CHAPTER 3

FINANCIAL REPORTING AND COMMENTS ON ACCOUNTS

This Chapter provides an overview and status of the State Government’s

compliance with various financial rules, procedures and directives during the
current year.
3.1 Personal Ledger Accounts/ Deposit Accounts
3.1.1 Article 202 of the Constitution of India provides for Legislative
financial control over public expenditure through the annual financial
statement/Budget. The Uttar Pradesh Budget Manual prescribes that all final
savings must be surrendered to the Finance Department by 25 March, and
concerned officers will be held responsible for any financial irregularity.
The CAG’s annual audit reports repeatedly comment on violation of financial
provisions by many departments of the GoUP, where unspent funds are
routinely transferred to various Personal Deposits (PDs)/ Personal Ledger
Accounts (PLAs) under the Public Account, to avoid lapse of grant at the end
of the financial year. Further, the U.P. Personal Ledger Accounts Rules, 1998,
permit deposit of unspent funds into PDs/ PLAs only with the prior approval
of Finance Department. Though this provision is to be utilised only rarely,
Audit did not find any evidence that the Finance Department ensured that the
departments sought its prior approval before such routine transfers of unspent
amounts into PD/ PL accounts. Such practices violate Legislative intent, which
is to ensure that funds approved by it for the financial year are spent during the
financial year itself. The Finance Department, which is the custodian of public
finances, however, has taken no action to curb such irregular practices that
violate financial propriety and prudence or to recommend departmental action
against concerned officials.
Non-reconciliation of balances in PD accounts periodically and not
transferring the unspent balances lying in PD accounts to Consolidated Fund
before the closure of the financial year entails the risk of misuse of public
funds, fraud and misappropriation.
The PLAs of GoUP have a closing balance of ` 6,835.75 crore as on 31 March
2017, as reported in the Finance Accounts of the State Government.
3.1.2 Inoperative PD/ PL Accounts
The PLA Rules stipulate that PD/ PL accounts with no transactions for over
three years are to be closed. It was observed however, that the GoUP had
failed to close 341 PD/ PL accounts under MH 8443-Civil Deposits and MH
8448-Deposits of Local Funds where no transactions had taken place for over
three years and which had unspent balances of ` 95.80 crore as on 31 March
2017. Details are given in table 3.1:

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 Report on State Finances for the year ended 31 March 2017

Table 3.1: Inoperative PD accounts

(Amount in `)
Sl. Amount range No. of cases Amount
No.
1. Below one lakh 206 53,05,322
2. 1 to 5 lakh 73 1,74,92,551
3. 5 to 10 lakh 19 1,30,59,197
4. 10 to 20 lakh 18 2,46,75,886
5. 20 to 50 lakh 11 3,44,45,675
6. 50 lakh and above 14 86,30,71,366
Total 95,80,49,997

Recommendation: The Finance Department is required to review all PD/PL

accounts and ensure that all amounts unnecessarily lying in these PD/PL
accounts are immediately remitted to the Consolidated Fund. Further, the
Finance Department is required to reiterate the instructions contained in the
financial rules and ensure that appropriate action is taken against
departmental officers who fail to follow the rules.

