The Meghalaya Local Fund (Audit) Act, 2021 (Act No. 5 of 2021)

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The Gazette of Meghalaya EXTRAORDINARY PUBLISHED BY AUTHORITY No. 61 Shillong, Friday, March 26, 2021 5th Caitra, 1943 (S. E.) PART-IV GOVERNMENT OF MEGHALAYA LAW (B) DEPARTMENT ------- NOTIFICATION The 26th March, 2021. No.LL(B).65/2019/2. – The Meghalaya Local Fund (Audit) Act, 2021 (Act No. 5 of 2021) is hereby published for general information. MEGHALAYA ACT NO. 5 OF 2021. (As passed by the Meghalaya Legislative Assembly) Received the assent of the Governor on the 23rd March, 2021. Published in the Gazette of Meghalaya Extra-Ordinary issue dated 26th March, 2021.

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MEGHALAYA LOCAL FUND (AUDIT) ACT, 2021
An
Act

to provide for and to regulate the Audit of the Local Funds under the management or control of
certain Local authorities in the State of Meghalaya.

Whereas it is expedient to provide for and to regulate the Audit of the Local Funds under the
management or control of certain Local Authorities in the State of Meghalaya and for matters connected
therein or incidental thereto;

Be it enacted by the Legislature of the State of Meghalaya in the Seventy Second Year of the
Republic of India as follows:-

Short title and commencement 1. (1) This Act may be called the Meghalaya Local Fund (Audit) Act,
2021.
(2) It extends to the whole of the State of Meghalaya.
(3) It shall come into force from the date the State Government may
by Notification in the Official Gazette, appoint.
Definitions. 2. In this Act, unless the context otherwise requires:-
(a) “Audit” includes Cent-per-cent Audit, Concurrent Audit, Post
Audit, Pre-Audit, Special Audit and Test Audit;
(i) “Cent-per-cent Audit” means an audit of accounts of the entire
transactions for the whole year or for the period specified by the
Director;
(ii) "Concurrent Audit" means audit on the spot either
simultaneously with or soon after the making of payment,
withdrawal or adjustment out of a Local Fund;

(iii) "Post Audit" means audit after making of payment, withdrawal
or adjustment out of a Local Fund which is not Concurrent Audit
but includes Cent-per-cent and Test Audit;

(iv) "Pre-Audit" means audit before payment, withdrawal or
adjustment out of a Local Fund;

(v) "Special Audit" means an audit of accounts pertaining to a
specified item or series of items requiring through examination;

(vi) “Test Audit” means an audit of a certain period selected at
random by the Director or any other authority empowered by
him;

(b) “Auditor” means the Director of Local Fund Audit and includes
any other Officer of the Directorate of Local Fund Audit
empowered by the Director to perform the functions of an
Auditor under this Act;

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(c) “Audit Report” means the report sent under Section 10 of this
Act and includes reports sent by the Auditor on conduct of Cent-
per-cent Audit, Concurrent Audit, Special Audit, Test Audit of
accounts of any institution for a specified period, included in the
Schedule;
(d) “Director” means the Director of Local Fund Audit and includes
any person empowered by the Government to perform the
functions of the Director of Local Fund Audit;
(e) “Executive Authority” means the Principal Executive Officer of a
Local Authority;
(f) “Local Authority” shall mean a Municipal Board, Council,
Corporation, Town Committee, Local Boards or any other
authority legally entitled to or entrusted by the State Government
with the control or management of a Municipal or Local Fund,
and such other institutions, boards, agencies or bodies as also
subsidiaries thereof constituted under any State Law which are in
receipt of financial grant, subsidy, funds or financial assistance in
any form from the Government;
(g) “Local Fund” means-
(i) a fund administered by a Local Authority which, though not part
of a Government Department, has been established by or under a
law or orders of the Government, and
(ii) any other fund which the Government may, by Notification in the
Gazette, declare to be a Local Fund for the purpose of this Act;
(h) “Prescribed” means prescribed by rules made under this Act;
(i) “Schedule” means the Schedule appended to the Meghalaya
Local Fund Audit Rules;
(j) “State” means the State of Meghalaya;
(k) “Surcharge” means an amount for which the Auditor, in
exercise of the powers vested in him under this Act, makes a
person liable for loss, waste, misapplication or misappropriation
of any money or other property belonging to any Local
Authority.
Appointment of Director. 3. (1) The Government shall, by Notification in the Gazette, appoint a
person, having such qualifications as may be prescribed to be the
Director of Local Fund Audit in charge of the audit of accounts of a
Local Authority or a Local Fund included in the Schedule.

