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GOVERNMENT OF KERALA
Law (Legislation-A) Department NOTIFICATION *
No. 11671 /Le¢g.A2/93/Law. Dated, Thiruvananthapuram, [1th May, 1994. 24st Vaisakha, 1916.
The following Act of the Kerala State Legislature is hereby published for general information, The Bill as passed by the Legislative Assembly received the assent of the Governor on the 6th day of May, 1994, By order of the Governor,
E. K. REGHURAMACHANDRAN,
Special Secretary (Law). * Published as Gazette Extrzordinary No. 446 Dated Uth May 1994. GPT. 4/1003/96/MC. .
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THE KERALA LOCAL FUND AUDIT ACT, 1994
Arrangement 'of Sections
SECTION:
1, Short title, extent and commencement.
2. Definitions.
3. Appointment of Director.
4. Aadit of accounts,
5. Power of audit of accounts of certain authorities, bodies, instituttons _ or funds.
6. Audit of accounts of stock and stores and verification of cash balance.
7. Manner in which audit is to be conducted. -8. 'Auditor to be deemed-to be public servant. '3. Liability of local-authorities to prepare and present accounts for audit,
10, Completion of audit of accounts.
11, Power of auditor to require production of accounts and attendance Of persons.
12, Penalty for disobeying requisition under section 11. 13, -Audit reports to be sent to certain officers and bodies as Government Riay direct.
14, Contents of audit report.
15, Procedure to be followed after getting the report of the Director under section 13,
16. Auditor to surcharge illegal payments and loss caused by negligence or misconduct.
17, Powers and duties of the Director.
18. Delegation of powers and functions.
19. Payment of charges for audit,
20. Power to dispense with detailed audit.
21. Defalcation or loss in money or stores to be reported by the Executive authority.
22. Act to override ather enactments, 23, Laying of audit report. 24, Protection of action taken in good faith.
25. Bar of jurisdiction of civil courts.
26. Special provision for pending audit. -97. - Gognizance of offences. '98, 'Power of Government to make rules. 99, Power to remove difficulties.
30. Savings.
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ACT 14 OF 1994
THE KERALA LOCAL FUND AUDIT ACT, 1994:
An Act to provide for and to regulate the audit of the local funds under tle management or control of certain local authorifies in the State of Kerala. Preamble -WHEREAS it is expedient to provide for and to regulate the audit of the local funds under the management or contrel of certair local authorities in the State of Kerala;
BE it enacted in the Forty-fifth Year of the Republic of India as follows37—
1. Short title and commencement—(l} This Act may be called the Kerala Local Fund Audit Act, 1994.
(2) It extends to the whole of the State. of-.Kerala.
(3) It shall come into foree-on such date asthe Government may, by notification in the Gazette, appoint.
2. Definitions —In this Act, unless the context. otherwise requires,—
(a) 'auditor? means the Director of Local Fund. Audit and includes any other officer of the Local Fund Audit Department empowered by the Director to perform the functions of an auditor under this Act:
(b} 'concurrent audit? means continuous audit of accounts of a local authority by auditors specially appointed by the Govern- ment by virtue of the powers conferred on them by the relevant enactments ;
(c) 'detailed audit' means. an audit of accounts of the entire tran- sactions for the whole year or for the period specified by the Director ;
{d) 'Director? means the Director of Lecal Fund Audit and includes any person empowered by the Government to perform the functions of the Director of Local Fund Audit;
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(e) 'Executive authority' means the principal executive officer of a Pp p local authority;
(f) 'local authority' means—-- (i} a Municipal Corporation constituted under the Kerala Municipal Corporations Act, 1961 (30 of 1961) or a Municipality constituted under the Kerala Municipalities Act, 1960 (14 of 1961) or Township specified in section 2 of the Guruvayur Township Act, 1961 (43 of 1961) or a Panchayat constituted or deemed to have been constituted for the local administration of a, Panchayat area under the Kerala Panchayats Act, 1960 (32 of 1960) or a Panchayat or a Municipality or a Metropolitan Planning Committee or a District Planning Committee constituted in the Statein accordance with the provisions in Part IX and Part [XA respectively, of the Constitution of India;
(ii) any other authority, body or institution established by or under any law or orders of the Government and responsible for the administration of a local fund;