3.2 Building and Other Construction Workers Welfare Cess

The Building and Other Construction Workers (BOCW) Welfare Cess Act,
1996 and the BOCW (Regulation of Employment and Conditions of Service)
Act, 1996 cover any establishment employing ten or more building workers in
any building or other construction work. The Acts, inter alia, provide for
constitution of Welfare Boards with the aim of improving the working
conditions of workers and to provide financial aid to them, and to augment the
resources of the Welfare Boards through the levy and collection of cess on the
cost of construction. Accordingly, GoUP created (November 2009) the U.P.
BOCW Welfare Board, and, in terms of the Cess Act, levies cess at one
per cent. The U.P. BOCW Rules, 2009 provides for collection of registration
fee of ` 50 and annual membership fee of ` 50 from registered workers. In this
connection, the findings of Audit are given below.
3.2.1 Accounting of Cess
It was observed that the Welfare Board has not finalised its accounts since its
constitution (November 2009). Details of receipts and utilisation of cess over
the past five years (2012-17) are given in table 3.2 below:
Table 3.2: Financial status of registration charges, cess realised and utilisation
(` in crore)
Sl. Year Opening Receipts Total Expend Closing
No. balance Registration Labour Cess Interest funds iture balance
charges and cess realised on available
annual received from deposits
membership in board treasury
fee account (State Govt.)
1 1 2012-13 381.91 13.87 311.79 0 27.43 735.00 4.89 730.11
2 2 2013-14 730.11 17.84 458.46 165.00 49.58 1,420.99 98.12 1,322.87
3 3 2014-15 1,322.87 28.59 500.44 9.25 97.07 1,958.22 127.63 1,830.59
4 4 2015-16 1,830.59 14.55 686.81 0 128.37 2,660.32 202.41 2,457.91
5 5 2016-17 2,457.91 13.00 829.60 10.00 162.23 3,472.74 277.78 3,194.96
(Source: Secretary, BOCW) (Provisional data)

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 Chapter 3 – Financial Reporting and Comments on Accounts

In this connection, the following additional observations are made:

Since the Board has not prepared accounts since inception, the authenticity
of receipts and expenditure could not be ascertained in Audit.
The Board does not have a fixed asset register, in the absence of which, the
physical existence of the assets created and their location could not be
verified.
The failure of GoUP to transfer ` 34.48 crore to the Board as of March,
2017, has overstated the revenue surplus and understated the fiscal deficit
for 2016-17 by the said amount.
The State Government appointed (September 2010), the officers of 16
departments as Cess Assessment Officer and Cess Collectors. GoUP
issued (August 2012) and reiterated (September 2016) orders to deposit the
receipts of cess collected by the concerned officials in the Nationalised
Bank account being operated by the Board for this purpose. The orders to
transfer the cess directly to the bank account without bringing it into the
Consolidated Fund of the State violates Article 266 (1) of the Constitution
of India. Consequently, it is not ascertainable as to how much money was
collected by the Cess Assessment Officers and how much money was
transferred to the Board.
3.2.2 Utilisation of Labour cess
The State Government notified various schemes/ activities viz., maternity
benefits, pension, advances for purchase/ construction of houses, funeral
assistance, medical assistance, cash awards for meritorious students, financial
assistance for education/ marriage of children of beneficiaries etc., for benefit
from the BOCW Welfare Fund. Details of expenditure on these schemes
during 2012-17 are given in table 3.3:
Table 3.3: Expenditure on schemes against allotment and available fund
Year Available Scheme Actual Registered Workers Percentage
funds operated expenditure workers covered
on at the end Workers Funds Funds
(` in
No. Allotment scheme of the covered utilised utilised
crore)
against against
(`in crore) (` in crore) year
allotment availability
2012-13 735.00 15 225.00 3.95 2,70,871 9,610 3.55 1.76 0.54
2013-14 1,420.99 18 301.90 93.39 10,90,192 95,295 8.74 30.93 6.57
2014-15 1,958.22 22 457.90 105.96 19,58,544 2,14,121 10.93 23.14 5.41
2015-16 2,660.32 21 605.61 141.82 27,41,452 2,77,909 10.14 23.42 5.33
2016-17 3,472.74 23 752.83 249.88 34,27,104 5,16,851 15.08 33.19 7.20
(Source: Secretary, BOCW) (Provisional data)

Recommendation: The U.P. BOCW Welfare Board should commence timely

preparation of accounts and maintain relevant records to fulfil its mandate of
improving the working conditions of building and other construction workers
and providing adequate financial assistance to them. GoUP should also
review its orders to transfer the cess directly to the bank account of the Board
instead of through the Consolidated Fund.

