corporation have a prescribed schedule of rates for each kind of prescribed schedule of rates for each kind of work and was it updated from time to time?work and was it updated from time to time?

Was there any case of execution of work, Was there any case of execution of work, other than in case of emergency, without a other than in case of emergency, without a proper detailed estimate?proper detailed estimate?

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Was every work costing above Rs.5,000/- Was every work costing above Rs.5,000/- sanctioned by the Board of Councillors in a sanctioned by the Board of Councillors in a meeting and signed by the presiding 0fficer? meeting and signed by the presiding 0fficer? Was such work covered by the current Was such work covered by the current budget grant? budget grant?

Was any work costing more than Rs. 5 lakh Was any work costing more than Rs. 5 lakh sanctioned by the Board of Councillors?sanctioned by the Board of Councillors?

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Did the Board of Councillors sanction any Did the Board of Councillors sanction any estimate which was a part of a scheme estimate which was a part of a scheme sanctioned by another authority?sanctioned by another authority?

Could the auditor ensure that no revised Could the auditor ensure that no revised estimate was sanctioned unless the cost of the estimate was sanctioned unless the cost of the original estimate exceeded by more than 10% original estimate exceeded by more than 10% of the total amount? of the total amount?

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Did the ULB maintain a Measurement Did the ULB maintain a Measurement Book (MB) in the prescribed form? Was it Book (MB) in the prescribed form? Was it under the custody of the appropriate under the custody of the appropriate authority?authority?

Were the pages of the MB machine Were the pages of the MB machine numbered? Were there any cases of erasing numbered? Were there any cases of erasing or effacing of records?or effacing of records?

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Audit points on Public WorksAudit points on Public Works Could the auditor ensure the following Could the auditor ensure the following

points? points? the entries in the MB were made in ink as far the entries in the MB were made in ink as far

as possible;as possible; recording of entries in respect of contents or recording of entries in respect of contents or

area were invariably made in ink;area were invariably made in ink; before preparation of a contractor’s bill the before preparation of a contractor’s bill the

entries in the MB relating to the description entries in the MB relating to the description and quantities of work or supplies were and quantities of work or supplies were scrutinised by the Municipal Engineer; scrutinised by the Municipal Engineer;

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the bill was prepared on the basis of actual the bill was prepared on the basis of actual measurement and the rates were taken from measurement and the rates were taken from Item rate Tender and contract of the works Item rate Tender and contract of the works agreement;agreement;

the pages of the MB in which the detailed the pages of the MB in which the detailed measurements were recorded, were quoted in measurements were recorded, were quoted in the bill;the bill;

the bill was signed by the officer in charge of the bill was signed by the officer in charge of the work and the contractor in token of its the work and the contractor in token of its correctness;correctness;

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before signing the bill the appropriate authority before signing the bill the appropriate authority actually compared the quantities in the bill with actually compared the quantities in the bill with those recorded in the MB;those recorded in the MB;

when the bill was on a running account, it was when the bill was on a running account, it was compared with the previous bill and every page compared with the previous bill and every page containing the detailed measurements was then containing the detailed measurements was then scored out by a diagonal red ink line;scored out by a diagonal red ink line;

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the Accountant checked the bill with the the Accountant checked the bill with the MB, estimate, agreement, previous bill (in MB, estimate, agreement, previous bill (in case of running bill), balance of allotment case of running bill), balance of allotment available and the arithmetical calculations; available and the arithmetical calculations;

the number and the date of payment voucher the number and the date of payment voucher was noted on the abstract of measurement in was noted on the abstract of measurement in the MB as well as on the pages containing the MB as well as on the pages containing the detailed measurements.the detailed measurements.

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Audit points on Public WorksAudit points on Public Works Did the municipality/corporation maintain Did the municipality/corporation maintain

approved list of contractors for three approved list of contractors for three categories of staff viz. (a) general works (b) categories of staff viz. (a) general works (b) sanitary/plumbing works and (c) electrical sanitary/plumbing works and (c) electrical works?works?

Was each of the above three divided into Was each of the above three divided into three or four classes depending on the three or four classes depending on the financial and/or technical limit as fixed by financial and/or technical limit as fixed by the Board of Councillors and work entrusted the Board of Councillors and work entrusted to contractors accordingly?to contractors accordingly?

