SeCoND ADMINIStRAtIVe ReFoRMS CoMMISSIoN - India

1 14. FourteenTH report SeCoND ADMINIStRAtIVe ReFoRMS CoMMISSIoN strengthening FINANCIAL MANAGEMENT SYSTEMS. strengthening . FINANCIAL MANAGEMENT SYSTEMS. SeCoND ADMINIStRAtIVe ReFoRMS CoMMISSIoN Government of India 2nd Floor, Vigyan Bhawan Annexe, Maulana Azad Road, New Delhi 110 011. e-mail : website : APRIL 2009. GOVERNMENT OF India . SeCoND ADMINIStRAtIVe ReFoRMS CoMMISSIoN . fouRTEENTH REPORT. strengthening Financial Management Systems APRIL 2009. Government of India Ministry of Personnel, Public Grievances & Pensions Department of ADMINIStRAtIVe ReFoRMS and Public Grievances Resolution New Delhi, the 31st August, 2005.

2 No. K-11022/9/2004-RC. The President is pleased to set up a CoMMISSIoN of Inquiry to be called the SeCoND ADMINIStRAtIVe ReFoRMS CoMMISSIoN (ARC) to prepare a detailed blueprint for revamping the public administration system. 2. The CoMMISSIoN will consist of the following : (i) Shri Veerappa Moily - Chairperson (ii) Shri V. Ramachandran - Member (iii) Dr. Mukherjee - Member (iv) Dr. Kalro - Member (v) Dr. Jayaprakash Narayan - Member*. (vi) Smt. Vineeta Rai - Member-Secretary 3. The CoMMISSIoN will suggest measures to achieve a proactive, responsive, accountable, sustainable and efficient administration for the country at all levels of the government.

3 The CoMMISSIoN will, inter alia, consider the following : (i) Organisational structure of the Government of India (ii) Ethics in governance (iii) Refurbishing of Personnel Administration (iv) strengthening of Financial Management Systems (v) Steps to ensure effective administration at the State level (vi) Steps to ensure effective District Administration (vii) Local Self-Government/Panchayati Raj Institutions (viii) Social Capital, Trust and Participative public service delivery (ix) Citizen-centric administration (x) Promoting e-governance (xi) Issues of Federal Polity (xii) Crisis Management (xiii)

4 Public Order Some of the issues to be examined under each head are given in the Terms of Reference attached i as a Schedule to this Resolution. Organisation 4. The CoMMISSIoN may exclude from its purview the detailed examination of administration of Defence, Railways, External Affairs, Security and Intelligence, as also subjects such as SeCoND ADMINIStRAtIVe ReFoRMS CoMMISSIoN Centre-State relations, judicial ReFoRMS etc. which are already being examined by other bodies. The CoMMISSIoN will, however, be free to take the problems of these sectors into account in 1.

5 Dr. Moily, Chairman*. recommending re-organisation of the machinery of the Government or of any of its service 2. Shri V. Ramachandran, Member**. agencies. 3. Dr. Mukherjee, Member 4. Dr. Kalro, Member 5. The CoMMISSIoN will give due consideration to the need for consultation with the State 5. Dr. Jayaprakash Narayan, Member**. Governments. 6. Smt. Vineeta Rai, Member-Secretary 6. The CoMMISSIoN will devise its own procedures (including for consultations with the State Government as may be considered appropriate by the CoMMISSIoN ), and may appoint Officers of the CoMMISSIoN committees, consultants/advisers to assist it.

6 The CoMMISSIoN may take into account the existing material and reports available on the subject and consider building upon the same 1. Shri Prasad, Additional Secretary rather than attempting to address all the issues ab initio. 2. Shri Kharola, Joint Secretary#. 3. Shri Singh, PS to Chairman#. 7. The Ministries and Departments of the Government of India will furnish such information 4. Shri Sanjeev Kumar, Director and documents and provide other assistance as may be required by the CoMMISSIoN . The 5. Shri Shahi Sanjay Kumar, Deputy Secretary Government of India trusts that the State Governments and all others concerned will extend their fullest cooperation and assistance to the CoMMISSIoN .

7 *Dr. M. Veeerappa Moily Chairman, resigned with effect from 1st April, 2009. (Resolution , dated 1st April, 2009). 8. The CoMMISSIoN will furnish its report(s) to the Ministry of Personnel, Public Grievances **Shri V. Ramachandran was appointed Acting Chairman (Resolution No. K-11022/26/2007-AR, dated 27th April, 2009). & Pensions, Government of India , within one year of its constitution. **Dr. Jayaprakash Narayan Member, resigned with effect from 1st September, 2007. (Resolution , dated 17th August, 2007). # Till Sd/- ( Suvrathan). Additional Secretary to Government of India *Dr.

8 Jayaprakash Narayan Member, resigned with effect from 1st September, 2007. (Resolution No. , dated 17th August, 2007). ii iii CONTENTS Table : Unspent Provision was More than the Supplementary Grant / Appropriation Chapter 1 Introduction 1. Table : Analysis of Observations by CAG in case of Civil Ministries/. Chapter 2 Public Finance Management - 3 Departments Concepts and Core Principles Table : Extent of Cost Overrun in Projects with Respect to Original Cost (Status Chapter 3 An Overview of the Existing Financial 22 as on ). Management System in India Table : Extent of Time Overrun in Projects with Respect to Original Schedule Chapter 4 Analysis of Budgetary Process 43 (Status as on ).

9 Chapter 5 Flow of Funds from Union to the States 91 Table : Demand for Grants Covered under the Modified Cash Centrally Sponsored Schemes Management System Chapter 6 Accrual System of Accounting 100 Table : Outcome Budget Illustrative Cases (2007-08). Chapter 7 Internal Control and Audit 119 Table : Operational Framework of Accrual Basis of Accounting in Government Chapter 8 External Audit and Parliamentary Financial 138. and Budgetary Control Table : Does the Legislature Generally Approve the Budget as presented by the Government Chapter 9 Financial Management in State Governments 159.

10 Table : Parliamentary Powers to Amend the Budget Conclusion 164. Table : What Best Describes the Committee Structure for Dealing with Summary of Recommendations 165 the Budget? LIST OF TABLES LIST OF FIGURES. Table No. Title Figure No. Title Table : Types of Fund Release Mechanism (Select Cases) : Devolution of Funds from Union to States Table : Due Dates for Rendition of Estimates by : Month-wise Plan Expenditure (Rs. in Crore) for April Union Ministries/Departments 2004-February 2009. Table : Details of Persistent Unspent Provision of Crore : Month-wise non-Plan Expenditure (Rs.)