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Report on State Finances for the year ended 31 March 2017

3.3 Transfer of additional stamp duty to Development Authorities and

Housing Development Councils
The Uttar Pradesh Urban Planning and Development Act, 1973 provides for
collection of additional stamp duty by the Stamps and Registration
Department, which is thereafter, to be transferred to municipal corporations/
municipalities/ parishads/development authorities in specified proportions.
The amount is accounted for under the Major Head 0030-Stamps and
Registration Fees, 02-Stamps Non-Judicial, 102-Sale of Stamps. However, no
distinct sub head has been opened by the State Government in this regard to
identify the revenues received on account of the additional stamp duty in the
absence of which it is not clear how much money was received by the
Government on account of two per cent additional stamp duty and whether all
the moneys received were transferred to the concerned municipal
corporations/ municipalities/parishads/ development authorities in specified
proportions.
As regards the transfer of funds to development authorities/ municipalities/
parishads, it was noticed that the Government was booking expenditure under
the Major Head 3475-800-03 instead of MH 2216-Housing or 2217-Urban
Development as the case may be. Due to the incorrect bookings, the
expenditure under MH 2216/2217- Housing/ Urban Development Department
was understated while the expenditure under MH 3475 - Other General
Economic Services are overstated to that extent.
GoUP issued orders (September 2015) stipulating that such additional stamp
duty would first be transferred to Lucknow Development Authority (LDA),
from where it would be routed to all the other entities entitled to receive these
funds under the Act. However, since the Government accounts do not capture
the onward transactions from LDA, it is not possible to verify from the
accounts of the State Government whether the LDA has fulfilled its
responsibility to transfer the full share of additional stamp duty to all the other
entities. It is also not been possible to verify from the accounts whether the
LDA has transferred funds only to those entities as stipulated in the Act and
not to others. Details of funds transferred (` 418.35 crore) to various
authorities are given in Appendix 3.1.
Further, the Government while determining the procedure (September 2013)
for distribution of the additional two per cent stamp duty, ordered transfer of
25 per cent of the amount collected to a Dedicated Urban Transport Fund
which was against the provisions of the Act. As per the provisions of the Act,
the additional amount of two per cent stamp duty collected was to be utilised
only for the development of the areas from which the amount was collected
and therefore transferring 25 per cent of the fund to Dedicated Urban
Transport Fund was irregular. It was noticed that the Government had been
constantly making provisions under MH 2217-80-800-08 towards this fund
from the year 2014-15 onwards. The details of provisions made and
expenditure on this account are detailed in table 3.4 below:

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 Chapter 3 – Financial Reporting and Comments on Accounts

Table 3.4: Details of provision/ expenditure for Dedicated Urban Transport Fund
(` in crore)
Year Provision Expenditure
2014-15 300 285
2015-16 434 430
2016-17 375 -
(Source: Appropriation Accounts of the respective years)

The amount of ` 375 crore provisioned during 2016-17 could not be drawn
from the treasury and ultimately lapsed since the financial sanction was
accorded on the last day of the year i.e., 31 March 2017.
Recommendation: GoUP should ensure that the accounts fully and
transparently capture the receipts and transfer of the additional stamp duty to
the authorities/municipalities etc. specified under the U.P. Urban Planning
and Development Act. GoUP should also review the Order transferring
25 per cent of the additional stamp duty to a Dedicated Urban Transport Fund
which is against the provisions of the Act.
3.4 Opaqueness in accounts
Minor head 800 relating to Other Receipts and Other Expenditure is intended
to be operated only when the appropriate minor head has not been provided in
the accounts. Routine operation of minor head 800 is to be discouraged, since
it renders the accounts opaque.
Scrutiny revealed that during 2016-17, under various revenue and capital
Major Heads of accounts on the expenditure side, ` 35,329.20 crore
(constituting about 11.53 per cent of total expenditure) was recorded under
minor head 800-Other Expenditure under different Major Heads.
Similarly, ` 36,826.27 crore (constituting about 14.34 per cent of the total
revenue receipts) under various revenue Major Heads of accounts, was
recorded under minor head 800-Other Receipts under different Major Heads.
Instances where a substantial proportion (50 per cent or more of the total
receipts/ expenditure under the concerned Major Head) of the receipts/
expenditure were classified under minor head 800 - Other Receipts/
Expenditure are given as Annexure B and C of Notes to Accounts
(Finance Accounts – Volume-I).
Though the issue has been continuously reported in previous reports of the
C&AG, there has been little improvement. The fact that such substantial
proportion of the receipts and expenditure under the concerned Major Head
are booked under minor head 800 is cause for concern since it severely
impacts transparency.
Recommendation: The Finance Department should, in consultation with the
Accountant General (A&E), conduct a comprehensive review of all items
presently appearing under minor head 800 and ensure that all such receipts
and expenditure are in future booked under the appropriate head of account.