(2) The Government may appoint such other officers in the
Directorate of Local Fund Audit to assist the Director in the exercise
of his powers vested in him and to discharge his functions and duties
under this Act.

(3) All Officers and staff of the Directorate of Local Fund Audit shall
be subordinate to the Director who shall have general
superintendence and control over them in the performance of their
functions under this Act or the Rules or Manual made there under.

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Audit of Accounts. 4. (1) Notwithstanding anything contained in any other law for the time
being in force but subject to the provisions of the Controller and
Auditor General (Duties, Powers and Conditions of Service) Act,
1971 (Central Act 56 of 1971) the Director shall, in the manner
provided by or under this Act, conduct the audit of accounts of a
Local Authority or Local Fund as prescribed.

(2) Government may, by Notification in the Gazette and for reason to
be specified therein, add any other authority, body, institution or
Local Fund to the Schedule referred to in the Meghalaya Local Fund
Audit Rules and on publication of the Notification, such authority,
body, institution or Local Fund shall be deemed to be added to the
Schedule.

(3) No authority, body, institution or Local Fund included in the
Schedule referred to in the Rules shall be omitted there from except
by the authority of a law made by the State Legislature.

Power of audit of accounts of
certain authorities, bodies,
institutions or funds not
included in the Schedule.

5. The Director may, with the previous sanction of the Government and
without prejudice to the provisions of sub-section (1) of Section 4,
audit the accounts of any authority, body, institution or fund not
included in the Schedule subject to such terms and conditions as may
be agreed upon between the Director and the person responsible for
the administration of such authority, body, institution or fund.

Audit of accounts of stock/
stores and verification of cash
balance.

6. (1) The Auditor shall have authority to Audit and report on the accounts
of stores/stock kept by a Local Authority as specified in the Schedule.
(2) An Officer not below the rank of a Deputy Director shall have
authority to make surprise inspection of the stock/stores kept by a
Local Authority as specified in the Schedule.
(3) The Director shall have authority to verify the cash balance of the
fund at the time of audit and inspection.

Manner in which Audit is to be
conducted.
7. The Auditor shall conduct the audit at such intervals as may be
decided by the Director or, may conduct audit of such local
authorities as are found necessary under the provisions of any law
governing them or as may be decided by the Director in consultation
with the State Government.

Auditor to be deemed to be
public servant.

8. An Auditor when acting in pursuance to any of the provisions of this
act shall be deemed to be a public servant within the meaning of
Section 21 of the Indian Penal Code 1860.

Liability of local authorities to
prepare and present accounts
for Audit.
9. (1) The accounts of a Local Authority or Local Fund included in the
Schedule relating to a financial year shall be prepared or caused to
be prepared by the Executive Authority, in such form and in such
manner as may be prescribed, and presented for audit within four
months after the close of that financial year.

(2) Where an Executive Authority makes default in the preparation
and presentation of accounts for audit within the period specified
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under sub-section (1), the Executive Authority shall be punishable,
on conviction, with fine which may extend to ten thousand rupees
but which shall not be less than five thousand rupees.

(3) No proceedings under sub-section (2) shall be taken by the
Director without giving the person affected thereby an opportunity to
show cause, within fifteen days as to why such proceedings should
not be taken against him.

Issue of Audit Report.

10. Issue of Audit Report shall be made by the Auditor within six months
from the date of completion of audit, failing which the officer
responsible for the delay shall be liable to be proceeded against
under the provisions of the Meghalaya Services (Discipline &
Appeal) Rules, 2011.

Power of auditor to require
production of accounts and
attendance of persons.

11. (1) For the purpose of an Audit under this Act, an Auditor may:-
(a) require in writing, the production at the place of audit such
vouchers, statements, returns, correspondence, notes or any other
documents for the perusal or examination of which he believes to be
necessary for the elucidation of the accounts;
(b) require in writing any employee of the Local Authority
accountable for or having the custody or control of such vouchers,
statements, returns, correspondences, notes or other documents or
any person having directly or indirectly, any share or interest in any
contract with or under the Local Authority to appear in person before
him at the head office of that Local Authority or at the place of audit
and answer any question and require any person so appearing to
make and sign a declaration with respect to such document or to
prepare and furnish any statement relating thereto; and
(c) in the event of any explanation being required from any officer or
member of a Local Authority, in writing invite such person and shall
in writing, specify the points on which his explanation is required.
(2) The Auditor may, in any requisition made under sub-section (1),
fix a reasonable period of not less than three days within which the
said requisition shall be complied with.
(3) The Auditor shall give notice in writing to the Executive
Authority of the institution concerned at least two weeks before the
date on which he propose to commence the audit;
Provided that the Auditor may, for special reasons to be recorded in
writing, give notice shorter than two weeks or commence a special
or detailed audit without notice, on the order of the Director.
(4) The Auditor shall, in suitable cases, and if so required by
Government, give public notice of the date and time of audit by
publication in the notice board of the local authority to be audited
and also in a newspaper in the local language having wide
circulation in the area where it is situated and shall consider the
objections, if any, made in writing by any person.

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Penalty for disobeying
requisition under Section 11.

12. Any person who willfully neglects or refuses to comply with any
requisition lawfully made upon him under clause (a) or clause (b) of
sub-section (1) Section 11 shall be punishable, on conviction, with a
fine which may extend to one thousand rupees:
Provided that before proceedings are taken, the Director shall call
upon the person against whom the proceeding are contemplated to
show cause, within fifteen days as to why such proceeding should
not be taken.
Audit Reports to be sent to
certain officers and bodies as
Government may direct.

13. As soon as practicable after the completion of the Audit, but not later
than six months thereafter, the Auditor shall send to the Local
Authority concerned a report on the accounts audited and examined
by him and the copies of the report shall also be sent to such
officers and such bodies as the Government may direct or as may
be specified under the law governing that Local Authority.
Contents of Audit Report.

14. The Auditor shall include in the Audit Report a statement of-
(a) every payment which appears to him to be contrary to law;
(b) the amount of any deficiency or loss which appears to have
been caused by the negligence or misconduct of any person;
(c) the cases of misappropriation or misutilisation of the Local
Fund;
(d) the amount, if any, received which is required to be brought into
account but has not been brought into account by any person; and
(e) any other material impropriety or irregularity which he observes
in the accounts.
Procedure to be followed after
getting the report of the
Director under section 13.

15. (1) On receipt of a report under Section 13, the Executive Authority
concerned shall either remedy the defects or irregularities which
may have been pointed out in the report and send to the Director
within three months of the receipt of the report or within such
period as may be specified under the law governing the Local
Authority, intimation of his having done so, or shall within the said
period, supply to the Director any further explanation as he may
wish to make in regard to the defects or irregularities.
(2) On receipt of such intimation or explanation, the Auditor may, in
respect of all or any of the matters discussed in his report:-
(a) accept the intimation or explanation and drop the objection;
or
(b) hold that the defects or irregularities pointed out in the report or
any of them have not been removed or remedied.
(3) (a) The Auditor shall send a report of his decision to the
Executive Authority concerned within two months from the date of
receipt by him of the intimation or explanation referred in sub
section (1) or if no such intimation or explanation is received, on
the expiry of the period of two months mentioned in that sub-
section.
(b) If the Auditor holds that any defects or irregularities have not
been removed or remedied he shall state in the report:-
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(i) whether, in his opinion, the defects or irregularities can be
regularised and, if so, by what method;

(ii) if they do not admit of being regularised, whether they can be
condoned and, if so, by what authority; and

(iii) whether the amounts to which the defects or irregularities relate
should, in his opinion, be charged and, if so, against whom.