(g) 'local fund' means—
(i) a fund administered by a local authority which, though not part of a Government Department, has been established by or under a law or orders of the Government, and
(ii) any other fund which the Government may, by notification in the - Gazette, declare to be a local fund for the purpose of this Act;
(h) " 'prescribed' means prescribed by rules made under this Act;
(i) 'Schedule? means the Schedule appended to this Act;
(j) 'special audit? means an audit of accounts pertaining to a specified ' item or series of items requiring thorough examination, and includes re-dudit of the accounts for a period already covered by audit as specified by the Director;
(ky 'State? means the State of Kerala;
'l) 'surcharge' means an amount for which the auditor, in exercise of the powers vested in him under this Act, makes a person liable for loss, waste, misapplication or misappropriatiaa of any money or ther property belongiug to any local authority. ©
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3. Appointment of Director—-(1) The Government shall, by notification in the Gazette, appoint a person, having such qualifications as may be prescri- bed, to be the Director of Local Fund Audit in charec of the audit of accounts of a local authority or a local fund included in the Schedule.
(2) The Government may appoint such other officers in the Local Fund Audit Department to assist the Direcicer in the exercise of his powers and the discharge of his functions and dutics under this Act.
(3) Allofficers and staff of the Local Fund Audit Department shall be subordinate to the Dircctor who shal! have general superintendence and conirol over them in the nerformance of their functions under this Aci or the rules made thereuneicr.
(4) Notwithstanding anything contained in sub-section (1} —
(a) the Examiner of Local Fund Accounts in the State funciioning — as such immediatcly preceding ihe conunencement of this Act shall be deemed to be the Director appointed under sub-section (1) and shall continue to function as such Director till a new Director is appointed undcr that sub-section; and
(b} the Joint Examiner of Local Fund Accoun's and the Deputy Examiner of Local Fund Accounis functioning as such in the Loca Fund Audit Department of the State immediately preceding the commencement of this Act shall, atsuch commencement, be known as the 'Joint Director of Local Fund Audit' and the 'Deputy Director of Local Fund Audit' , lespectiveiy. 4+. Audit of eccounts—(1} Notwithstanding anything contained in any other law for the time being in force, but subject to the provisions of the Comptroller and Auditor General, (Duties, Powers and Condi'jons of Service) Act, 1971 (Central Act 56 of 1971), the Director shall, in the manner provided by or under this Act, conduct the audit of accounts of a local authority or a lacal fund included in the Schedule.
(2) Governmeni may, by notification in the Gazette and for reasons to be specified thercin, add any other authority, body, institution or local fund to the Schedule referrcd to in sub-section (1) 'and on the publicatien of the noti- fication, stich authority, body, institution or local fund shall be deemed to be added to the Schedule.
(3) No authority, body, institution or local fund included in the Schedule referred to in sub-section (1) shall be omitted therefrom except by the authority of a law made by the State Legislature,
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5. Power of audit of accounts of certain authorities, bodies, institutions or funds.—The Director may, with the previous sanction of the Government, and without prejudice to the provisions of sub-section (1) . of section 4, audit the accounts of any authority, body, institution or fund not included in the Sche- dule subject to such terms and conditions as may be agreed upon between the Director and the person responsible for the administration of such authority, body, institution or fund.
6. Audit af accounts of stock and stores and verification of cash balance.—(1) The auditor shali have authority to audit and report on the accounts of stores and stock kept by a loca! authority specified in the Schedule,
(2) The Director may, with the sanction of Government, seek the services of any tcchnical expert for the purpose referred in sub-section (1) if, in his opinion, it is necessary to do so,
(3) An officer not below the rank of a Deputy Director shali have authority to make surprise inspection of the stock and stores kept by a local authority specified in the Schedule.