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Report on State Finances for the year ended 31 March 2017

3.5 Non-maintenance of Cash Books

The Cash Book is the primary record of financial transactions of receipts and
disbursements which is required to be maintained mandatorily in each office
to ensure proper receipt and custody of Government money. Non-
maintenance/ improper maintenance of Cash Book not only impacts the
accuracy and completeness of accounts but is also a red flag for probable
fraud, misappropriation and embezzlement of Government funds.
The reports of the C&AG submitted to the State Legislature and individual
inspection reports of the Accountant General issued to various departments
have flagged many instances of non-maintenance/ improper maintenance of
Cash Books by various entities under GoUP. For instance, the Performance
Audit of Right of Children to Free and Compulsory Education (Report No. 2
of 2017) revealed that 184 test checked schools did not maintain Cash Books.
Some additional instances noticed in recent audits are listed at Appendix 3.2.
Recommendation: The Finance Department should ensure that all
departments and subordinate entities of GoUP maintain Cash Books in the
manner prescribed in the financial rules.
3.6 Delay in finalisation of accounts of PSUs/Corporations
The Companies Act stipulates that the financial statements of companies are
required to be finalised within six months of the end of the relevant financial
year, i.e., 30 September of the next financial year. Failure to submit accounts
on time renders the officers of the company liable to penal provisions under
the Act, extending to fine of up to ` one lakh, and with further fine of up to
` 5,000 for every additional day of default. In the case of Statutory
Corporations, the Acts governing them stipulate that their accounts are to be
finalised, audited and presented to the State Legislature.
In violation of the above provisions, more than 88 per cent of the PSUs in
Uttar Pradesh are in arrears of accounts, as detailed in table 3.5 below:
Table 3.5: Age-wise arrears of Annual Accounts of PSUs as of 31 March 201
Sl. No. Particulars Working Non-working Total
1 Number of PSUs 65 39 104
2(a) Number of PSUs/Corporations having 56 36 92
accounts in arrears
2(b) Number of accounts arrears 230 527 757
3(a) Number of PSUs/Corporations with arrears 40 10 50
of less than 5 years
3(b) Number of accounts arrears in above PSUs 76 24 100
4(a) Number of PSUs/Corporations with 11 6 17
accounts in arrears for 5 to 10 years
4(b) Number of accounts arrears in above 71 36 107
PSUs/ Corporations
5(a) Number of PSUs/ Corporations with 5 20 25
accounts in arrears for 10 years and above
5(b) Number of accounts arrears in above 83 467 550
PSUs/Corporations
6 Extent of arrears of accounts (in years) 1 to 19 1 to 34 1 to 34
(Source: Latest finalised accounts of the PSUs)

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 Chapter 3 – Financial Reporting and Comments on Accounts

