Finance Department

Policy Note - 2006 - 2007

Demand No. 16

The Finance Department is vested with the responsibility of managing the public finances of the Government of Tamil Nadu. It has an important role in the preparation of the State Budget and presenting it to the Legislature every year. The Finance Department being the custodian of the State Exchequer has the overall responsibility of balancing receipts and payments and has to ensure that debt obligations are also met. The Finance Department makes a critical scrutiny of the proposals of the Departments and evaluates the proposals with reference to needs, cost effectiveness, budget provisions, financial procedure etc., keeping in mind the importance of balancing receipts and expenditure and achieving the fiscal objectives of the Government.

2. The following seven Departments are under the administrative control of Finance Department.

1) Treasuries and Accounts Department.

2) Local Fund Audit Department.

3) Small Savings Department.

4) Government Data Centre.

5) Co-Operative Audit

6) Internal Audit and Statutory Boards Audit Department.

7) Directorate of Pension.

3. The functions of the above Departments are as follows.

TREASURIES AND ACCOUNTS DEPARTMENT

4. The Treasuries and Accounts Department was formed on 1.4.1962. It has 9 pay and Accounts offices, 30 District Treasuries, 203 sub-Treasuries, 3 Regional Joint Director of Treasuries and Accounts, one Pension Pay office at Chennai and one Assistant Superintendent of stamps with the Headquarters office of the Commissioner of Treasuries and Accounts at Chennai within its fold. Its main function is disbursement of salaries and pensions to all the Government servants and pensioners and disbursement of all moneys sanctioned by the Government for implementing various scheme by the Departments of the Government. It is also responsible for the receipt of money due to Government and rendering detailed accounts therefore to the Accountant General. The Treasuries and Accounts Department also looks after proper distribution of stamps used in Registration. The Tamil Nadu Government Employees Health Fund is being operated by Treasuries and Accounts Department. Valuables and Articles deposited by Government Departments are kept under safe custody in the Treasuries.

5. This department has been identified as one of the mission mode departments for implementation of e-governance initiatives over a period of 3 years commencing from 2004-2005 at an outlay of Rs.15 crores. A sum of Rs.5 crores has been provided in the Revised Budget Estimate for 2006-2007 for the above scheme. A state of the art Central Hub for the e-governance will be established in Chennai.

6. Certain initiatives such as implementation of Electronic Clearance System for payment and Introduction of e-office in the Commissionerate have already been taken up. Electronic Clearance System for Salary payment has been extended to all District Headquarters Treasuries. The office of the Commissioner of Treasuries and Accounts is being converted as a modular office. Automated Treasury Bill passing system has been introduced in Karur and Theni Districts as well as in the PAO, Secretariat on pilot basis. Mustering of pensioners through video-conferencing is under consideration.

7. Out of total 203 Sub-Treasuries in the State, 201 Sub-Treasuries have been converted as banking Sub-Treasuries. Efforts are being taken to convert the remaining 2 non-banking Sub-Treasuries also (one at Radhapuram in Tirunelveli District and other at Ottapidaram in Tuticorin District). These will also be converted into banking Sub-Treasuries on receipt of concurrence of RBI.

8. To avoid physical handling of cash and to avoid wear and tear of the Bills, Cheque system of payment was introduced in all the District Treasuries has now been extended to 168 sub-treasuries having transaction with the State Bank of India.

9. A software developed in-house and certified by NIC for covering the General Insurance Scheme (GIS) of All India Service of Tamil Nadu cadre is on test-run in the office of the Special Commissioner and Commissioner, Treasuries and Accounts. Under the Scheme, subscription of GIS of All India Service is being recovered from their salary every month and repaid with interest on their retirement. The recovery details are collected from various Treasuries every month. A data base has been created containing the personal details of the Officers including the details of nominees. The monthly recoveries are also entered into the data base. Computerization of the data facilitates quicker settlement of the claims.

10. The operations under Scheme of Tamil Nadu Government employees Health Fund administered by this office have been fully computerized and claims as and when received are being settled, according to seniority of claim. Efforts are being made to receive claims on line.