(4) The Director shail have authority to verify the cash balance of the fund at the time of audit and inspection.
7. Manner in which audit ts ta be conducted.—The auditor shall conduct the audit annually and at such intervals as may be decided by the Director or may conduct concurrent audit of such of those local authorities as are found necessary under the provisions of any law governing them or as may be decided by the Director in consultation with the Government,
8. Auditor to be deemed to be public servant.—An auditor shall, for the purpose of powers and duties conferred and imposed on him by or under this Act, be deemed to be a public servant within the meaning ofsection 2! of the Indian Penal Gode (Central Act 45 of 1860).
9, Liability of local authorities io prepare and present accounts for audit.—(1) The accounts of a local authority or a local fund included in the Schedule relating to a financial year shall be prepared or caused to be prepared by the Exccutive authority, in such form and in such manner as may be prescribed, and presented for audit within four months of the close of that financial year.
(2) Where an Executive authority makes default in the preparation and presentation of accounts for audit within the period specified under sub- section (1), he shall be punishable, on conviction, with fine which may extend to three thoysand rupees but which shall not be less than ons thousand rapes:
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- Provided that the court may, for any adequate and special reasons to be 'recorded in the judgement, impose.a fine of less than one thousand rupees.
(3) No proceedings under sub-section (2) shall be taken by the Director without giving the person affected thercby an opportunity to shew cause, within fifteen days, why such proceedings should not be taken against him.
10. Completion of audit of accounis——The audit of the accounts prepared and presented for audit under section 9 shall be completed by the auditor within six months of the date of its presentation for audit, failing which the officer responsible for the audit shall be liable to be proceeded against under the provisions of the Kerala Civil Services (Classification, Control and Appeal) Rules, 1960.
ll. Power of auditor to require production of accounts and attendance of persons.—
(1) For the purpose of an audit under this Act, an auditor may,—
(a) require in writing, the production at the place of audit, such vouchers, statements, returns, correspondences, notes or any other -documents the perusal or examination of which he believes to be necessary for the elucidation of the accounts;
(b) require in writing, any employee of the local authority account- able for or having the custody or control of such vouchers, statements, returns, correspondences, notes or other documents or any person having directly or indirectly, any share or interest in any contract with or under the local authority to appear in person before him at the head office of that local authority or at the place of audit and answer any question and require any person so appearing to make and sign a declaration with respect to such document or to prepare and furnish any statement relating thereto; and
(c) in the event of any explanation being required from any officer or member of.a local authority, in writing, invite such person and shall in writing, specify the points on which his explanation is required.
(2) The auditor may, in any requisition made under sub-section (1), fix a reasonable period of not less than three days within which the said requisition shall be complied with.
(3) The auditor shall give notice in writing to the Executive authority of the institution concerned at least two weeks before the date on which he proposes to commence the audit:
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Provided that the auditor may, for special reasons to be recorded in writing, give shorter notice than two weeks or commence a special or detailed auclit without noticc, on the order of the Director,
(4) The auditor shall, in suitable cases, and if so required by Govern- ment, give public notice of the date and time of audit by publication in the notice hoard of the local authority to be audited and also in a newspaper in the local language having wide circulation in the area where it is situated and shall consider the objections, if any, made in writing by any person.
12. Penalty for disobeying requisition under section 1}.—Any person who wilfully neglects or refuses to comply with any requisition lawfully made upon him under clause (a) or clause (b) of sub-section (1) section 1] shall be punishable, on conviction, with fine which may extend to one thousand rupees:
Provided that before procecdings are taken, the Director shall call upon the person against whom the proceedings are contemplated to show cause, within fifteen days, why such proceedings should not be taken.
13. Audit reports to be sent to certain officers and bedies as Government may direct. —As soon, as practicable after the completion of the audit, but not later than three months thereafter, the auditor shail send to the local authority concerned a report on the accounts audited and examined by him and the copies of the report shall also be sent to such officers and such bodies as the Government may direct or as may be specified under the law governing that local authority.