Due to non-finalisation of accounts, the C&AG has been unable to perform the
supplementary audit of Companies as stipulated in the Companies Act, and
statutory audit of the Corporations as stipulated in their respective Acts, for
periods up to 34 years.
The above denotes failure of the concerned administrative departments and
specifically of the Finance Department to ensure that the defaulting companies
and corporations comply with the relevant Acts.
It is of specific interest to observe that even in the absence of accounts to
judge the genuineness of demands for financial support from these PSUs, the
Finance Department has regularly provided budgetary support to these PSUs
by way of infusion of equity, loans and grants-in-aid/ subsidies. During
2016-17, the Government had provided ` 21,038.52 crore (equity:
` 13,717.74 crore, loans: ` 3,815.81 crore, grants: ` 155.87 crore and
subsidies: ` 3,347.57 crore) to 16 working companies/ Statutory Corporation
and loan of ` 1.53 crore to two non-working companies for which accounts
have not been finalised as detailed in Appendix 3.3.
Similarly, financial support and assistance amounting to ` 19,794.16 crore
(equity: ` 19,251.33 crore, loans: ` 162.73 crore, grants: ` 320.93 crore and
subsidies ` 59.17 crore) was given to nine working companies during 2015-16
for which accounts have not been finalised as detailed in Appendix 3.4.
During 2016-17, total ` 6,741 crore was disbursed as loan by the State
Government, the major disbursement being a single loan of ` 3,700 crore to
UPPCL (for UDAY), seven loans of ` 490 crore to Cane Commissioner, 498
loans of ` 330 crore to sewage disposal and sanitation units of local bodies.
Recommendation: The Finance Department should review the cases of all
PSUs that are in arrears of accounts, ensure that the accounts are made
current within a reasonable period, and stop financial support in all cases
where accounts continue to be in arrears.
3.7 Dividend not declared
The State Government had formulated (October 2002) a dividend policy under
which all profit earning PSUs are required to pay a minimum return of five
per cent on the paid up share capital contributed by the State Government.
Accordingly, 18 PSUs33 were required to declare dividend as per the dividend
policy. However, only eight PSUs34 declared a dividend of ` 6.54 crore. The
remaining 10 profit earning PSUs35 did not declare dividend of ` 507.48 crore

33
18=(Total PSUs:33 less: 15 PSUs [three PSUs namely Uttar Pradesh Jal Nigam, Uptron Powertronics Ltd. and
UCM Coal Company Ltd. fall under both category i.e. having accumulated losses and without having Government
Equity Capital].
34
Uttar Pradesh Projects Corporation Ltd., Uttar Pradesh State Industrial Development Corporation Ltd., Uttar
Pradesh Rajkiya Nirman Nigam Ltd., Uttar Pradesh State Construction and Infrastructure Development
Corporation Ltd., Uttar Pradesh State Bridge Corporation Ltd., Uttar Pradesh Electronics Corporation Ltd., Uttar
Pradesh Food and Essential Commodities Corporation Ltd. and Uttar Pradesh Purva Sainik Kalyan Nigam Ltd.
35
Uttar Pradesh Rajya Vidyut Utpadan Nigam Ltd., Uttar Pradesh State Warehousing Corporation, Uttar Pradesh
Police Awas Nigam Ltd., Uttar Pradesh Scheduled Castes Finance and Development Corporation Ltd., Uttar
Pradesh Beej Vikas Nigam Ltd., Uttar Pradesh Development Systems Corporation Ltd., Uttar Pradesh Mahila
Kalyan Nigam Ltd., Uttar Pradesh Alpsankhyak Vitta evam Vikas Nigam Ltd., Uttar Pradesh Matsya Vikas Nigam
Ltd. and Uttar Pradesh Bhumi Sudhar Nigam Ltd.

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Report on State Finances for the year ended 31 March 2017

