Contents - GANGAPEDIA

City Development Plan for Allahabad Final Report
16.0 Financial Profile & Credit Worthiness
16.1 Existing
Practices
There is an increased role of urban government/ governance with increase in urban
population. With advancement in science and technology, man’s concept of minimum
amenities for acceptable living conditions has undergone changes. It has now become
utmost important to provide quality services to the urban dwellers in order to increase
the competitiveness in the city and attract investment on a continuous basis.
Since the fiscal decentralization is in the early process of devolution in the state of
UP, MCA is facing problems of poor financial status, absence of regular maintenance
and high operating costs. Lack of capacity and capability of MCA to mobilize the
resources due to undue pressure by the elected body would result in low investment
for creation of new infrastructure.
State Finance Commission (SFC) is appointed by the State Government under
Section 138-A of the Municipal Corporations (MC) Adhiniyam, 1959 to review the
financial position of MCs. SFC is required ‘to make recommendations relating to the
distribution between State, Gram/ Kshetra/ ZPs and ULB of the net proceeds of taxes,
duties, tolls and fees leviable by the State, which may be divided amongst them under
Part IX and IX-A of the Constitution and the allocation between panchayats at all
levels and ULBs of their respective shares of such proceeds’ to give the
recommendation about the distribution of taxes, duties, tolls and fees leviable which
may be assigned to the MC, or the grants to MC from consolidated fund of the state.
SFC suggests measures to MC to improve its financial position.
MCA like any other MC in India is not able to recover the cost of services rendered
by it. There is big resource gap for performing the basic core functions like public
health, sanitation, and waste management. In order to bridge the gap all the three tiers
of the Government have to cooperate and work in this direction. The Mission is one
of the initiatives by the Central Government for enhancing the service levels of ULB
in the different cities of India.
MCA maintains records on single entry cash based system of accounting. The output
of this cash basis of accounting is a Statement of Receipts and Payments that
classifies cash receipts and cash payments under different heads. A statement of
assets and liabilities is not prepared.
The adoption of cash basis of accounting by governmental entities owes its origin to
the pre-eminence of budget as the principal means of financial control in the
Government. In the case of Governments, the budget is a formal document setting
forth the objects and purposes for which expenditure should be incurred during a
period and the sources from which funds should be raised to meet such expenditures
and receipts under various budget heads to facilitate a comparison of actual
performance vis-à-vis budgeted targets. The cash basis of accounting fails to meet
most of financial reporting objectives. The measurement of performance and financial
position under the cash basis of accounting is unlikely to yield correct results,
because the evaluation of performance requires the measurement of accomplishment
(the revenues) during a period and the efforts expended for those accomplishments
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