14. Contents of audit report -—The auditor shall include in the audit report a statement of—
(a) every payment which appears to him to be contrary to law; fb) the amount of any deficiency or loss which appears to have been caused by the negligence or misconduct of any person;
(c) the cases of misappropriation or misutilisation of the local fund;
(d) the amount, if any, received which is required to be brouglit into account but has not been brought into account by any person; and
fe) any other material impropriety or irregularity which he has observed in the accounts.
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15. Procedure to be followed after getting the report af the Director under sections. 13.—(1} On receipt of areport under section 13, the Executive authority concerned shali either remedy the delects or irregularities which May have been pointed out in the report and send to the Director within two months.of the receipt of the report or within such period as may be speci- fied under the law governing the local authority, intimation of his having done so, or shall. within the said period, supply to the Director any further explanation as he may wish to make in regard to the defects or irregularities. {2} On receipt of such intimation or explanation, the auditor may, in respect of all or any of the matters discussed in his report— (a}. accept the intimation or explanation and drop the objection; or
(b) hold that the defects or irregularities pointed out in the report or any of them have not been removed or remedied.
(3) (a) The auditor shall send a report of his decision to the Executive authority concerned within two months from the date of receipt by him of the intimation or explanation referred in sub-section (1) or if no suck intimation or explanation is received, on the expiry of the period of two months mentioned in that sub-section.
(b) If the auditor holds that any defects or irregularities have not been removed or remedied he shall state in the report,—
(i) whether, in his opinion, the defects or irregularities can be regularised and, if so, by what method; —
(ii} if they do not admit of being reguiarised, whether they can be condoned and, if so, by what authority; and
(ij) whether the amounts to which the defects or irregularities relate should, in his opinion, be charged and, if so, against whom,
(4) The local authority concerned shall publish in its next admini- stration report, such portions of the report under section 13, dealing with defects and irregularities falling under clause {b) of sub-section (2) together with the explanation thereof, if any, given under sub-section (1) and the final report of the auditor thereon under sub-section (3). The report of defects and irregularities, the explanation thereon and the final report shall be open te inspection by the public at the office of the local authority for a period of ome month from the date of their receipt.
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(5) Nothing in this section or in section 13 shall preclude the auditor, at any time, from bringing to the notice of the Government or of any officer of Government for such action as may be necessary, any information which appears to the auditor to support a presumption of criminal misappropria- tion or fraud or which, in his opinion, deserves specia! attention or immediate investigation.
16, Auditor to surcharge ulegal payments and.loss caused by negligence or mis- cotduct—(1) The auditor may disallow any item which appears to him to be contrary to law and surcharge the same against the person making or person or body of persons authorising the making of the illegal payment and may charge against any person responsible therefor, the amount of atiy deficiency or loss caused by the negligence or misconduct of that person or any sum received which ought to have been, but has not been breught into account by that person and shall, in every such case, certify the amount due from such person.
(2) The auditor shall state, in writing, the reasons for his decision in respect of every disallowance, surcharge or charge and shall communi- cate the same by registered post to the person against whom it is made together with an extract of the relevant objection in the audit report, |
(3) Any person aggrieved by disallowance, surcharge or charge made may, within one menth after he has received or been served with the decision of the auditor, apply toe the District Gourt, to set aside such dis- allowance, surcharge or charge and the court, after taking such evidence as is necessary, may confirm, modify or remit such disallowance, surcharge. or charge.
(4) Every sum certified to be due from any person by the auditor under this Act shall be paid by such person to the Executive authority within one month after the intimation to him of the decision of the Director unless, within that time, such person has filed an application before the District Court against the deciston under sub-section (3) and such amount, if not so paid, or such amount as the District Court shall declare to be due, shall be recoverable under the provisions of the Kerala Revenue Recovery Act, 1968 (15 of 1968) for the time being in force, aa if it were an arrear of public revenue due on land.
17. Powers and duties of the Director —(l) The Director shall exercise general supervision and control over the discharge by the auditors 'of their duties under this Act.
