The Tamil Nadu Local Fund Audit Act, 2014

TAMIL  NADU  GOVERNMENT  GAZETTE  EXTRAORDINARY 94 
The following Act of the Tamil Nadu Legislative Ass embly received the assent of the 
Governor on the 14th December 2014 and is hereby pu blished for general information:— 
ACT No. 24 OF 2014. 
An Act  to provide for an effective and efficient a udit system to all local 
authorities and certain other authorities, bodies o r institutions and Funds and for 
matters connected therewith and incidental thereto.
WHEREAS the Thirteenth Finance Commission in its re port recommended that the 
State Government must put in place an audit system for all local bodies and 
also recommended that the Comptroller and Auditor G eneral of India must give technical 
guidance and supervision over the audit of all the local bodies in the State at every tier/ 
category; 
AND WHEREAS the Second State Finance Commission has  also recommended to 
enact an Act to provide for and to regulate the aud it of the local funds and authorize the 
Director of Local Fund Audit to audit the accounts relating to the local authorities; 
AND WHEREAS it has become imperative to ensure effe ctive spending of the grants 
of the Government of India and the State Government  by the local authorities and other 
authorities and to promote public confidence on how  the public money is expended by the 
local authorities and other authorities established  by the State Government; 
BE it enacted by the Legislative Assembly of the Stat e of Tamil Nadu in the Sixty-fifth 
Year of the Republic of India as follows:- 
1. (1) This Act may be called the Tamil Nadu Local Fun d Audit Act, 2014. 
(2) It extends to the whole of the State of Tamil N adu. 
(3) It shall come into force at once. 
2. In this Act, unless the context otherwise requires, — 
(a) ‘audit’ includes cent per cent audit, post audit, test audi t, special audit and such 
other examination of accounts as the Government may , from time to time, 
specify; 
(b) ‘cent per cent audit’ means a post audit of all the transactions of a par ticular 
account for the whole financial year or for such pe riod as may be specified by 
the Director; 
(c) ‘concurrent audit’ means a continuous post audit of accounts of day-to -day 
transactions; 
(d) ‘Director’ means the Director of Local Fund Audit appointed un der section 3 
and includes any person authorised by the Governmen t to perform the functions of 
the Director of Local Fund Audit; 
(e) ‘Executive authority’ means the Chief executive officer or any other offi cer of 
a local authority, vested with the power to adminis ter the fund of that authority; 
(f) ‘Government’ means the State Government; 
(g) ‘local authority’ means,— 
(i) any municipal corporation or municipal council or panchayat union council 
or village panchayat constituted under the relevant  law for the time being in force; or 
(ii) any other authority, body or institution estab lished by or under any law or order 
of the Government and specified in the Schedule; 
(h) ‘local fund’ means the fund administered by a local authority an d other fund 
specified in the Schedule; 
(i) ‘Local Library Authority’ means the Local  Library Authority constituted unde r 
the Tamil Nadu  Public Libraries Act, 1948; 
(j) ‘Local Planning Authority’ means the Local Planning Authority constituted 
under the Tamil Nadu Town and Country Planning Act,  1971; 
Short title, 
extent and 
commence- 
ment. 
Definitions. 
Tamil Nadu 
Act XXIV of 
1948. 
Tamil Nadu 
Act 35 of 
1972. 
95 TAMIL  NADU  GOVERNMENT  GAZETTE  EXTRAORDINARY 
(k) ‘market  committee’ means the market  committee constituted under the T amil 
Nadu Agricultural Produce Marketing (Regulation) Ac t, 1987; 
(l) ‘post audit’ means the detailed audit conducted after the comple tion of transactions; 
(m) ‘Schedule’ means the Schedule to this Act; 
(n) ‘special audit’ means an audit of accounts pertaining to a specifie d item or series 
of items requiring thorough examination, and includ es re-audit of the accounts for a period 
already covered by audit; 
(o) ‘State’ means the State of Tamil Nadu; 
(p) ‘surcharge’ means an amount for which the Director makes a pers on liable for 
loss, waste, misapplication or misappropriation of any money or other 
property; 
(q) ‘University’ means the University established or incorporated by  an Act of the State 
Legislature. 
3. (1) The Government may, by notification, appoint a person, having such qualification 
as may be prescribed, as the Director of Local Fund  Audit. 
(2) The Government may also appoint such other offi cers of the Local Fund Audit 
Department, as it may deem necessary, to carry out the purposes of this Act. 
(3) All officers and staff of the Local Fund Audit Department shall be subordinate to the 
Director, who shall have general superintendence an d control over them in the performance 
of their functions under this Act or the rule made thereunder. 
(4) Notwithstanding anything contained in sub-secti on (1), the Director of Local Fund 
Audit functioning before the commencement of this A ct, shall be deemed to have been 
appointed as the Director under this Act. 
4. Notwithstanding anything contained in any other law  for the time being in force, but 
subject to the provisions of the Comptroller and Au ditor General  (Duties, Powers and 
Conditions of Service) Act, 1971, the  Director sha ll audit or cause to be audited by an 
officer of the Local Fund Audit Department authoris ed by him by general or special order 
in this behalf, the accounts of a local authority o r local fund in the manner provided by or 
under this Act. The officer so authorised shall exe rcise such of the powers and perform 
such of the functions of the Director in regard to the conduct of audit under this Act. 
5. The Director may, with the previous sanction of the  Government, and without 
prejudice to the provisions of section 4, audit the  accounts of any authority, body, 
institution or fund not included in the Schedule su bject to such terms and conditions as 
may be agreed upon between the Director and the per son responsible for the administration 
of such authority, body, institution or fund. 