(4) The Local Authority concerned shall publish in its next Annual
Report such portions of the report under Section 13, dealing with
defects and irregularities falling under clause (b) of sub-section (2)
together with the explanation thereof, if any, given under sub-
section (1) and the final report of the Auditor thereon under sub-
section (3). The report of defects and irregularities, the explanation
thereon and the final report shall be open to inspection by the public
at the office of the Local Authority for a period of one month from
the date of their receipt.

(5) Nothing in this Section or in Section 13 shall preclude the
Auditor, at any time, from bringing to the notice of the Government
or of any officer of Government for such action as may be
necessary, any information which appears to the Auditor to support
a presumption of criminal misappropriation or fraud or which, in
Auditor’s opinion, deserves special attention or immediate
investigation.

Auditor to surcharge illegal
payments and loss caused by
negligence or misconduct.

16. (1) The Auditor may disallow any item which appears to him to be
contrary to law and surcharge the same against the person making
or person or body of persons authorizing the making of the illegal
payment and may charge against any person responsible thereof,
the amount of any deficiency or loss caused by the negligence or
misconduct of that person or any sum received which ought to have
been, but has not been brought into account by that person and
shall, in every such case, certify the amount due from such person.

(2) The Auditor shall state, in writing, the reasons for his decision in
respect of every disallowance, surcharge or charge and shall
communicate the same by registered post to the person against
whom it is made together with an extract of the relevant objection
in the Audit Report.

(3) Any person aggrieved by disallowance, surcharge or charge
made may, within one month after he has received or been served
with the decision of the Auditor, apply to the District Court, to set
aside such disallowance, surcharge or charge and the court, after
taking such evidence as is necessary, may confirm, modify or remit
such disallowance, surcharge or charge.

(4) Every sum certified to be due from any person by the Auditor
under this Act shall be paid by such person to the Executive
Authority within one month after the intimation to him of the
decision of the Director unless, within that time, such person has
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filed an application before the District Court against the decision
under sub-section (3) and such amount, if not so paid, or such
amount as the District Court shall declare to be due as if it were an
arrear of public revenue due on land.

Powers and duties of the
Director.

17. (1) The Director shall exercise general supervision and control over
the discharge by the subordinates of their duties under this Act.

(2) The Director may seek technical advice and services of any
expert if, in his opinion, it is necessary to do so.

(3) He may condone a payment made from a Local Fund, which
appears to him to be contrary to law, if:-

(i) in his opinion there was no negligence or misconduct on the part
of the person making or authorizing such payment, and

(ii) such payment does not exceed rupees five thousand in each
case.

(4) If any Audit Report already issued but genuine errors were later
detected, such audit report(s) may be reviewed and re-opened by
the Director as a special case.

Delegation of powers and
functions.

18. The Director may, delegate all or any of the powers to be exercised
or functions to be performed by him under this Act to any officer of
the Directorate of Local Fund Audit and may in like manner
withdraw such powers or functions so delegated.

Payment of charges for Audit.-

19. (1) The cost of Audit of accounts shall be paid by the authority
concerned at such rates as may be fixed by the Government, from
time to time.
(2) The Government may, by general or special order, exempt,
either wholly or in part, any authority from the liability to pay the
cost of Audit under sub-section (1).

Power to dispense with Cent-
per-cent Audit:-
20. The Director may, when circumstances so warrant, dispense with
Cent-per-cent Audit of any account or class or transactions and
apply such limited check in relation to such accounts or transactions
as may deem fit.

Defalcation or loss in money or
stores to be reported by the
Executive Authority.

21. Whenever any defalcation or loss in money or stores of local
authority is discovered the fact shall be promptly reported by the
Executive Authority to the Director and to the Controlling authority
or the Government, as the case may be, giving in detail the
circumstances which led to such defalcation or loss.
Explanation: -
(1) In this sub-section Controlling Authority means the Head of the
Department concerned or the Officer empowered to countersign the
Grant-in-aid Bill.