11. Computerized inspection of treasuries has also been introduced with e- inspection software developed in-house and certified by NIC.

12. A proposal to modernize the Pension Pay Office to make it senior citizen friendly is under active consideration.

LOCAL FUND AUDIT DEPARTMENT

13. The Local Fund Audit Department is entrusted with the task of statutory audit of urban and rural local bodies, Universities, Market Committees, Local Library Authorities and other miscellaneous institutions under the provisions of the respective Acts governing the institutions.

14. The following are the institutions under the audit control of Local Fund Audit Department.

Concurrent Audit of Urban Local Bodies, Panchayat Raj Institutions and Universities :

15. The "Concurrent Audit System" is in vogue in all the Corporations, 19 Municipalities and 14 Universities. The audit units are stationed in these institutions. The concurrent audit system was introduced in all the 385 Panchayat Unions from the year 2000-01. Audit Parties consisting of one Inspector and One Deputy Inspector / One Assistant Inspector for every three or four Panchayat Unions with headquarters at select 119 Panchayat Union Offices have been formed for this purpose.

16. The audit objections noticed during the Concurrent audit of these institutions are communicated to the institutions concerned then and there in the form of "Audit Slips" by the audit parties, and after verifying the replies received, the objections are admitted and the Audit Reports issued. The replies furnished to these audit objections duly rectifying the defects are verified by the audit parties with reference to the concerned records and registers locally and the objections settled.

Test Audit of Village Panchayats :

17. The Test Audit of 20% of the total Village Panchayats is being done by this Department. Accordingly, 2524 Village Panchayats are audited by this department. In addition , Test audit of 2% of Village Panchayats based on the receipts, value of works and specific complaints forwarded by Director of Rural Development has to be taken up by this department.

18. The audit of other instititutions like Town Panchayats, District Panchayats, Market Committee, Local Library Authority and other Miscellaneous Institutions are taken up annually at the local level on receipt of Annual accounts.

Accrual Based Accounting System in Urban Local Bodies:

19. The existing Cash Basis system of Accounting in Urban Local Bodies has been replaced by implementing the Accrual Based System of Accounting in the Urban Local Bodies in two phases from the accounting year 1999-2000 and 2000-01. This system was introduced in Town Panchayats with effect from 2002-2003.

20. The object and scope of this system is to maintain the account on Generally Accepted Accounting Principles with the preparation of Income & Expenditure Accounts to know the financial operation during a year and a Balance sheet to know the true financial status of Urban Local Bodies at a given period of time.

21. This system enables the Urban Local Bodies to identify their Assets available with due valuation methods and incorporated in accounts through Asset Register. Because of the improved method of accounting in Urban Local Bodies, financial institutions have come forward to provide financial assistance for the capital projects thereby supplementing the funds available with them.

22. Tamil Nadu has earned the distinction as the first State in India for the sucessful implementation of accounting reforms in Urban Local Bodies from 2000-01.

New Accounting Format adopted for Rural Local Bodies

23. New Accounting formats as recommended by Eleventh Finance Commission has been finalised in consultation with C&A.G.(Audit) in co-ordination with the D.R.D. and a software has also been developed in respect of Panchayat Raj Institutions. After consultations with the Director of Rural Development, the approval of the Principal Accountant General has been obtained for the new accounting formats. The training of personnel for maintaining the accounts utilising computers in the New Accounting Format is being arranged by Director of Rural Development.

24. This department has been entrusted with the maintenance of ‘Budget Master’ for the new format of accounts developed by Comptroller and Auditor General of India.

Certification of Annual Accounts of Local Bodies

25. Certification of accounts of local bodies is a very important issue and internationally also it is accepted that accounts have no meaning without proper certification. Accordingly the annual accounts of urban local bodies are now certified by the Officers of the Local Fund Audit as per Govt. Orders in G.O.Ms.No. 93/Fin(FC-IV)Department, Dated 28-03-2003, consequent to the implementation of the Accrual Based Accounting System in the Urban Local Bodies.

Stage of Audit :-

26. The stage of audit of various institutions under the control of this department as on 30-6-2006 is as given below: