PARLIAMENTARY FINANCIAL CONTROL

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PARLIAMENTARY FINANCIAL CONTROL

• Arun Sharma
• Assistant Controller General of Accounts
• Ministry of Finance
• Government of India

2
Parliamentary Financial Control

• Parliamentary control over public finance is the
  central point in public financial administration
  public accountability system.
• Parliament sets goals of public financial
  management and watches the performance of
  Government in this area.

3
Control and Accountability

• Legislative controls over the Executive are an
  exercise of power through a series of techniques
  goal settings, restrictions and reporting.
• To ensure expenditure remains within the grants
  Financial actions of government correspond to
  fiscal policies and objectives approved by
  parliament.
• Parliamentary control over public purse is also
  an instrument of accountability at the highest
  level of government

4
Process of Accountability

• The Accountability Paradigm in the parliamentary
  system has three interrelated groups
• The public, who receives service from the
  legislative and executive and wants them to be
  accountable to them.
• The legislative, who frames policy and provide
  resources to the executive to implement the
  policies and therefore want them to be
  accountable to them.
• The executives who are service providers and are
  to account for the resources provided to them by
  the legislative.

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Process of Accountability

• Parliament acts on behalf of people and obtains
  accountability information from the executive
  obliged to provide this information.
• Budget is the instrument through which goal
  setting is approved by the parliament.
• Against this, executive provides information of
  performance in the form of accounts and other
  performance reports.
• Audit contributes to accountability process
  through objective and independence analyses of
  performance and reporting on such matters to
  parliament

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Constitutional provision

• Article 266
• All revenues and receipts of government are to a
  Consolidated Fund and moneys can be withdrawn
  from the Fund only in accordance with laws
  passed by Parliament.

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Consolidated Fund of India

• Subject to assignment of certain taxes to the
  States,
• all revenues received by the Government of India,
• all loans raised by the Government and
• all moneys received by that Government in
  repayment of loans
• shall form one consolidated fund to be called
  the Consolidated Fund of India

Art 266(1)
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Consolidated Fund of India

• No moneys shall be appropriated out of the
  Consolidated Fund of India except in accordance
  with law.
• No money can be issued out of Consolidated Fund
  of India unless the expenditure is authorised by
  an Appropriation Act.

Art 266(3)
Art 114
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Contingency Fund

• Parliament may by law establish a Contingency
  Fund in the nature of an imprest to be called
  the Contingency Fund of India.
• Fund shall be placed at the disposal of the
  President to enable advances to be made for
  meeting unforeseen expenditure, pending
  authorization by Parliament

Art 267
Contingency Fund of India Act, 1950
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Public Account of India

• All other public moneys received by or on behalf
  of the Government of India shall be credited to
  the Public Account of India

Art 266(2)
11
Constitutional provision

• Article 112
• President to place Annual Financial statement
  before Parliament every financial year.Charged
  and voted estimates of expenditure to be shown
  separately.
• Expenditure on revenue account to be shown as
  distinct from other expenditure.

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Constitutional provision

• Article 113
• Charged expenditure not to be submitted to the
  vote of Parliament.
• Expenditure of estimates to be submitted in the
  form of demands for Grants of Parliament for its
  assessment.
• Prior recommendation of President necessary for
  placing demand for Grants.
• Article 114
• Withdrawal of money from the Consolidated Fund
  only after passing of the Appropriation Bill.

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Voted Charged Expenditure

• The estimates of expenditure embodied in the
  annual financial statement shall show separately
• the sums required to meet expenditure described
  by this constitution as expenditure charged upon
  the Consolidated Fund of India and
• the sums required to meet other expenditure
  proposed to be made from the Consolidated Fund of
  India

Art 112
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Voted Charged Expenditure

• Estimates relating to charged expenditure not to
  be submitted to the vote of Parliament.
• Each house competent to discuss such estimates.
• Estimates relating to other expenditure to be
  submitted in the form of demands for grants to
  the house of the People
• House of People shall have power to
• assent
• refuse to assent to any demand
• assent to any demand subject to reduction.

Art 112
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Voted Charged Expenditure

• Expenditure on and related to
• The President his office
• Chairman, Deputy Chairman of the Council of
  States
• Speaker, Deputy Speaker of House of People
• Judges of Supreme Court High Court
• Comptroller Auditor General of India
• Debt liability of GOI and related charges
• Sums required to satisfy a Judgment, decree,
  award
• Any other expenditure declared by Parliament

Art 112
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Constitutional provision

• Article 115
• Provision of supplementary, additional or excess
  grants.
• Article 116
• Provision of vote on account, vote on credit and
  exceptional grants.
• Article 117
• Finance Bill to be introduced in the Parliament
  with the recommendation of the President of
  India.

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Parliamentary Rules/Orders

• Introduction of New Service and New Instrument of
  service.
• Approval of excess demands for grants by PAC
  before their presentation to the Parliament for
  discussion and approval.
• Examination of detailed demand for grants and
  proposals for taxation by the Departmental
  Standing Committees.
• Placing of various documents along with the
  Budget proposals.
• Placing of performance Budget along with the
  detailed demand for grants.