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(2) On receipt of a report under sub-section (1), the Director shall
immediately conduct or cause to be conducted a special audit of the
accounts of that Local Authority:

Provided that nothing in this section shall prevent the Local
Authority from taking criminal proceedings against any person
suspected of, involved in, any defalcation or loss of money or
stores, where such a course is considered expedient.

Act to override other
enactment.

22. If any provision contained in any other law for the time being in
force relating to the audit of accounts of a Local Authority or a
Local Fund included in the Schedule is repugnant to the provisions
of this Act, the latter shall prevail and the former shall be void to
the extent of such repugnancy.

Laying of audit report. 23. The Director shall send to the Government annually a consolidated
report of the accounts audited by him containing such particulars
which he intends to bring to their notice and the Government shall,
within a period of three months after the receipt of the same, cause
it to be laid before the Legislative Assembly.

Protection of action taken in
good faith.

24. No suit, prosecution or other legal proceedings shall lie against the
Director or any officer acting under the provisions of this Act for
anything which is in good faith done or intended to be done under
this Act or the Rules made thereunder.

Bar of jurisdiction of Civil
Courts.
25. Save as otherwise provided in sub-section (3) of section 16, no Civil
Court shall have jurisdiction to entertain any suit or proceeding in
respect of any action taken or to be taken by the Government or the
Director or any Officer in pursuance of any power conferred by or
under this Act.

Special provision for pending
audit.

26. All audit of accounts pending at the commencement of this Act in
respect of any Local Authority or Local Fund included in the
Schedule shall, notwithstanding anything contained in this Act, be
continued and completed by the Director, within such time as may
be prescribed, in the same manner in which such accounts were
being audited by him, as if this Act had not been enacted.

Cognizance of offence. 27. No court shall take cognizance of any offence punishable under this
Act except on a complaint in writing of the facts constituting such
offence, made by the Director or any Officer authorized by him in
this behalf.

Power of Government to make
rules.

28. (1) The Government may, by Notification in the Gazette, make rules
for the purpose of carrying into effect the provisions of this Act.

(2) In particular, and without prejudice to the generality of the
foregoing power, such rules may provide for all or any of the
following matters, namely:-

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(a) the manner and the form in which the accounts of a Local
Authority whose accounts are subject to audit under this Act, shall
be kept and presented:

(b) the powers and duties of Auditors and procedure to be followed
by them for conducting an audit and period at which such audit may
be conducted;

(d) all other matters, which may be or are required to be prescribed.

(3) Every rule made under this Act shall be laid, as soon as may be
after it is made, before the Legislative Assembly while it is in
session for a total period of fourteen days, which may be comprised
in one session or in two successive sessions, and if, before the
expiry of the session in which it is so laid or the session
immediately following, the Legislative Assembly makes any
modification in the rule or decides that the rule should not be made,
the rule shall thereafter have effect only in such modified form or
be of no effect, as the case may be; so, however, that any such
modification or annulment shall be without prejudice to the validity
of anything previously done under that rule.

Power to remove difficulties.

29. If any difficulty arises in giving effect to the provisions of this Act,
the Government may, by order, as occasion may require, do
anything not inconsistent with the provisions of this Act which
appears to them to be necessary or expedient for the purpose of
removing the difficulty:

Provided that no such order shall be issued after the expiry of two
years from the date of commencement of this Act.

Savings. 30. Notwithstanding anything contained in this Act, the provisions of
this Act shall not apply to any case, suit, appeal, revision petition or
any other proceedings that may be pending before an Auditor, Civil
Court or the Government and the law in force immediately before
the commencement of this Act.

********

S. K. SANGMA,
Deputy Secretary to the Govt. of Meghalaya,
Law (B) Department.

SHILLONG: Printed and Published by the Director, Printing and Stationery, Meghalaya, Shillong.
(Extraordinary Gazette of Meghalaya) No. 121 - 730 + 150 — 26 - 3 - 2021.
website:- http://megpns.gov.in/gazette/gazette.asp

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