Important observations raised in Audit Reports of different states

1. Important observations raised in Audit Reports ofdifferent states

2. Session Overview: • Discussions on important audit observations of different states. Next Training Module on 'Audit Of ULBs' Session 13

3. Learning Objective • Significant audit observations on municipalities/corporations of different states will enable the participants • to acquaint with different audit points taken in different angles. Next Training Module on 'Audit Of ULBs' Session 13

4. Performance review Implementation of Building Regulations (Audit Report for the year ended 31st March, 2001, Municipal Corporation of Delhi) Next Training Module on 'Audit Of ULBs' Session 13

5. Implementation of Building Regulations • The building deptt. of municipal corporation of Delhi (MCD), responsible for control and monitoring of building activities failed to control unauthorised constructions due to its lax attitude in taking action. Next Training Module on 'Audit Of ULBs' Session 13

6. Implementation of Building Regulations • Statutory provisions were not implemented by the deptt., even specific directions of the Commissioner and the Lieutenant Governor were ignored and not carried out by zonal offices and others concerned. Next Training Module on 'Audit Of ULBs' Session 13

7. Implementation of Building Regulations • This omission on their part for the last five years has gone unnoticed and unpunished and orders remain unimplemented. Next Training Module on 'Audit Of ULBs' Session 13

8. Implementation of Building Regulations • MCD’s failure in implementing the orders for demolition or sealing action resulted not only in increase of unauthorised constructions year after year but also in loss of revenue to the Department. Next Training Module on 'Audit Of ULBs' Session 13

9. Implementation of Building Regulations • The Department needs to review its activities to arrest the growth of unauthorised constructions in an effective manner. Next Training Module on 'Audit Of ULBs' Session 13

10. Implementation of Building Regulations • The building department of MCD failed to contain the growth of un-authorised constructions. Next Training Module on 'Audit Of ULBs' Session 13

11. Implementation of Building Regulations • Such constructions increased five-fold over the period 1996-2000 with reference to the base year 1995 in six zones test checked by audit. Next Training Module on 'Audit Of ULBs' Session 13

12. Implementation of Building Regulations • In 68% to 93% of un-authorised constructions ordered to be demolished during 1995-2000 • the officers concerned did not demolish the un-authorised structures. Next Training Module on 'Audit Of ULBs' Session 13

13. Implementation of Building Regulations • The un-authorised constructions ordered to be sealed by the competent authority were • not sealed in more than 50% cases. Next Training Module on 'Audit Of ULBs' Session 13

14. Implementation of Building Regulations • The department did not recover • demolition charges of Rs.26.33 lakhs recoverable from building owners. Next Training Module on 'Audit Of ULBs' Session 13

15. Implementation of Building Regulations • The department also suffered • a loss of Rs.24.53 lakhs approximately towards demolition charges not assessed in respect of 1887 cases of demolition action during 1995-2000. Next Training Module on 'Audit Of ULBs' Session 13

16. Implementation of Building Regulations • Fund collected on account of regularisation of un-authorised buildings which were required to be kept in a separate account and utilised for augmentation of civic services were • merged with a fund earmarked for other purposes. Next Training Module on 'Audit Of ULBs' Session 13

17. Implementation of Building Regulations • Out of Rs.56.25 Crores collected upto 31st March, 2001, • Rs.0.53 Crore in a separate escrow account and the balance Rs.55.72 Crores were utilised for general purpose. Next Training Module on 'Audit Of ULBs' Session 13

18. Under assessment of property tax payable byChennai Port Trust Audit Report for the year ended 31st March, 2001, Corporation of Chennai Next Training Module on 'Audit Of ULBs' Session 13

19. Under assessment of property tax payable by Chennai Port Trust (CPT) • Commissioner, Chennai Corporation failed • to ascertain annual additions and alterations to the properties of CPT and also • incorrectly assessed as Government Property which resulted in under assessment of property tax to the tune of Rs.4.24 crores. Next Training Module on 'Audit Of ULBs' Session 13