which is contrary to the State Government’s policy regarding payment of

minimum dividend due. Details are given in Appendix 3.5.
Recommendation: The State Government should ensure that profit earning
PSUs deposit the specified dividend invariably into the Government account at
the close of the year.
3.8 Non-reconciliation of Equities/ Loans
As of 31 March 2017, the Government had invested a total ` 96,400 crore in
various entities36. It is observed that there is a difference of ` 8,241.58 crore
between the details given in the Finance Accounts and with the figures
reported by the PSUs, which is under reconciliation.
Similarly, there is difference between the Finance Accounts and the figures
reported by the PSUs regarding the loans given by the GoUP which is under
reconciliation.
Recommendation: The Finance Department and the concerned administrative
departments should work closely with the Accountant General (A&E) to
reconcile the differences in records and accounts relating to State Government
investments, loans, and guarantees extended to State PSUs.
3.9 Reporting of pending cases
As per the details available/ reported to the office of the Principal Accountant
General (G&SSA), U.P., Allahabad, 135 cases of defalcation or losses
involving ` 8.83 crore were pending for settlement as of 2016-17. The
department-wise break up of pending cases and their age-wise analysis is
given in Appendix 3.6. The nature of these cases is given in Appendix 3.7.
The nature and age profile of the pending cases given in the appendices are
summarised in table 3.6 below:
Table 3.6: Profile of pending cases
Age-profile of the pending cases Nature of the pending cases
Years ranging Number Amount involved Nature of the Number Amount involved
of cases (` in lakh) cases of cases (` in lakh)
0–5 6 64.24 Theft 61 33.21
5 – 10 15 287.80
10 – 15 22 67.05 Misappropriations 08 58.73
15 – 20 14 62.86
20 – 25 29 13.55 Losses 24 172.35
25 & above 49 387.07 Defalcations 42 618.28
Total 135 882.57 Total 135 882.57
(Source: Records of concerned departments)

Reasons for pendency, as reported by the departments are listed in table 3.7:

36
Statutory Corporations (` 856 crore), Government Companies (` 93,299 crore), Co-operatives (` 2,199 crore) and
Banks (` 58 crore)- details of investment amounting to ` 12 crore are under reconciliation.

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 Chapter 3 – Financial Reporting and Comments on Accounts

Table 3.7: Reasons for pending cases

Reasons for the delay/outstanding cases Number Amount
of cases (` in lakh)
1. Awaiting departmental and criminal investigation 27 189.67
2. Departmental action initiated but not finalised 74 541.63
3. Criminal proceedings finalised but action on 1 4.14
recoveries pending
4. Awaiting orders for recovery or write off 9 6.40
5. Pending in Courts of Law 24 140.73
Total 135 882.57
(Source: Records of concerned departments)

Recommendation: The Government should expedite completion of

departmental action as warranted, and strengthen internal control systems to
prevent/ reduce recurrence of such cases.
3.10 Proforma Accounts of Departmental Commercial Undertakings

Departmental Commercial Undertakings are required to finalise proforma

annual accounts in prescribed format, and submit the same to the Accountant
General for audit within three months of closure of accounts. It was observed,
however, that out of the nine departmental commercial undertakings in the
State, three had not finalised their accounts for many years. Details are given
in Appendix 3.8.
3.11 Non-submission of Utilisation Certificates

The financial rules stipulate that where grants-in-aid are given for specific
purposes, departmental officers concerned should obtain Utilisation
Certificates (UCs) from grantees, which, after verification, should be
forwarded to the Accountant General (A&E), to ensure that the funds have
been utilised for intended purposes. It was observed, however, that UCs
amounting to ` 97,906.27 crore were outstanding as of 31 March, 2017, as
given in table 3.8:
Table 3.8: Outstanding Utilisation Certificates
Period Number of Utilisation Amount (` in crore)
Certificates awaited
Upto 2014-15 2,25,597 66,861.14
2015-16 11,355 10,223.77
2016-17 18,071 20,821.36
Total 2,55,023 97,906.27
(Source: Finance Accounts 2016-17)

Major cases of non-submission of UCs pertain to Panchayati Raj Department

(` 25,490.95 crore), Education Department (` 25,693.52 crore) and Social
Welfare Department (` 26,927.49 crore). Though such instances of non-
submission of UCs are being reported in the reports of the C&AG regularly,
there has been no improvement. In many cases, the same recipients continue to
receive further grants from the same departments, even while the UCs for

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Report on State Finances for the year ended 31 March 2017

earlier grants are pending. High pendency of UCs was fraught with the risk of
misappropriation of funds and fraud.

