Contents
TOC \o "1-3" \h \z \u 1. Introduction PAGEREF _Toc478254526 \h 2
2. Historical perspective of Local self-Governments. PAGEREF _Toc478254527 \h 5
3. 73 rd and 74 th amendments of Constitution. PAGEREF _Toc478254528 \h 7
4. Need of Accountability of Local governments. PAGEREF _Toc478254529 \h 9
5. Devolution of funds, functions and functionaries to the PRIs. PAGEREF _Toc478254530 \h 11
6. Adequacy of systems of financial accountability in local bodies. PAGEREF _Toc478254531 \h 13
7. Initiatives of CAG in local bodies accounting and auditing. PAGEREF _Toc478254532 \h 14
8. Conclusion. PAGEREF _Toc478254533 \h 16
Bibliography PAGEREF _Toc478254534 \h 17













Acco untability of Local Governments

Introduction :

The concept of local self-governments is not new to India as we can find its existence in the ancient period as well as in the era of Aryans, M auryas , Rajputs etc.
The local self-government system has found a new breath of life in the British reign over our country, particularly in the efforts of Lord Mayo and Lord Rippon .
After Independence, various committees were formed to suggest measures for implementing effective local self governance at grass root level, e.g. Balwant rai Mehta committee, Ashok Mehta Committee, Singhvi Committee etc.
Finally, 73 rd and 74 th amendments to the constitution in 1992 gave con stitutional status to Panchayati Raj Institutions (PRIs) and Municipalities.
Chapters IX( article 243 to 243-O) and IXA( articles 243-P to 243 ZG) were added along with 11 th and 12 th schedule to deal with rural and urban local governments respectively.

The 73rd and 74th Constitution Amendment Acts 1992,supplemented by legislation/resolutions in the States in 1994, changed the structure of governance permanently from a two-tier to a three-tier system consisting of the Union, the States and the Panchayats /Municipal Bodies with a distinct developmental orientation. With these landmark Constitutional amendments, the units of local self-governments at various tiers/levels got a new lease of life and many far-reaching changes in the Constitution and the State laws were brought about to ensure proper functioning of democracy at the grassroots. The Government of India (GOI) Task Force on Decentralisation (2001) stated,
" Decentralisation in the context of panchayats means that when authority is transferred from the state to the local governments, the latter should have the prerogative of taking decisions on the planning and implementation of such activity."

The functioning of the third tier of government depends on the devolution of resources, subjects and functionaries to the Panchayats and Municipalities. With increasing funds being made available to the local self-governments and the slow but gradual transfer of functions to these units, the question of accountability of these institutions has assumed great importance. The need for capacity building in accounts, budgeting, monitoring, etc. becomes all the more critical in this context.

This assignment broadly addresses the issues related to improving accountability of local self-governments in India. The issue of accountability in the larger perspective involves political, administrative as well as financial accountability. This assignment however discusses the issues related to improving financial accountability of Panchayati Raj Institutions (PRIs) and Urban Local Bodies (ULBs) with focus on Comptroller & Auditor General of India (CAG)'s initiatives in improving the accounting and auditing arrangements at the grass roots level.

Relevant Constitutional provisions:
Article 243H- Powers to impose taxes by, and funds of, the panchayats .
Article 243I- Constitution of finance commission to review financial position.
Article 243J- Audit of accounts of panchayats
The above articles relating to panchayats are mirrored for Municip alities under articles 243X, 243Y and 243Z.

If local bodies are to perform their assigned functions effectively, they must be fiscally capable and autonomous. There is a significant mismatch between functional and financial capabilities of PRIs in many states. The innovative idea of setting up state finance commissions to further augment financial resources of local bodies has also had problems in implementation.
Along with transfer of funds comes the issue of administering them. There is a disjoint between functions and functionaries. In many states, Functionaries remains state officials on deputation to the local bodies, with panchayats exercising little administrative control over them.
Financial accountability involves accountability for whether the money and other resources have been utilized according to the legal requirements and efficiently.