20. Under assessment of property tax payable by CPT • According to the Madras City Municipal Corporation Act, 1919, • property tax was leviable on all buildings and lands at a percentage of their annual value. Next Training Module on 'Audit Of ULBs' Session 13

21. Under assessment of property tax payable by CPT • Property tax leviable for properties exceeding annual value of Rs.5000 was • 11.95% per half year since the first half year 1993. Next Training Module on 'Audit Of ULBs' Session 13

22. Under assessment of property tax payable by CPT • In the case of any building not ordinarily let, the annual value of which cannot be estimated, it shall be determined • to be 6% of the total of the estimated market value of the land at the time of assessment and the estimated cost of erecting the building at such time after deducting for depreciation not less than 10% of such cost. Next Training Module on 'Audit Of ULBs' Session 13

23. Under assessment of property tax payable by CPT • Scrutiny of records in Chennai Corporation (CC) revealed that • the tax levied in respect of the properties of Chennai Port Trust (CPT) for the period 1995-96 to 1998-99 was Rs. 24.75 lakh per half year. Next Training Module on 'Audit Of ULBs' Session 13

24. Under assessment of property tax payable by CPT • Although there had been a general revision of property tax in April, 1993 and in October, 1998, • it was not applied to property tax of CPT, as the Commissioner of CC included the properties of CPT in ‘Government Property List’ as belonging to the State Government. Next Training Module on 'Audit Of ULBs' Session 13

25. Under assessment of property tax payable by CPT • Based on the recommendations (February, 2000) of a committee constituted for revision of service charge of the State/Central Government properties, • 100% increase in annual value of property was applied to CPT and • property tax of Rs.45.34 lakh per half year was arrived at with effect from October, 1998. Next Training Module on 'Audit Of ULBs' Session 13

26. Under assessment of property tax payable by CPT • Demand for payment of Rs.63.66 lakh (after assessing the annual value as Rs.379.47 lakh) as arrears for 3 half year ending 1999-2000 • was sent by the Revenue Officer of the Corporation to Chairman, CPT in March, 2000. Next Training Module on 'Audit Of ULBs' Session 13

27. Under assessment of property tax payable by CPT • Thus, the Commissioner of CC wrongly classified CPT property as government property and also • failed to ascertain the number of new buildings constructed or additions and alterations carried out by CPT annually. Next Training Module on 'Audit Of ULBs' Session 13

28. Under assessment of property tax payable by CPT • Based on the value of land and building reflected on the annual accounts of the CPT and adopting annual value of 6% of the value of the property as per prevailing act in force • tax payable for the period 1995-96 to 1999-2000 works out to Rs.691.17 lakh. Next Training Module on 'Audit Of ULBs' Session 13

29. Under assessment of property tax payable by CPT • The property tax actually levied including the arrears of Rs.63.66 lakh demanded in March, 2000, was Rs.266.69 lakh. • Thus, there was an under-assessment of at least Rs.4.24 crore for this period. Next Training Module on 'Audit Of ULBs' Session 13

30. Under assessment of property tax payable by CPT • Government replied (June, 2001) that • exact details of additions/deletions of buildings would be ascertained from Chennai Port Trust. Training Module on 'Audit Of ULBs' Session 13

31. Under assessment of property tax payable by CPT • However, property tax demand upto 1999-2000 has been raised by the Commissioner based on the audit observation, and • the CPT has referred the matter to their legal department. Training Module on 'Audit Of ULBs' Session 13

32. Lack of accountability inKolkata Municipal Corporation Para 2.16 of Audit Report 2000-2001 of Government of West Bengal Next Training Module on 'Audit Of ULBs' Session 13

33. Lack of accountability in KMC • KMC is required to prepare annual accounts by the 15th July of the next financial year and • Municipal Commissioner shall submit account to the auditors immediately thereafter. Next Training Module on 'Audit Of ULBs' Session 13

34. Lack of accountability in KMC • The Controller of Municipal Finances and Accounts is responsible for financial management, compilation of accounts, maintenance of books of accounts. Next Training Module on 'Audit Of ULBs' Session 13