Recommendation: The Finance Department should to prescribe a time frame

within which administrative departments releasing grants collect UCs pending
for more than the time stipulated in the grant orders and also ensure that till
such time, administrative departments release no further grants to defaulting
grantees.
3.12 Outstanding Detailed Contingent Bills

The financial rules require that advances drawn through Abstract Contingent
(AC) bills are adjusted promptly through Detailed Contingent (DC) bills. It
was observed however, that 3,620 AC bills of ` 139.05 crore were lying
unadjusted as on 31 March 2017, as per details in table 3.9. Failure to submit
DC bills on time is indicative of probable misappropriation and fraud.
Table 3.9: Outstanding Abstract Contingent Bills
Year Number of pending DC bills Amount (` in crore)
Upto 2014-15 3,329 72.27
2015-16 170 19.04
2016-17 121 47.74
Total 3620 139.05
(Source: Finance Accounts 2016-17)

Audit observed that 40 AC bills of ` 32.97 crore were drawn in March 2017
alone, which included 11 AC bills of ` 32.63 crore37, drawn by the Finance
Department between 28 March and 31 March 2017. The reasons why the
Finance Department withdrew ` 32.53 crore towards assignments to block
panchayats and gram panchayats through AC bills instead of directly
transferring the funds to these bodies is not clear. Unnecessary withdrawal
through AC bills and non-submission of DC bills within the prescribed time
breaches financial discipline and entails risk of misappropriation of public
money and unhealthy practices.

Recommendation: The Finance Department should ensure that all controlling

officers adjust in a time bound manner, all AC bills pending beyond the
prescribed period, and also ensure that AC bills are not drawn merely to
avoid lapse of budget.

3.13 Non-payment of interest on Deposits

The State Government is required to pay interest on deposits appearing under

MH 8336 to 8342. As on 31 March 2017, the Public Account relating to these
Major Heads had a balance of ` 3,767.19 crore (Major Head 8336-Civil
Deposit: ` 1.49 crore, Major Head 8338-Deposits of Local Funds:

37
Director, Fund Account of Finance Department (` 0.09 crore) for purchase of staff car/vehicle (` 8,19,000) and
purchase of computer hardware/software (` 95,500), District Panchayat Raj Officer, Padrauna under Finance
Department (Debt services and other expenditure) for assignment to block panchayat (` 5.64 crore) and
assignment to gram panchayat (` 26.89 crore).

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 Chapter 3 – Financial Reporting and Comments on Accounts

` 459.68 crore and Major Head 8342-Other Deposits: ` 3,306.02 crore).

However, no interest has been paid on these deposits as is evident from the
fact that no expenditure has been booked under the head 2049-60-101-Interest
on Deposits during 2016-17. Taking a conservative estimate at the Government
borrowing cost of 6.82 per cent for 2016-17 alone, the interest payable on this
deposits amounted to ` 256.92 crore for this period. Consequently, the
Revenue Surplus for 2016-17 was overstated by ` 256.92 crore.

Recommendation: The Finance Department should review the balances under

MH 8336 to 8342 for appropriate action to book interest in respect of all
interest bearing deposits.
3.14 Apportionment of balances as on reorganisation of the State

Balances amounting to ` 8,757.37 crore representing balances under Deposits

and Advances (MH 8336- Civil Deposits to MH 8550- Civil Advances)
remain to be apportioned between the successor States of Uttar Pradesh and
Uttarakhand, almost two decades after the reorganisation of the composite
State of Uttar Pradesh with effect from 8 November 2000.

Recommendation: The State Government should expedite the apportionment

of balances under Deposits and Advances (` 8,757.37 crore) between the two
successor States.

3.15 Variation in Cash Balance

As per the Certificate of confirmation of balances issued by Reserve Bank of

India, the State had a debit balance of ` 1,407.94 crore while the closing cash
balance of the State for the month of March 2017 as certified by the
Accountant General (A&E) was ` 1,280.65 crore. Thus, there is a difference
of ` 127.29 crore (net debit) including the previous years’ balances, between
the cash balance of the State Government, as worked out by the Accountant
General (A&E) and as reported by the Reserve Bank of India (as on
31.03.2017).

The State Government stated (January, 2018) that the process of reconciliation
is under progress.

