KERALA BUDGET
MANUAL
Preparation of Budget Part I and II – Revised
Estimates
Execution
of Budget - Allotment of Funds –
Reappropriation – Supplementary Grant – Resumption & Savings.
Appropriation
Control – Public Accounts Committee –
Public Undertakings Committee.
1.
Budget is a statement of the estimated receipt and
expenditure of the State, for each financial year, to be laid before the Legislative Assembly under Article 202 (1) of
the Constitution of India.
2.
Budget Estimates is a detailed forecast of what the
different heads of revenue are expected to yield during a financial year and the extent to which funds are likely
to be expended during the same period under the different heads of expenditure.
3.
Revised estimates is an estimate for the probable revenue
and expenditure of the current financial year under the various heads, framed
during the course of the year based on the actual transaction of the first five months and anticipation for
the next seven months of the year.
4.
Chief Controlling Officer: The Head of the Department or other officer
who submits estimates direct to Government.
He is entrusted with the responsibility of controlling the incurring of
expenditure or the collection of revenue.
5.
Disbursing Officer: The officer authorised to draw money from the
consolidated fund and make payments on behalf of the State Government.
6.
Estimating Officer: The head of a department or other officer
entrusted with the responsibility of
making forecasts of the amount expected to be realised/expected during a year
under particular budget heads.
7.
Charged expenditure means expenditure which is
not subject to the vote of the Legislative Assembly as specified in Article 202
(3) of the Constitution of India.
8.
Voted Expenditure means expenditure which is
subject to the vote of the Legislative Assembly.
9.
Grant means the sum sanctioned by the
Legislature for a particular service/function with reference to a demand
presented to it, and eventually included in an Appropriation Act.
10.
Re-appropriation means the transfer of funds
from one unit of appropriation to another such unit. The detailed head is taken as the unit of
appropriation.
11.
Appropriation Act (para 65)
Appropriation
is assignment of funds by the Legislature to meet specified expenditure. As soon as the Demands for grants are passed
by the Assembly, Appropriation Bill is introduced and passed. When approved by the Governor, this become
the Appropriation Act, which is published in the Gazette. This is the legal authority to draw money
from the Consolidated Fund.
12.
Performance Budgeting is a technique of
presenting the operations of Government in both financial and physical terms,
thus enabling evaluation of the performance of each Department. It is a link between the financial outlay and
the physical target. Performance budget
defines the work to be done or the services rendered, besides estimating the
cost at which this is proposed to be done.
13.
Appropriation Accounts means accounts which
relate to the expenditure brought to account during a financial year to the several items specified in the
Law made in accordance with the provisions of the Constitution of India for the
appropriation of moneys out of the consolidated fund of the State.
14.
The Budget Documents (para 51)
The following
budget documents are presented to the Legislature by the Finance Minister on
day appointed by the Governor – either by the end of February or early each
year.
(d)
Annual Financial Statement (Budget)
(ii) Detailed Budget Estimates of Revenue
(i)
Demands for Grants and Detailed Budget Estimates
(ii)
Explanatory Memorandum of the Budget
(iii)
Appendix I (Details of Staff)
(iv)
Appendix II (Details of Works)
(v)
Detailed Estimates of Receipts and Disbursement under
Debt Heads
(vi)
Five Year Plan Programmes for the year
(vii)
Performance Budget
(viii)
Evaluation Reports
(ix)
Economic Review
15
Vote on Account (para 57)
The budget
grants for the financial year cannot be carried over to meet the expenditure
for the next year. It has been found
impracticable for the Legislature to complete consideration of the budget and
make appropriation for the new financial year before its beginning. So grants in advance for certain months (from
1 April until the Appropriation Act is passed) may have to be moved. Advance grants so sought and passed is called
Vote on Account. The same procedure as
passing of the budget is applicable to vote on Account.
Budget: Annual
Financial Statement) is a statement of
the estimated receipts and expenditure of the State for each financial year to
be laid before the Legislature under Article 202 (1) of the constitution of
India. This statement covers all the
transactions of the State Government during the previous, current and ensuing
years. Budget consists of the following parts:
Part I : The
Consolidated Fund
Part II : The
Contingency Fund
Part III : The Public Account
Part I The Consolidated Fund comprises of :
1.
Revenue
2.
Capital
3.
Public Debt, Loans and Advances etc.
Revenue
Account deals with Taxes, duties, fees, fines and penalties, revenue from
Government estates, receipts from Government commercial concerns and other
miscellaneous items, and the expenditure
therefrom. The capital account
deals with expenditure usually met from borrowed funds with the object of
increasing concrete assets of a material character or of reducing recurring
liabilities such as construction of buildings, irrigation projects etc.