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Audit points on Public WorksAudit points on Public Works Were there cases of awarding of works to Were there cases of awarding of works to

contractors without calling for tenders? If contractors without calling for tenders? If so, the following further points should be so, the following further points should be ascertained:ascertained: Was the money value of the original work less Was the money value of the original work less

than Rs 5,000 for the category of general than Rs 5,000 for the category of general works, Rs 2,500 for plumbing works, Rs 500 works, Rs 2,500 for plumbing works, Rs 500 for electrical works? for electrical works?

In case of repair works was it less than Rs. In case of repair works was it less than Rs. 2,500 for general works, Rs 1,000 for 2,500 for general works, Rs 1,000 for plumbing works and Rs. 200 for electrical plumbing works and Rs. 200 for electrical works?works?

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Audit points on Public WorksAudit points on Public Works Were in all cases competitive tenders Were in all cases competitive tenders

invited from the approved list when the invited from the approved list when the financial limit was Rs. 5,00,000 for general financial limit was Rs. 5,00,000 for general works, Rs. 1,00,000 for plumbing and Rs. works, Rs. 1,00,000 for plumbing and Rs. 50,000 for electrical works?50,000 for electrical works?

Were in all cases of works exceeding the Were in all cases of works exceeding the above financial limit open competitive above financial limit open competitive tenders invited?tenders invited?

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In case of non-acceptance of the lowest In case of non-acceptance of the lowest tenders were the reasons therefore tenders were the reasons therefore forthcoming?forthcoming?

In cases of open tenders which need to be In cases of open tenders which need to be called for from the public under the rules, called for from the public under the rules, were the tenders invited by advertisements were the tenders invited by advertisements in the important and leading newspapers?in the important and leading newspapers?

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Audit points on Public WorksAudit points on Public Works Did such a tender include the following and Did such a tender include the following and

the tenderers have free access to the contract the tenderers have free access to the contract documents?documents? a tender notice; a tender notice; a complete specification of the work to be done and a complete specification of the work to be done and

of materials to be used;of materials to be used; a schedule of quantities of various descriptions of a schedule of quantities of various descriptions of

work and/or a schedule of probable items with rates;work and/or a schedule of probable items with rates; a set of conditions of contract to be complied with as a set of conditions of contract to be complied with as

embodied in the prescribed form in which the embodied in the prescribed form in which the contract was to be finally executed.contract was to be finally executed.

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Audit points on Public WorksAudit points on Public WorksCould the auditor ensure that no tender for Could the auditor ensure that no tender for

execution of work was received unless execution of work was received unless accompanied by the deposit of earnest money accompanied by the deposit of earnest money at the prescribed rate?at the prescribed rate?Could the auditor ensure that tenders for Could the auditor ensure that tenders for

works valued up to Rs. 10,000 were accepted works valued up to Rs. 10,000 were accepted by the Chairman/mayor and those exceeding by the Chairman/mayor and those exceeding Rs 10,000 by the Chairman/Mayor-in-Rs 10,000 by the Chairman/Mayor-in-Council?Council?

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Audit points on Public WorksAudit points on Public Works Was Security Deposit at the prescribed rate Was Security Deposit at the prescribed rate

collected from the contractor before collected from the contractor before execution of the work?execution of the work?

Were all payments to the contractors made Were all payments to the contractors made by cheques and were the same delivered to by cheques and were the same delivered to them direct?them direct?

In case of execution of works through In case of execution of works through departmental agency, was Muster Roll the departmental agency, was Muster Roll the basis of account?basis of account?

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Audit points on Public WorksAudit points on Public Works Was an extract from the Measurement Was an extract from the Measurement

Book endorsed on the Muster Roll and the Book endorsed on the Muster Roll and the quantity of work turned out compared quantity of work turned out compared with the cost of the labour employed?with the cost of the labour employed?

Was the Muster Roll closed immediately Was the Muster Roll closed immediately after the close of the prescribed period after the close of the prescribed period and the labourers paid as soon as and the labourers paid as soon as possible?possible?

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Audit points on Public WorksAudit points on Public Works Was the payment in all cases made in the Was the payment in all cases made in the

presence of the competent authority?presence of the competent authority?

Was there any case of payment of wages Was there any case of payment of wages not claimed within three months without not claimed within three months without the written orders of the Chairman/Mayor the written orders of the Chairman/Mayor or the Executive Officer? or the Executive Officer?

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Could the auditor ensure that before final Could the auditor ensure that before final payment for a work was made, a payment for a work was made, a completion certificate was submitted by the completion certificate was submitted by the competent authority with the necessary competent authority with the necessary certification?certification?



Did the ULB maintain a Register of Works Did the ULB maintain a Register of Works containing record of every original work or containing record of every original work or repair estimated to cost more than Rs 1,000?repair estimated to cost more than Rs 1,000?

Did the register show the expenditure Did the register show the expenditure incurred in comparison with the estimate and incurred in comparison with the estimate and the arrears due on accounts for which part the arrears due on accounts for which part payments were made? payments were made?


Audit points on the basis of Accounting system Audit points on the basis of Accounting system as recommended byas recommended by

National Municipal Accounting Manual (NMAM) National Municipal Accounting Manual (NMAM)

Did the State Government develop any Did the State Government develop any accounting system on basis of NMAM?accounting system on basis of NMAM?

Did the ULB follow accounting system as Did the ULB follow accounting system as per the guidelines of the NMAM?per the guidelines of the NMAM?

Did the ULB take steps to follow accrual Did the ULB take steps to follow accrual system of accounting?system of accounting?

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Audit points on the basis of Accounting systemAudit points on the basis of Accounting systemas recommended by NMAMas recommended by NMAM

Did the ULB prepare Income and Did the ULB prepare Income and Expenditure Statement and Balance Sheet Expenditure Statement and Balance Sheet every year in the prescribed formats?every year in the prescribed formats?

Did the ‘Income’ and ‘Expenditure’ in Did the ‘Income’ and ‘Expenditure’ in accounts constitute both revenue received accounts constitute both revenue received and receivable and amounts paid and and receivable and amounts paid and payable respectively? payable respectively?

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Audit points on the basis of Accounting Audit points on the basis of Accounting system as recommended by NMAMsystem as recommended by NMAM

Were there cases of incurrence of Were there cases of incurrence of expenditure on repairs and maintenance expenditure on repairs and maintenance during the period of the financial year but during the period of the financial year but not actually paid during the year?not actually paid during the year? If so, were such amounts treated as liability If so, were such amounts treated as liability

(payable) and disclosed as such in the Balance (payable) and disclosed as such in the Balance Sheet? If not, the same would be irregular.Sheet? If not, the same would be irregular.

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Were the collections made on behalf of the Were the collections made on behalf of the State Government credited to the control State Government credited to the control account called ‘State Government Levies in account called ‘State Government Levies in Taxes- Control Account’?Taxes- Control Account’?

Was any subsequent collection or recovery Was any subsequent collection or recovery of “Receivables for Property & Other Taxes” of “Receivables for Property & Other Taxes” which were already written off recognized as which were already written off recognized as a ‘Prior Period Income’?a ‘Prior Period Income’?

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Were the demands raised with retrospective Were the demands raised with retrospective effect treated as prior period income to the effect treated as prior period income to the extent it pertained to earlier years?extent it pertained to earlier years?

Were write-offs of Cess adjusted against the Were write-offs of Cess adjusted against the provisions made and to that extent provisions made and to that extent ‘recoverable’ got reduced? ‘recoverable’ got reduced?

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Was revenue in respect of Water Tax, Was revenue in respect of Water Tax, Water Benefit Tax, Water Supply Water Benefit Tax, Water Supply Charges, Water Meter Rent etc. Charges, Water Meter Rent etc. recognised in the period in which they recognised in the period in which they became due, ie. , when the bills were became due, ie. , when the bills were raised?raised?

Was revenue in respect of Connection Was revenue in respect of Connection Charges for Water Supply recognised on Charges for Water Supply recognised on actual receipt?actual receipt? Next



Was the additional expenditure incurred for Was the additional expenditure incurred for improvement of the fixed asset capitalised improvement of the fixed asset capitalised and included in the cost of the asset?and included in the cost of the asset?

In case the benefits of revenue expenditure In case the benefits of revenue expenditure for repairs and maintenance of the asset was for repairs and maintenance of the asset was less than for a year, was such expenditure less than for a year, was such expenditure charged off?charged off?

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Were assets under erection/installation on Were assets under erection/installation on existing projects (including advances for existing projects (including advances for capital works and project stores) shown as capital works and project stores) shown as “Capital Works-in-Progress”?“Capital Works-in-Progress”?

In case of forfeiture of Earnest Money In case of forfeiture of Earnest Money Deposit and Security Deposit and the right Deposit and Security Deposit and the right for claiming refund of deposit having for claiming refund of deposit having expired, was the amount involved recognised expired, was the amount involved recognised as income?as income?

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Was deposit received under Deposit Works Was deposit received under Deposit Works treated as a liability till such time the treated as a liability till such time the projects for which money was received?projects for which money was received? Was the cost incurred against it reduced from the Was the cost incurred against it reduced from the

liability upon completion of the projects?liability upon completion of the projects?

Was expenditure in respect of stores Was expenditure in respect of stores (material, equipment, etc.) procured (material, equipment, etc.) procured recognized on accrual basis?recognized on accrual basis?

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Was the stock lying at the period- valued at Was the stock lying at the period- valued at cost in accordance with the FIFO (First in-cost in accordance with the FIFO (First in-First out) method?First out) method?

Was revenue in respect of disposal of Was revenue in respect of disposal of material recognized on actual receipt?material recognized on actual receipt?

Did the municipality/corporation follow any Did the municipality/corporation follow any prescribed codification structure for prescribed codification structure for classification of income and expenditure classification of income and expenditure under different heads?under different heads?

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Could the auditor ensure that:Could the auditor ensure that: repair works to newly purchased or previously repair works to newly purchased or previously

abandoned buildings, which were required for abandoned buildings, which were required for bringing them into use were classified as Original bringing them into use were classified as Original Works? Works?

where the PWD issued any permission for road where the PWD issued any permission for road digging or any other activity for private purpose, it digging or any other activity for private purpose, it actually recovered the charges incurred for repair of actually recovered the charges incurred for repair of the damaged road or any other structure from the the damaged road or any other structure from the person seeking permission? person seeking permission?

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the money received from the Government for the money received from the Government for Deposit Works was accounted as a liability of Deposit Works was accounted as a liability of the municipality/corporation?the municipality/corporation?

certain percentage of the value of the Deposit certain percentage of the value of the Deposit Works was provided to the Works was provided to the municipality/corporation as service charges?municipality/corporation as service charges?

revenues (percentage charges) in respect of revenues (percentage charges) in respect of Deposit Works were accrued along with the Deposit Works were accrued along with the expenditure of Deposit Works? expenditure of Deposit Works?

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Earnest Money Deposit was refunded to the Earnest Money Deposit was refunded to the unsuccessful bidders?unsuccessful bidders?

advance was provided to the contractors as per advance was provided to the contractors as per the terms and procedures of the the terms and procedures of the municipality/corporation?municipality/corporation?

payment was made against bill raised after payment was made against bill raised after deducting the Security Deposit, income tax, deducting the Security Deposit, income tax, works contract tax and other deductions/recovery works contract tax and other deductions/recovery including advance provided, if any? including advance provided, if any?

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on receipt of approval for payment, entries were on receipt of approval for payment, entries were made for money advanced in the Cheque Issue made for money advanced in the Cheque Issue Register and in the Register of Advance for the Register and in the Register of Advance for the cheques issued to the contractors?cheques issued to the contractors?

the details of expenditure incurred on capital the details of expenditure incurred on capital projects were recorded in the Capital Works-in-projects were recorded in the Capital Works-in-Progress Account?Progress Account?

separate Capital Works-in-Progress Control separate Capital Works-in-Progress Control Accounts were opened for Civil, Electrical, Accounts were opened for Civil, Electrical, Water Works and Other projects? Water Works and Other projects?

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the Contract Completion Certificate was annexed the Contract Completion Certificate was annexed to the final bill?to the final bill?

on receipt of the bill the particulars were entered on receipt of the bill the particulars were entered in the Register of Bills in the prescribed form?in the Register of Bills in the prescribed form?

in the Contractors Control Account the in the Contractors Control Account the particulars for liability for amount payable to particulars for liability for amount payable to various contractors were credited and the amount various contractors were credited and the amount paid to them debited? paid to them debited?