3.16 Non-transfer of amounts to the Central Road Fund

The list of Major and Minor Heads prescribes the accounting procedure
relating to the Central Road Fund (CRF). In terms of this procedure, such
grants received from Government of India (GoI) are first to be transferred to
the Public Account, from where expenditure on maintenance and repairs of
roads and bridges is to be set off. GoUP, however, failed to transfer the
` 219.71 crore received as CRF grant in 2016-17 to the Public Account, and
though ` 4,639.29 crore was incurred against maintenance and repairs of
roads and bridges, it could not be ascertained how much of GoI release of
` 219.71 crore was utilised for the intended purposes.

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Report on State Finances for the year ended 31 March 2017

The State Government stated that as the Central Government provides grants
from Central Road Fund (created by the Central Government) to the State
Government for construction of roads which is credited under the Major Head
1601- “Grants-in-aid from Central Government” and that the expenditure is
incurred from the concerned Major Head 3054/5054 for maintenance of State
Roads which are the assets of the State Government and therefore, it was not
desirable to transfer an amount equivalent to the said grant to the Major Head
8449-103-Central Road Fund.

The view of the State Government is not in order as it deviates from the
accounting procedure of the Central Road Fund.

3.17 Impact on Revenue Surplus and Fiscal Deficit

The impact of incorrect booking/accounting of expenditure and revenue

resulted in overstatement of Revenue Surplus by ` 4,532.04 crore and
understatement of Fiscal Deficit to the tune of ` 4,462.96 crore as depicted in
the Finance Accounts is given in table 3.10 below:
Table 3.10: Impact on Revenue Surplus and Fiscal Deficit as per Accounts
Particulars Impact on Revenue Impact on Fiscal Deficit
Surplus (` in crore) (` in crore)
Over Under Over Under
statement statement statement statement
Minor construction works and grants-in-aid 69.08 - - -
booked under Capital section instead of Revenue
Amount transferred from Sinking Fund to 4,145.61 - - 4,145.61
Consolidated Fund as revenue receipts
Non contribution to Guarantee Redemption Fund 298.27 - - 298.27
Interest on balances of State Disaster Response 19.08 - - 19.08
Fund
Total 4,532.04 - - 4,462.96
(Source: Finance Accounts 2016-17)

However, as discussed in various places in the report, the impact of incorrect

booking/accounting of expenditure and revenue as worked out by Audit are
discussed in table 3.11:
Table 3.11: Impact on Revenue Surplus and Fiscal Deficit as per Audit
Particulars Impact on Revenue Impact on Fiscal Deficit
Surplus (` in crore) (` in crore)
Over Under Over Under
statement statement statement statement
Minor construction works and grants-in-aid 69.08 - - -
booked under Capital section instead of Revenue
Sinking Fund transactions - 6,626.74 6,626.74 -
Non contribution to Guarantee Redemption Fund 298.27 - - 298.27
Interest on balances of State Disaster Response 19.08 - - 19.08
Fund
Non-payment of interest on deposits 256.92 - - 256.92
Un-transferred amount of labour cess to Board 34.48 - - 34.48
Total 677.83 6,626.74 6,626.74 608.75

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 Chapter 3 – Financial Reporting and Comments on Accounts

In view of the above, the Revenue Surplus and Fiscal Deficit of the State
which was ` 20,283 crore and ` 41,187 crore (excluding UDAY) would
actually be ` 19,605 crore and ` 41,796 crore respectively. The impact of
sinking fund transactions above would result in increasing the outstanding
liabilities of the State to that extent i.e., the outstanding liabilities would be
` 4,15,049 crore instead of ` 4,08,422 crore (excluding UDAY) as depicted in
table 1.32 above. The overall impact of these on the performance of the State
are discussed in para 1.1.2 above.

(P.K. KATARIA)
ALLAHABAD Principal Accountant General (G&SSA)
THE Uttar Pradesh

COUNTERSIGNED

(RAJIV MEHRISHI)
NEW DELHI Comptroller and Auditor General of India
THE

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