Public debt, loans and advances deals with the internal debt of the
State Government.
Part II Contingency Fund (Para 96)
The contingency fund has been create
under State Law enacted under Article 267 (2) of the constitution of India to
make advances for meeting unforeseen and unavoidable urgent expenditure
including expenditure on “New Service”.
It is maintained in the form of an imprest. The corpus of this fund is Rs.25 crores. The contingency funds is placed at the
disposal of the Governor. The fund is held by the Finance Secretary to
Government. Advances form this fund will
be made for the purpose of meeting expenditure not contemplated in the Budget
subject to authorisation of such expenditure by the Legislature
subsequently. All expenditure financed
from the contingency fund in the first instance should be submitted to the
Legislature at the first session meeting
immediately after the advance is sanctioned and thus the advance made from the
Fund will be resumed to the Fund (vide Appendix 14 – Kerala Contingency Fund
Act & Rules).
Part III: Public Account
The Public
Account deals with transactions on Public moneys relating to deposits,
advances, remittances and suspense. It
is meant to record transactions relating to debt (other than the debts included
in the consolidated fund). In respect of
the transactions of the Public Account the Government functions as Banker and
incurs liability to repay the moneys received.
Moneys lying in the Public Account do not belong to government as they
have to be paid back at some time or other.
The Public Account consists of ;
1.
Small savings
2.
Reserve Funds
3.
Deposits and advances
4.
Suspense & Miscellaneous
5.
Remittances
6.
Cash Balance.
Structure of Accounts: There is a six tier classification of transactions-
I tier
(Sector) indicates broad grouping of functions/service
II tier
(Major heads) indicates the functions of the government such as
Agriculture, Education, Health etc. Each
head is alloted a Code Number which is a four digit arabic number.
III tier (Sub
major head): 2 digit number 01-99
IV tier
(Minor heads) is a head of account subordinate to a major head of account
to denote various plan and non-plan programmes under each function.
V tier (Sub
Head) is a head subordinate to a minor head to denote the scheme or
activity undertaken.
VI tier
(Detailed Head): this head of
account indicates the nature of form of expenditure such as salaries, wages,
office expenses, travel expenses, rent major works, minor works etc.
Major heads are
arranged in blocks as follows:
Major
Head Block
1. Revenue Receipt : 0020
to 1999
2. Revenue expenditure : 2011
to 3999
3. Capital Expenditure : 4011 to 5999
4. Public Debt : 6011
to 6010
5. Loans & Advances,
inter-state
settlement and
transfer
to contingency
fund : 6011 to 7999
6. Contingency Fund : 8000
7. Public Account : 8001
to 8999
The codification pattern is evolved
in such a manner that the first digit indicates whether major heads fall in the
receipt section or expenditure section on revenue, or capital account or loans
and advances and public debt or public account section. The last two digits will be the same for the
corresponding major heads denoting the same functions.
Example
Major head
receipt
|
Major head expenditure
|
Major head
capital
|
Major head
loan
|
0210 Medical
& Public Health
|
2210 Medical
|
4210 Medical
|
6210Medical
|
0213 Housing
|
2213 Housing
|
4213 Housing
|
6213 Housing
|
1055 Road
transport
|
3055 Road
Transport
|
5055 Road
Transport
|
7055 Road
Transport
|
Head
of Account
“A. General
Service – 2029 Land Revenue (00-101) Collection Charges 99 Village
Establishment- 01 Salaries” is a head of account. This can be written as “A 2029-00-101-99
Salaries” also.
A General Services - 1st
tier Sector
2029 Land Revenue - 2nd tier Major Head
00 - 3rd tier sub major head
101 Collection charges - 4th tier Minor Head
99 Village Establishment - 5th
tier Sub Head
01 Salaries - 6th tier Detailed Head
PREPARATION OF THE BUDGET
The preparation
of the Budget Estimates involves three stages:
(1)
Preparation of the estimates by the Heads of
Departments (Chief controlling Officers and Estimating Officers) based on the
estimates submitted by the Regional/District Officers.
(2)
Scrutiny of the Budget Estimates by –
(a)
The Administrative Department
(b)
The Finance Department
(3)
Final consolidation of estimates in the Finance
Department before presentation to the Legislature.