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on completion of construction of the on completion of construction of the asset, the cost incurred for construction asset, the cost incurred for construction was passed on to the relevant asset was passed on to the relevant asset account?account?

the Accounts Department passed the Accounts Department passed necessary accounting entries to record necessary accounting entries to record the difference between the Stores Issue the difference between the Stores Issue Rate and the Recovery Rate for Rate and the Recovery Rate for materials issued to contractors? materials issued to contractors?

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the Works Department, Accounts Department the Works Department, Accounts Department and the Internal Audit Department exercised the and the Internal Audit Department exercised the following internal controls—following internal controls—

• ensure budget availability at the time of approval ensure budget availability at the time of approval of the bill;of the bill;

• ensure that all the dues, including liquidated ensure that all the dues, including liquidated damages/penalties, were recovered from the damages/penalties, were recovered from the contractor before making the final payment;contractor before making the final payment;

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• ensure that no amount was due from the ensure that no amount was due from the suppliers/contractors, which might be otherwise suppliers/contractors, which might be otherwise adjusted before payment;adjusted before payment;

• ensure that all the bills/invoices of contractors ensure that all the bills/invoices of contractors were journalised before release of payments.were journalised before release of payments.

all reconciliation statements were certified by the all reconciliation statements were certified by the Head of the Accounts department? Head of the Accounts department?

the Stores Department prepared a Summary of the Stores Department prepared a Summary of Daily Collections and forwarded the same to the Daily Collections and forwarded the same to the Accounts Department?Accounts Department?

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on receipt of the Summary of Daily Collections, on receipt of the Summary of Daily Collections, the Accounts Department passed necessary the Accounts Department passed necessary entries?entries?

the Stores Department prepared the Material the Stores Department prepared the Material Receipt Note in the prescribed form? Receipt Note in the prescribed form?

from the Material Receipt Note, the Stores from the Material Receipt Note, the Stores recorded the receipt of materials in the Stores recorded the receipt of materials in the Stores Ledger?Ledger?

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on receipt of bill from the supplier, the Stores on receipt of bill from the supplier, the Stores verified the bill received with the Material verified the bill received with the Material Receipt Note and recorded it in the Register of Receipt Note and recorded it in the Register of Bills for Payment?Bills for Payment?

on acceptance and approval of the material on acceptance and approval of the material supplied and on receipt of the processed bill supplied and on receipt of the processed bill from the Stores, the Accounts passed necessary from the Stores, the Accounts passed necessary entries? entries?

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Grants received in advance were deposited Grants received in advance were deposited in the respective Designated Grant Bank in the respective Designated Grant Bank Accounts and the same were accounted for Accounts and the same were accounted for in the following manner—in the following manner— the details of the Grant Sanction Order were the details of the Grant Sanction Order were

recorded in the Grant Register;recorded in the Grant Register; separate Cash Book in prescribed form was separate Cash Book in prescribed form was

maintained in respect of all grants;maintained in respect of all grants; the details of the receipt of the grant was the details of the receipt of the grant was

updated in the Grant register;updated in the Grant register;Next



advance made to a contractor/supplier in advance made to a contractor/supplier in respect of project/scheme against a Specific respect of project/scheme against a Specific Grant was paid from the Designated Grant Grant was paid from the Designated Grant Bank Account and not from the Main Bank Bank Account and not from the Main Bank Account;Account;

the details of expenditure were recorded in the the details of expenditure were recorded in the Grant Register under the respective Specific Grant Register under the respective Specific Grant;Grant;

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on payment, the Accounts Department passed on payment, the Accounts Department passed necessary entries.necessary entries.

the bank reconciliation was carried out on a the bank reconciliation was carried out on a monthly basis or such other shorter time monthly basis or such other shorter time interval as the municipality/corporation interval as the municipality/corporation decided? decided?

The End

Training Module on 'Audit of ULBs' Session 7 Part II1 This part deals with accounting system of : stores; Health and sanitation; Special Fund; Financial.

Documents

stores accounting

stores health

receipt of summary

accounts department

audit of ulbs session

summary of daily collection

receipt of emd

training module