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Financial Committees of Parliament

• Committee on Public Accounts
• Constituted under Rule no. 308 of the Rules
  of Procedure and conduct of business in Lok
  Sabha. Total No. of members -22
• Term of office One year.
• Committee on Public undertakings
• Constituted under Rule No. 312 A of Rules of
  Procedure and conduct of business in Lok Saba.
  Total number of members-22
• Term of office- One year.

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Financial Committees of Parliament

• Examines the Appropriation Accounts and Annual
  Finance Accounts.
• Examines the Report of CAG of India on these
  accounts and other matters.
• Examines the expenditure by various ministries /
  departments and accounts of autonomous bodies.
• Examines various aspects of tax administration,
  Ascertains that Government spent money within the
  scope of the demand.
• Examines and reports on money spent in excess of
  the amount granted by the House for
  regularization.Ministers not called before the
  Committee.

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COMMITTEE ON PUBLIC UNDERTAKINGS

• Examines the reports and accounts of the Public
  Undertaking and Reports of CAG of India.Examines
  whether the affairs of Public Undertaking are
  being in accordance with sound business
  principles and prudent commercial practices.
• Not to examine matters of major Government
  policy as distinct from business or commercial
  functions of Public undertakings or matters of
  day to day administration.
• Ministers not called before the Committee.

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COMMITTEE ON ESTIMATES

• Reports on what economics, improvements in
  organization, efficiency or administrative
  reforms, consistent with the policy underlying
  the estimates, may be effected.
• Suggests alternative policies in order to bring
  about efficiency and economy in
  administration.Examines whether the money is
  well laid out within the limits of policy implied
  in the estimates.
• Suggests the form in which estimates shall be
  presented to Parliament.

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Departmentally Related Standing Committee

• Constituted under Rule 331C to 331N of the Rules
  of Procedure and conduct of Business in Lok
  Sabha.
• Started in 1993
• Total No. of Committees-17Total No. of members
  -45 (Lok Sabha-30, Rajya Sabha 15) in each
  committee.
• Term of office-One year.

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FUNCTIONS

• Considers and reports on Demand for Grants for
  the concerned ministries. No cut motion to be
  suggested.
• Examines and reports on Bills referred to the
  Committee.
• Consider Annual Report on Ministries/Departments.
• Considers national basic long term policy
  documents, if referred to.
• Not to consider matters of day to day
  administration and matter which are under
  consideration by other Parliamentary Committees.

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Operational Frame Work of Parliamentary Control

• Budget or Annual Financial Statement central
  focus of Legislative Financial Control Process.
• Controls executed through the control over
  Demand for Grants and raising of Taxes.
• In matter of raising of resources through taxes,
  Constitution permits imposition of any tax only
  with authority of Law.

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Operational Frame Work of Parliamentary Control

• Thus Parliament is the sole authority for
  imposition of Tax.
• Union Government can borrow or raise loans on
  the security of the Consolidated Fund of India.
• Parliament has the power to fix limits of such
  borrowings

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Passing of Budget

• Macro Economic Policy reflected in the Budget
  Proposals.
• These cover plan priorities approved by the
  National Development Council and Planning
  Commission.
• Non Plan Grants recommended by the Finance
  Commission and other Non Plan Expenditure
  proposed by the Government.
• Demands presented in the form of Grants for
  various departments by Ministry of Finance.
• Subsequently, Administrative Departments present
  detailed Demand for Grants.

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Passing of Budget

• Under the Demand for Grants, amounts are grouped
  under Revenue and Capital section and also
  under Charged and Voted. Each grant also
  shows provisions under Plan and Non Plan for
  each Major Head of Accounts.
• Parliamentary scrutiny of Budget Process involves
  a general debate over budget proposals after
  presentation of budgets.
• After this Parliament is adjourned to facilitate
  scrutiny of grants through Departmental Related
  Standing Committees.

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Passing of Budget

• Voting for the grants takes place after
  discussions.
• Passing of the appropriation bill provides one
  more opportunity to discuss policy and other
  matters.
• But amounts already approved by Parliament cannot
  be disturbed.
• With passing of Finance Act and Appropriation
  Act, the pre-appropriation control process comes
  to a formal end.

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Execution of Budget

• After passing of the Acts, amounts under each
  grant are placed at the disposal of the
  Administrative Departments for execution of
  Budget ProposalsNo formal control of Parliament
  over the execution of Budget.
• However mechanism of questions raised by the
  members to obtain information on ongoing
  activities provides opportunity for the
  Parliament to intervene if necessary.

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Execution of Budget

• Other mechanisms which Parliament uses to ensure
  monies granted are not spent on the purpose not
  approved are passing of- Supplementary Grants,
  Re-appropriations, Token Grants
• Power of the Executive to appropriate funds from
  Revenue to Capital or Charged to Voted is also
  restricted

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Summing Up

• Parliamentary financial control system in India
  has a firm legal base and meets the norm of good
  governance. But significant gap between theory
  and practice.
• To strengthen parliamentary control, budget
  proposals need to be supported by expenditure
  plan and periodical reports on performance.
• There is scope for parliamentary financial
  control to be proactive in monitoring the
  budgetary performance of government.

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Summing Up

• Departmental Standing Committees need research
  and institutional support for effective scrutiny
  of budget proposal.
• Discussion of report of CAG by PAC and COPU need
  to gain momentum to improve the accountability
  process.
• Timely response and complete action on audit
  reports will need to be assured to strengthen
  parliamentary control and accountability process