35. Lack of accountability in KMC • He is assisted by a special CMFA, two additional CMFAs, fifteen Dy. CMFs and about seven hundred other staff. Next Training Module on 'Audit Of ULBs' Session 13

36. Lack of accountability in KMC • During the last five years approximate receipts and expenditure of KMC were as under: Next Training Module on 'Audit Of ULBs' Session 13

37. Lack of accountability in KMC • KMC did not prepare their annual accounts in the formats prescribed in the KMC account code from the year 1990-91. • During 1997-98, 6 hand written statements for the year from 1990-91 to 1995-96 were presented to audit. Next Training Module on 'Audit Of ULBs' Session 13

38. Lack of accountability in KMC • The statements comprised of R&PA and I&EA for KMC headquarters without incorporating the transactions of 3 added units. • Balance sheet was not compiled for any of these years. Next Training Module on 'Audit Of ULBs' Session 13

39. Lack of accountability in KMC • The statements were not authenticated, • nor were any of the figures supported by relevant documents from 1996-97 and onwards, • KMC did not prepare accounts in any form (June 2001). Next Training Module on 'Audit Of ULBs' Session 13

40. Lack of accountability in KMC • Thus, KMC failed to discharge their accountability for such huge receipts and expenditure as shown in the above table. • In absence of balance sheet, no account of assets and liabilities are known. Next Training Module on 'Audit Of ULBs' Session 13

41. Lack of accountability in KMC • The inadequacies and incompleteness in the accounts of 1990-1994 (4 years) were pointed out to the Municipal Commissioner by Examiner of Local Accounts in February 1998 • for early rectification so that the accounts could be examined in audit. Next Training Module on 'Audit Of ULBs' Session 13

42. Lack of accountability in KMC • These accounts were not rectified except for 1990-1991 and • supporting documents were not submitted for any of the years. • The government did not reply to the letter as of September 2001. Next Training Module on 'Audit Of ULBs' Session 13

43. Lack of accountability in KMC • Audit verified the General Cash Book of KMC with a view to verifying the correctness of the balance of the municipal fund for the period 1990-91 to 1995-96. Next Training Module on 'Audit Of ULBs' Session 13

44. Lack of accountability in KMC • Scrutiny revealed • that cash book was not totalled and balanced by the Treasurer as required at the end of any month or year and • the balance as shown in R&P A/cs for those years did not bear any relevance to cash book balance (as worked out in audit). Next Training Module on 'Audit Of ULBs' Session 13

45. Lack of accountability in KMC • The Treasurer did not arrange to work out the balance; • The opening balance of respective R&P A/cs was taken into consideration by audit to arrive at fund balances at bank. Next Training Module on 'Audit Of ULBs' Session 13

46. Lack of accountability in KMC • The balances revealed that cash at bank at the close of the respective years were much in excess with reference to cash book balances. • The variation ranged between Rs. 1072 crore and Rs. 35.12 crore. Next Training Module on 'Audit Of ULBs' Session 13

47. Lack of accountability in KMC • The CMFA did not ever furnish list of bank accounts with balances to audit. • Therefore, it was not possible to ascertain whether the R&P A/cs included the balances of all the bank accounts and whether the cash book was complete in all respects. Training Module on 'Audit Of ULBs' Session 13

48. Lack of accountability in KMC • This would explain partially the huge discrepancy between the two sets of accounts as detailed above and also • indicate the unreliability of these accounts and records. Training Module on 'Audit Of ULBs' Session 13

49. Huge accumulation of dishonoured cheques inKolkata Municipal Corporation Para 2.16 of Audit Report 2000-2001 of Government of West Bengal Training Module on 'Audit Of ULBs' Session 13

50. Dishonoured cheques in KMC • Bank reconciliation statement was prepared by CMFA in KMC in consolidated manner for each year instead of individual bank account-wise reconciliation. Even this was not supported by bank statements. Next Training Module on 'Audit Of ULBs' Session 13