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Pending audits cost ULBs in
July, 27th 2010

Urban local bodies (ULBs) in the state are set to lose grants from the government of India as well as funding from external agencies running into hundreds of crores as auditing of accounts has remained pending for several years.

The first-of-its-kind data on audit status of ULBs in the state revealed that auditing of accounts was not completed for many years even as the state government is eager to introduce the double-entry system of accounting in the civic bodies from next year.

With the auditing of accounts pending for many years, the ULBs face the danger of losing 40 per cent of funds given by the Centre as `Performance Grant' under the 13th Finance Commission.

Official sources in the Municipal Administration and Urban Development Department (MA&UD) said the flow of funds under JNNURM too would be curtailed to civic bodies that do not have their account books updated. The World Bank, which is funding the Andhra Pradesh Municipal Development Project (APMDP), is also unwilling to extend funds to ULBs that have not completed the audit process, according to the sources. "If audits are not done properly, ULBs cannot instil confidence in the lending agency. This will impede development in the respective ULBs," an official observed.

A case-in-point is Malkajgiri, which is part of the Greater Hyderabad Municipal Corporation (GHMC). The auditing of accounts in Malkajgiri, when it was an independent municipality prior to its amalgamation with the GHMC in 2007, was pending for 10 audit years. Malkajgiri now stands to lose a Rs 270-crore drinking water supply project under the APMDP because of its poor audit record.

Another case is that of Anantapur Municipal Corporation where auditing of accounts has been pending for the last 14 years. Development projects worth Rs 60 crore under the APMDP are now in jeopardy because of non-completion of audit, official sources said.

The data on ULB auditing, compiled by MAUD, has revealed that a civic body like the Greater Hyderabad Municipal Corporation has an audit pending for 11 years, plus the current year. Among municipal corporations in the state, Greater Visakhapatnam tops the list with audit pending for 20 years, including the current year, from 1979-'80. Interestingly, smaller corporations like Kakinada and Guntur have zero pendancy.

"An audit (of accounts) is nothing but an indicator of financial discipline and commitment to better citizen services. It will also help the ULB achieve a better credit rating and help it secure funds from various sources for development," a top official of the MAUD department observed.

Lack of accountability at the local level and monitoring at the highest level are cited as the main reasons for the huge pendancy of audit in ULBs. That no clear data on the status of auditing in ULBs has been compiled all these years also points to lack of vigil at the highest level (MAUD ministry).

It is only because of the compelling need to secure funds from World Bank and other agencies that the government has finally got into the act and prodded the ULBs to hasten the auditing process so as to access funds under various schemes. "We have now fixed specific timelines for the ULBs to rebuild records of all pending accounts and step up the auditing process in accordance with the deadlines set," an official of MAUD said.

As of now, 31 municipalities have zero pendancy of audit, while 36 ULBs have one year's audit pending, 12 ULBs have two years audit pending and 17 have a a pendancy of three years. Among municipal corporations, Warangal has one year's audit pending, while Karimnagar, Vijayawada, Tirupati, Nizamabad and Kadapa have three years pendancy each. Nellore and Kurnool have six years of audit pending.

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