(2) He may condone a payment made from a local fund, which appears to him to be contrary to law, if—
(i) in his opinion there was no negligence or misconduct « on. + the part of the person making or authorising auch payment, and. -
(ii) such | Payment dees mot exceed ripees one hundred in "each
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18. 'Delegation of powers and functions.—-The Director may, delegate all or any of the powers to be exercised or functions to be performed by him under this Act to any officer of the Local Fund Audit Department and may. in like manner withdraw such powers or functions so delegated.
19. Payment of charges for audit.—(i) The charges for audit of accounts under this Act shall be paid by the local authority concerned at such rates as may be fixed by the Director with the approval of the Government.
(2) The Government may, by general or special order, exempt a local authority from the liability to pay audit charges under sub-section {1}, either wholly or in part.
(3) Ifthe audit charges due under sub-section (1) is not paid within one year from the date of its becoming due, Government may adjust the same from the grant or other sums, if any, payable to such local authority. _ (4) Where a local authority does not pay the audit charges within one year from the date of its becoming due and where no grant or other sum is payable by the Government to the focal authority, the amount of audit charges. may be recovered from the local authority, as if it were arrears of public revenue due on land, under the provisions of the Kerala Revenue Recovery Act, 1968 (15 of 1968), for the time being in force.
20. Power to dispense with detailed audit——The Director may, when circumstances so warrant, dispense with detailed audit of any account or class of transactions and apply such limited check i in relation to such accounts or transactions as he may decrn fit.
21. Defalcahon or loss in money or stores to be reported by the Execunve autherety.— {1} Whenever any defalcation or loss in money or stores of a local authority. is discovered. the fact shall be promptly reported by the Executive authority to the Director and to the Controlling Authority or the Government, as the case may be, giving im n detail the circumstances which fed to such defalcation or loss,
Note-—In this sub-section Controlling Authority means the Head of the Department concerned or the officer empowered to countersign = the grant-in-aid Bill.
{2} On receipt ofa report under sub-section (1), the Director shall immediately conduct or cause to be . conducted .a special audit of the accounts of that local. authority: ,
Provided that nothing in this section shall prevent the lecal authority from taking crimina] proceedings against any person suspected of, or involved in, any defalcation or loss of money or stores, where such | a course.is considered expedient.
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22, Act to override other enactments—If any provision contamed in any other law for the time being in force relating to the audit of accounts ofa lecal authority or a local fund included in the Schedule is repugnant to the provisions of this Act, the latter shall prevail and the former be void to the extent ofsuch repugnancy.
23. Laying of audit report-—The Director shall send to the Government annually a consolidated report of the accounts audited by him oontaming such patticulars which he intends to bring to their notice and the Government shall, within a period of three months after the receipt of the same, cause it to be laid before the Legislative Assembly.
24. Protection of action taken in good farth__-No suit, prosecution or other legal proceedings shalllie against the Director or any officer acting wder the provisions of this Act for anything which is, in good faith, done or intended to be done under this Act or the rules made thereunder.
25. Bar of jurisdiction of awl courts —Save as otherwise provided im sub- section (3) of section 16, no civil court shall have jurisdiction to entertain any suit or proceedings in respect of any action taken or to be taken by the Govern- ment or the Director or any officer in pursuance of any power conferred by or under this Act.
26. Special provision for pending audit.—All audit of accounts pending at the commencement of this Act in respect of any local authority or local fund included in the Schedule shall, notwithstanding anything contained in this Act, be continuted and completed by the Director, within such time.as may be prescribed, in the same manner in which such accounts were being audited by him, as if this Act had not been enacted.
27. Cogntzance of offences—No court shall take cognizance of any offence punishable under this Act except on a complaint in writing of the facts consti- tuting such offence, made by the Director or any officer authorised by him in this behalf.
28. Power of Government to make rules. —(1) The Government may, by notification in the Gazette, make rules for the purpose of carrying into effect the provisions of this Act.
