Abstract
This chapter covers the “financial and accounting” aspects of municipal management. It explains where the municipalities’ financial resources come from and reviews their expenditures since the 1990s. The analysis undertaken provides a chronological overview of the changes that have taken place within public services and how small towns’ local governments’ ways of working have changed since decentralisation. As with the roads service, it steadily became apparent that studying this aspect provided an ideal opportunity not only to assess the independence of the municipalities’ budget decisions with a view to quantifying disparities in the support provided to the municipalities by the state but also, and more generally, to better assess the repositioning of the municipalities within the institutional architecture that has been taking place since the 1990s. This comparative perspective thus made it possible to analyse the differences in the municipalities’ financial management and gain an understanding of their relative empowerment since implementation of the reform.
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- 1.
The double-entry accounting system can be set out using a “T-account”, where the left side of the “T” account is called a “debit” and the right side a “credit”. This system makes it easy to check financial reports as the T-accounts can be analysed to identify any errors or omissions.
- 2.
“Accrual” is a generic term that describes a revenue or expense that is recorded as they occur regardless of whether or not any payment (in or out) has actually been made (GRET-CGAP 2007 pgs. 12, 13, 60).
- 3.
A government organisation responsible for advising and auditing the accounts of municipal, regional and central governments http://www.cag.gov.in/ (accessed 26 November 2015).
- 4.
The main aspects clarified through this draft law include:
-the essential role played by the State Finance Commission in municipal finances;
-the type of administrative penalties to be imposed for municipalities in infringement of the regulations;
-the debt limit for municipalities;
-the standard accounting rules;
-the methods to be used for collectively developing municipal budgets;
-the requirement for municipalities to prepare an inventory of infrastructure and assets;
-the advantages to local governments of preparing their own development plan;
-the need to include the private sector in constructing, financing and managing public services.
- 5.
- 6.
Interview conducted in November 2009 with the accounts department of the Directorate of Local Bodies in Lucknow.
- 7.
For example, the clerk in Kushinagar does not know where to put certain expenditure items and does not always know what some of these items refer to.
- 8.
A professor and expert on this topic from the School of Planning and Architecture in New Delhi told me that the highly erratic accounting data available at the regional and national levels in no way reflects the financial situation at the local level (informal interview, February 2011). This observation was subsequently confirmed by one head of the National Institute of Urban Affairs (interview in January 2013).
- 9.
The malpractice inherent in the financial management of these towns meant that the Mayor and Executive Officer were often unwilling to release these documents out of fear that any irregularities would be discovered as they would be held primarily responsible.
- 10.
The drafting and compilation of the financial reports produced for this research took several weeks as the accounting records could not be used in their original state.
- 11.
The details of this category were not always available for the period from 1991–1992 to 2007–2008 and are not listed here to ease understanding (certain findings were subsequently clarified following a review of the more detailed forecast tax revenue included in accounts for the 2008–2009 financial year).
- 12.
Idem, this can include deductions from property transfers, income from renting out municipal land or fees received for building permits or fishing licences.
- 13.
This official term refers to all locally generated fiscal revenue (the municipality’s own resources).
- 14.
This term refers to revenue received from outside the municipality and includes financial transfers devolved to the municipality by higher levels of government or provided by external donors.
- 15.
See Figure ‘r’: Average rise of local and external revenue in municipal budgets in rupees in the annex.
- 16.
Interview held in Phulpur in February 2009.
- 17.
In one respect, this echoes the political voice hypothesis (formulated by Hirschman in 1970, among others) which presents government decision-makers as potential Leviathans whose predatory behaviours can be regulated through the intermediary of the electoral system.
- 18.
These situations also echo the yardstick competition hypothesis that Salmon applied to analysis of political behaviour which gives voters the opportunity to compare the performances of their elected officials with those of their neighbours (Salmon 1987) or, in this instance, with those of the previous incumbents.
- 19.
Crisil describes itself as “a global analytical company providing ratings, research, and risk and policy advisory services” (cf. www.crisil.com).
- 20.
In Kushinagar, there is no mention of this fund in either the financial data for 1991–1992 to 2007–2008 or in the 2008–2009 municipal budget.
- For the municipality of Siddarthnagar, it only appears in 2001–2002 to 2005–2006, for a total of 8,545,000 rupees.
- In Chandauli, there was no budget heading reserved for this, with the exception of 2008–2009, when 2,000,000 rupees was requested.
-In Phulpur, although there is no mention of this in the revenue breakdown, it would appear that, between 2005–2006 and 2007–2008, 1,677,382 rupees was spent on revolving fund repayments and a further 8,000,000 rupees was set aside for this for 2008–2009. It can thus be assumed that Phulpur owes at least 2,477,382 rupees to the revolving fund.
- 21.
It is important to note, however, that revolving fund repayments have been included in the Phulpur municipality budget since 2005–2006. This is as part of efforts to ensure the town achieves Ardash Panchayat status and thus will be able to obtain additional grants.
- 22.
The case of Chandauli and Siddarthnagar, both district headquarters, is a good illustration of this as, when comparing the four towns, Chandauli receives the least amount of regional transfers, whereas Siddarthnagar receives the most.
- 23.
Interview with the Finance Department in Lucknow, November 2009.
- 24.
A Nagar Panchayat can have no more than 15 wards, whereas a Nagar Palika has a minimum of 25 wards.
- 25.
According to the interview with Said Naja (and interim Chandauli) Executive Officer held in November 2010 in Chandauli Nagar Panchayat).
- 26.
The Pay Commission establishes the salary scale for (permanent and non-permanent) regional administration staff.
- 27.
Interview with the President of the Pay Commission held at the Lucknow Finance Department, November 2009.
- 28.
Interview with the Lucknow Finance Department, November 2009.
- 29.
“The standard public finance question takes subnational jurisdiction’s income as given and looks at the incentive effects of tax assignments and transfers. The second generation of fiscal federalism growth perspective examines the effect of the tax and transfer system to increase income (through public or private investment) […] the allocative efficiency of the tax system in a standard public economy sense is of second importance to fiscal autonomy on the revenue side” (Singh and Srinivasan 2006, p. 5).
- 30.
His study is based on an analysis of the recent budgets of 29 small towns in Rajasthan, Odisha, Andhra Pradesh, Haryana, Himachal Pradesh, Madhya Pradesh, Chattisgarh and Bihar (but not Uttar Pradesh).
- 31.
planning.up.nic.in/annualplan0304/part1/Chapter-09.htm [consulted on 15 January 2012].
- 32.
With the exception of cheques where the signature of one of the two representatives is sufficient (as, in theory, the budget documents authorising payment should already have been approved by both parties).
- 33.
The precise definition of these six main spending categories is provided at the start of this chapter, in the section outlining the data collected.
- 34.
This was the year prior to elections and this figure supports rumours that funds were misappropriated to finance the Mayor’s election campaign.
- 35.
Details of this expenditure was documented in a written exchange between the Mayor and the District Magistrate following a complaint from the Executive Officer, who accused the Mayor of misappropriating public funds and requested that a First Investigation Report be initiated to review his suspected corruption.
- 36.
These include responsibility for the development of parks and similar public places, the promotion of aesthetic, educational and cultural activities, cremations and cemetery management, animal welfare, management of birth and death registers and public amenities (public lighting, bus stops, etc.).
- 37.
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de Bercegol, R. (2017). From Dependence to Artificial Autonomy: Low Financial Resources of Small Municipalities. In: Small Towns and Decentralisation in India. Exploring Urban Change in South Asia. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2764-9_5
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