The
Heads of Department and other Estimating Officers should submit the estimates,
in duplicate to Government, one copy to the Finance Department and the other to
the Administrative Department of the Secretariat, on the following prescribed
dates:
Non-plan
not later than September 15
Plan
later than November
30
Revenue
later than November 30
NON-PLAN ESTIMATES
Part I Estimates
are prepared on the basis of standing sanctions. Budget estimate of revenue should be based on
existing rates and expenditure to be incurred by virtue of existing laws, rules
and orders.
Part II
Estimates are estimates of new expenditure or of abandonment of an existing
source of revenue.
Note (i) Proposals for additions to cadres of
Services or posts permanently or temporarily.
(ii)
Additions to cadres of subordinate services to deal
with normal increase of work.
(iii)
Temporarily additions to Public Works Department for
execution of original work in progress.
Points to be
borne in mind while estimating.
(1) Salaries:
Provision should include pay and
allowances in all forms, of offices and staff except TA. No separate provision for leave salary to be
provided. Provision should not be made
normally for posts kept in abeyance.
Provision should be made only for the staff to be on duty for the year
and not for the sanctioned strength.
Provision for the month of March
will be made in the budget estimate of the following year.
Details of officers and
Establishment should be furnished to verify calculations. Permanent and temporary staff may be
distinguished in the Number statements in Form A. form 3 is used for providing fixed
allowances, rates of allowances etc.
(2)
Travel Expenses: The estimates should be
supported by the actual expenditure for the past three years and abnormal
increase in the estimated budget year should be convincingly explained.
(3)
Office Expenses: Office expenses include all
contingent expenditure including purchase and maintenance of staff car. The provisions proposed against each
item of expenditure should be supported
by statements indicating the requirements for component items based on the
actual of the past three years.
(4)
Major Works: Major works are works the estimates
cost to which exceed Rs.5.00 lakh. The
PWD and forest Department should furnish details of the works in progress.
(5)
Minor works: Minor works the cost of which do
not exceed Rs.5.00 lakh
(6)
Provision for Stores should be estimated on the
basis of the past consumption, stock in hand and forecast of requirements for
works during the coming year.
(7)
Decretal claims are charged items of
expenditure. These are proposed for
satisfying court decrees, considering the suits those are taken to court and
the unforeseen expenditure arising from court decrees.
(8)
Inter-departmental adjustments and adjustments
between different heads of account.
Adequate provision should be proposed in the original estimate itself as
no supplementary demand could be made justifiably.
Note (i) The
estimate should be close. The estimate should be as accurate and realistic as
possible. The tendency to under-estimate
revenue and over estimate expenditure should be totally avoided/.
(ii)
the estimate should be on cash basis. The estimate should only consider the
anticipated actual receipts and payments during the year including arrears of
previous years. There is no carry over
system of sanctioned sum for subsequent financial year.
(iii)
Lump sum provision should be avoided.
(iv)
Estimates should be rounded to the nearest thousand.
(v)
Provision for losses, if any, should be provided only
with prior sanction of Government.
Explanatory
Memorandum
Paras 30 and 51
(c ), Details like govt. properties or assets proposed to be transferred free
of cost or old at concessional rates to Bodies/Institutions/parties and
particulars of Govt. properties leased out at subsidised or concessional rates
of rent etc. are furnished in the Explanatory Memorandum of the Budget. The Explanatory memorandum also indicates the
nature of the various items of receipts and expenditure included under each
head and explain variations between the budget estimates and the revised
estimates of the current year and the budget estimates of the current and coming
years.
Plan Schemes
(Para 16)
Estimates for Plan schemes are
prepared not as in Parts – I & II under Non-plan. A single consolidate estimate in the
prescribed form comprising both existing/continuing and new schemes need be
proposed taking into account the outlay tentatively fixed for each scheme
included in the Five Year Plan for the year.
In respect of new schemes etc. details and explanatory notes should also
be furnished.
Union
(Agency) Subjects: (Para 52)
The State Government at present,
administers the following subjects as the agent of the Union Government.
(1)
Registration and surveillance of foreigners
(2)
Deportation of foreigners
(3)
Indo-Pakistan/Indo-Bangla Desh Passport work
(4)
Payment of Political Pension from central revenues
(5)
Administration of central Acts such as Explosives Act, Petroleum Act, Indian Arms
Act, Rice Milling Industry (Regulation) Act, etc.
The
annul estimates in respect of (1) to (3) are forwarded by the Home Department
to the Union Ministers concerned. As
regards item (4)it is based on no estimates but based on the annual payments
agreed to, by debit to central funds. In
respect of item (5), no estimate need be furnished from 1967-77 as receipts are
credited directly to State section of the accounts.
Revised
Estimate Para 20
Revised Estimate is an estimate of
the probable revenue and expenditure of the current financial year, under the
various heads, framed during the course of the year, based on the actual
transactions recorded for the first five months and the anticipation for the
rest of the year (seven months). Revised
Estimates makes no provision for any expenditure ie, a provision if fixed in
excess of the Budget Estimates provide for the current year, does not give any
authority to incur so much of that provision.
That much can be incurred only after
proper sanction by way of re-appropriation or by supplementary demand for
grant, even if they are fixed with reference to subsequent schemes/proposals
sanctioned by Govt. The Revised Estimate
is fixed for information to indicate how far the expenditure already sanctioned
will be worked up and it does not supersede the Budget Estimate.
The Revised Estimate helps to arrive
at the approximate closing balance and also serve as best guide for the fixing
of the next year’s budget estimates.
Therefore the Revised Estimate has to be fixed in accordance with:-
1.
The transactions as recorded for the first five months
2.
The expenditure that are likely to be required for the
rest of the year.
3.
The new schemes sanctioned in the course of the year
4.
Additional funds already obtained
5.
New heads of account opened during the year and
6.
Other relevant factor.
Control
of Expenditure
When
the budget is passed the grants are distributed among the various controlling
and disbursing officers. A Chief Controlling
Officer may either retain with him the whole of the appropriation among his
sub-ordinate controlling officer who may distribute the funds among the
disbursing officers subordinate to them.
The detailed head is taken as the unit of appropriation. The unit of appropriation helps not only in
attaching the progress of expenditure under each unit but also ensure that the
expenditure does not exceed the grant as a whole. The control of expenditure is exercised by:-
1.
the Legislature
2.
the Executive
3.
Audit
Appropriation
Control
Control of
expenditure and appropriation control have the same objective viz: to ensure
that there is no unauthorised excess over appropriation or unsurrendered saving
at the close of the financial year.
Appropriation control is attended to by the Finance
Department in the Secretariat, in three different ways;
1.
Transfer of appropriation from one unit to another
(Re-appropriation)
2.
Obtaining additional appropriation (Supplementary
grant)
3.
Withdrawal of excess appropriation (resumption)
Re-appropriation: (Paras 83-86) means the transfer of
funds from one unit of appropriation to another such unit. The estimates included in the schedule of
expenditure authorised b y the appropriation Act are not rigid. As the estimates are prepared quite early
before the financial year, variations between units of appropriation become
inevitable. It may become necessary to
spend more on one item and less on another.
I such cases, necessary transfer of funds are to be made within the
grant. No re-appropriation is
permissible between voted and charged items.
Details regarding the powers and procedure are enumerated in paras 83 to
84. Re-appropriations should be made in
multiples of Rs.1000/-.
Supplementary
grant: (Paras 87-89)
Supplementary
grant means the sum sanctioned by the Legislature over and above the among
already sanctioned during the current financial year. If and when the amount authorised by the
Appropriation Act is found insufficient for the purpose of that year or when an
unforeseen item of expenditure has arisen upon a new service for that year,
another statement laid before the
Legislature including the amounts if any on charged expenditure for the
approval of the Legislature. The
supplementary demand for grant is also passed on the same manner as the budget.
Excess Grant
(Para 97) Generally no
expenditure in excess of the grants sanctioned by the Legislature should be
incurred. But sometimes the expenditure
may exceed the grants. Such excess
expenditure noticed after the close of the financial year has to be regularised
by moving a demand for such excess grant.
Special
procedure for PW and Forest Departments
The claims of the PW and Forest
Departments are met not by presenting bills at treasuries but by drawing
cheques on them. These Departments
compile their own accounts and submit to the Accountant-General. Details regarding the procedure is given in
paras 79 & 80.
Appropriation
Control – Public Accounts Committee –
Estimates Committee
Public
Undertaking Committee
In a democratic form of Government,
the Executive and the Legislature have well-defined prerogatives and spheres of
responsibility. It is the responsibility
of the Executive to form late demands for money and it is the prerogative of
the Legislature to grant the money required for public expenditure. Legislature has to be assured that the
appropriations were spent by the executive
for purposes for which they were granted. This legislative control of expenditure is
ensured by the provisions of audit of public accounts by an independent
statutory authority (the Comptroller & Auditor General) and the subsequent
examination of his report by Public Account Committee or the Committee on
Public Undertakings. To examine the
estimates presented before the House there is an Estimates Committee also.
Review of the
Budget consists of –
(e)
Audit of accounts by the Accountant-General and
preparation and submission of the Audit Report.
(ii)
Scrutiny of the Audit Report by the Public Accounts
Committee/Public Undertakings Committee
(iii)
Detailed examination of the Estimates by the Estimates
Committee.
Audit Report
(Paras 98 & 99)
Audit Report is
a report on the audited accounts of the Government for a financial year prepared by the Comptroller
& Auditor General and presented to the Governor of a State, to be laid
before the Legislature.
Audit Report on Appropriation Accounts:- It contains:-
(1)
The comment on the regularity and propriety of
expenditure
(2)
Results of audit of all accounts of Govt., commercial
or quasi-Govt., concerns and –
(3)
Irregularities discovered during the course of audit of
receipt and stores and stock.
Audit Report on Finance Accounts
It deals with
the entire receipts and disbursement of a govt., for a financial year. It contains:-
1.
Revenues and capital accounts
2.
Accounts of Public Debt and of the liabilities and
assets of govt.
3.
Revenue or balance under debt and remittance heads.
Public
Accounts Committee (para 108)
Public Accounts Committee consists of eleven members
elected by the Assembly from among its members with a non-official Chairman
appointed by the speaker. The members
are elected for a period of two years.
Elections are made after the commencement of the financial year. The procedure for the internal working of the
committee is enumerated in Rule 179-210 of the Procedure & conduct of
Business in the Legislative Assembly.
Functions of
the Committee
1. The Public Accounts Committee
scrutinises the Appropriation Accounts to see-
(i)
That the moneys disbursed by Govt. are duly provided
for in the budget and are applicable to the purpose for which they were
intended.
(ii)
That the expenditure conforms to the authority which
governs it.
(iii)
That every re-appropriation has been made by a
competent authority.
2. To
examine the accounts showing income and expenditure of the commercial
undertakings of govt.
3. To
examine the results of audit done under prescribed audit of consent audit.
4.
To consider the results of audit of receipt and stores
and stock
Committee on
Estimates; (Para 109)
The
Committee on Estimates consists of eleven members elected by the Assembly from
among its members after the commencement of the financial year for a period of
two years. The primary function of the
Committee is to make a comprehensive examination of the expenditure incurred by
particular departments in relation to the resource available. Ensuring best economy is the ultimate aim of
the Committee.
Functions of
the Committee on Estimates
(a)
To report what economies, improvements in organisation,
efficiency or administrative reform, consistent with the policy underlying the
estimates, may be effected.
(b)
To suggest alternative policies in order to bring about
efficiency and economy in administration.
(c)
To examine whether the money is well laid out within
the limits of the policy implied in the estimates and
(d)
To suggest the form in which the estimates shall be
presented to the Assembly
Committee on
Public Undertakings (Para III)
The Committee on Public Undertakings is like the Public
Accounts Committee, eleven members with a chairman. It was first constituted in November 1968 to
examine the working of the public undertakings.
The Committee shall be constituted as soon as the commencement of the
financial year.
* * * * *
NEW SERVICE
The
term New Service, which appears in Article 115 (1) & Article 205 (1) has
not been clearly explained therein. New
Services means a service, the expenditure on which is not contemplated in the
Annual Financial Statement for the year and for which a supplementary statement
of Expenditure should be presented in the Legislature. Until a Supplementary grant is
obtained, expenditure on a New Service if at all incurred, should be met out of an advance from the Contingency Fund
(para 96 Article 267 (2). The criteria
for deciding whether a service is 'New' are laid down by Govt. from time to
time on the advice of the Public Accounts Committee. (See para 94 Ammended -
GO(P)1803/99/Fin dated 15-9-1999 – Appendix 13).
A New Service may be a new form of
service or a new instrument of service.
Eg. If Land
Board is newly created to implement the land reform measures that is New
Service.
In every State there are
Hospitals. If a new hospital is decided
to be established this is not a new form
of service, because hospitals already exist.
It is however, a new instrument of service.
A new form of service involve
adoption of a new policy, the provision of a new facility, or the alteration in
character of an existing facility and is looked up on as a New Service.
A new instrument of service is
treated as a new service only if the expenditure involved is relatively large.
No
expenditure should be incurred on a New Service even if there are savings with
in the grant, before a supplementary grant
is thus obtained if the
expenditure can be met fully or partly from savings within the grant. A token sum (Rs.1,000/-) or the balance
actually required as the case may be need alone be shown in the Supplementary
Demand for Grants. Details of the New
Service including its financial implications should be given as a foot note.
* * * * *