(2) In particular, and without prefidice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—
. (a) the manner and the form in which the accounts of a local authority whose accounts are subject to audit under this Act, shail be kept and presented ;
_(b) the powers and duties of auditors and the procedure to be. followed by them for conducting an audit and the period-at which such audit may be conducted;
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(c) the manner in which the matters required to be published under this Act shall be published; and
{d) all other matters, which may be or are required to be prescribed.
(3) Every rule made under this Act shalt be laid, as soon as may be after it is made, before the Legislative Assembly while it is in session for a total period of fourteen days, which may be comprised in one session or in two successive sessions, and if, before the expiry of the session in which it isso laid or the session immediately following, the Legislative Assembly makes any modification in the rule or decides that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
29. Power to remove dificulties-—If any difficulty arises in giving effect to the provisions of this Act, the Government may, by order, as occasion may require, do anything not inconsistent with the provisions of this Act which appears to them ta be necessary or expedient for the purpose of rermoving the difficulty: . ;
Provided that no such order shall be issued after the expiry of two years from the date of commencement of this Act.
30. Savings—-The provisions of this Act shall not apply to any case, suit, appeal, revision petition or any other proceedings that may 'be pending at the commencement of this Act before an auditor, civil court or the Govern- ment and the law in force immediately before the commencement of this Act shall, notwithstanding anything contained in this Act, continue to apply to such cases, suits, appeals, revision petitions and other proceedings.
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10.
ll.
12.
13.
14.
15,
16.
V7,
18.
19,
26.
ai.
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FHE SCHEDULE.
[See section 3 (1)] All Municipal Corporations All Municipalities -"
Guruvayoor Township All Panchayats |
All Universities
The Kerala State Housing Board Kerala Rural Development Board All Development Authorities Temples under the management of Hindu Religious and Charitable no Endowments Administration Deparument oe
State Institute of Languages
State Institute of Encyclopaedic Publications Malabar Market Committee
Orphanages and Poor Homes
The Kerala Sports Council and its District Units 'and affiliated institutions
Kerala State Jawahar Balabhavan and District Balabhavans Harijan Hostels
Wakf Board
Kerala Lalithakala Academy
Kerala Sangeetha Nataka Academy
Kerala Sahitya Academy
Kerala Kalamandalam
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Py
22,
23.
24,
25.
26.
27,
28,
29.
30.
3l.
32.
33.
34.
35.
36.
37.
38.
39.
40.
4t,
42.
43.
44,
45.
47.
48.
| 49,
50.
al.
52.
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Kerala Association for Non-formal Education and Development
(KANFED)
The State Institute of Children's Literature The State Library Council, District Library Councils and Taluk Library Unions and Librarics affiliated to the State Library Council The Bharat Sevak Samaj, Kerala Predesh
Bharat Scouts and Guides
The T. B. Association of Kerala
The Society for Prevention of Cruelty to Animals The Travancore-Cochin Medical Council
The Kerala Nurses' and Midwives' Council
The Kerala Pharmacy Council
The Kerala Dental Council
The Kerala State Nirmithi Kendra
Kerala Urban Development Finance Corporation
The Kerala Health Research and Welfare Society
The Kerala Police Welfare and Amenity Fund
The Kerala Police Sports Fund
The Kerala State Military Benevolent Fund, District Benevolent Funds and the Flag Day Fund of the Rajya Sainik Board The Scientific Research Funds under the State Committee of Science and Technology
The Kerala Panchayat Association Fund
The Kerala Head Load Workers' Welfare Fund
The Kerala Khadi Workers' Welfare Fund
The Kerala Motor Transport Workers' Welfare Fund The Kerala Coir Workers' Welfare Fund
The Kerala Construction Workers' Welfare Fund
The Kerala Abkari Workers' Welfare Fund
Toddy Workers' Welfare Fund
Labour Welfare Fund
. Hanaloom Workers' Welfare Fund Agricultural Workers' Welfare Fund The Kerala Tailoring Workers' Welfare Fund Kerala Cashew Workers' Relief and Welfare Fund.
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