6. (1) The Director or the officer authorised by him u nder section 4, shall conduct the 
audit annually or at such intervals as he may deem fit. The Director may also 
conduct concurrent audit of such of those local aut hority or local fund as are found 
necessary under the provisions of any law governing  them or as may be decided by the 
Director in consultation with the Government: 
Provided that so far as village panchayats are conc erned, the Director may conduct 
audit of twenty per cent of such panchayats in a fi nancial year, so that all 
such panchayats are audited within a span of five y ears: 
Provided further that no audit shall be commenced u nless notice in writing for a period 
of not less than fifteen days is given to the execu tive authority concerned: 
Provided also that for reasons to be recorded in wr iting, notice for a lesser period may 
be given or the notice may be dispensed with. 
(2) The Director may verify the cash balance of the  local fund at the time of audit. 
(3) An officer not below the rank of Deputy Directo r, appointed under sub-section (2) 
of section 3, may inspect the records relating to t he accounts of a local authority or local 
fund. 
Tamil Nadu 
Act 27 of 
1989. 
Appointment 
of the 
Director. 
Central Act 
56 of 1971. 
Audit of 
Accounts. 
Power to audit 
accounts of 
certain 
authorities, 
bodies, 
institutions 
or fund not 
included in the 
Schedule. 
Manner in 
which audit 
is to be 
conducted. 
TAMIL  NADU  GOVERNMENT  GAZETTE  EXTRAORDINARY 96 
7. (1) The accounts of a local authority or local fund  relating to every financial year 
shall be prepared or caused to be prepared by the E xecutive authority, within 
three months from the end of the financial year, in  such form and in such manner as may 
be prescribed, and presented for audit. 
(2) Where an Executive authority makes default in t he preparation and presentation of 
accounts for audit within the specified period, he shall be punishable with a 
fine of not less than one thousand rupees, which ma y extend to five thousand rupees and 
shall also be liable to departmental action: 
Provided that no such fine shall be imposed by the Director unless an opportunity of 
not less than fifteen days is given to show cause a s to why it may not be 
imposed. 
(3) The Government may withhold release of funds to  any authority which fails to 
furnish accounts for audit on expiry of three month s from the specified period. 
8.  (1) For the purpose of audit under this Act, the D irector may,— 
(a) require in writing, the production at the place  of audit, such vouchers, statements, 
returns, correspondences, notes or any other docume nts including documents in electronic 
form, the perusal or examination of which are neces sary for the elucidation of the 
accounts; 
(b) require in writing, any employee of a local aut hority or an authority which 
administers a local fund accountable for or having the custody or control of such vouchers, 
statements, returns, correspondences, notes or othe r documents including documents in 
electronic form or any person having directly or in directly, any share or 
interest in any contract with the local authority o r the authority which administers the local 
fund to appear in person before him and answer any question and require any person so 
appearing to make and sign a declaration with respe ct to such document or to prepare and 
furnish any statement relating thereto; and 
(c) in the event of an explanation being required f rom any officer or member of a local 
authority or an authority which administers a local  fund, invite such person and shall in 
writing, specify the point on which his explanation  is required. 
(2) The Director may, in any requisition made under  sub-section (1), specify a period 
of not less than three days within which the said r equisition shall be complied with. 
9. Any person who wilfully neglects or refuses to comp ly with any requisition lawfully 
made upon him under clause (a) or clause (b) of sub -section (1) of 
section 8 shall be punishable with a fine of not le ss than one thousand rupees, which may 
extend to five thousand  rupees: 
Provided that no such fine shall be imposed by the Director on any person until he has 
been given an opportunity of not less than fifteen days of showing cause 
against the fine: 
Provided further that in the case of an employee of  a local authority or an authority 
which administers a local fund, he shall also be li able to departmental action. 
10. (1) The audit of the accounts prepared and presente d for audit under section 7 
shall be completed by the Director within a period of not exceeding six months as may 
be prescribed. 
(2) The Director at the time of completion of audit  shall verify the correctness of the 
accounts, certify the annual accounts in such manne r as may be prescribed 
and append the certified copy of the accounts with the audit report. 
11. As soon as practicable after the completion of the audit, but not later than three 
months thereafter, the Director shall send to the E xecutive authority concerned a 
report on the accounts audited by him and copies of  the report to such officers and bodies 
or institutions, as the Government may direct or as  may be specified under the 
law governing that local authority or local fund, a s the case may be. 
Liability of the 
Executive 
authority to 
prepare and 
present 
accounts for 
audit. 
Power to 
require 
production 
of accounts 
and 
attendance 
of persons 
for audit. 
Penalty for 
disobeying 
requisition 
under 
section 8. 
Completion of 
audit of 
accounts. 
Audit report to 
be sent to 
Executive 
authority 
and certain 
officers and 
bodies. 
97 TAMIL  NADU  GOVERNMENT  GAZETTE  EXTRAORDINARY 
12. The Director shall include in the audit report,— 
(a) any payment which appears to have been made con trary to any law or order of the 
Government; 
(b) the amount of any deficiency or loss which appe ars to have been caused by the 
negligence or misconduct of any person in the perfo rmance of his duties; 
(c) any case of misappropriation or improper utilis ation of the fund; 
(d) the amount, if any, received which ought to hav e been brought into account but not 
brought into account; and 
(e) any other material impropriety or irregularity observed in the audit. 
13. (1) On receipt of the audit report sent under secti on 11, the Executive authority 
shall, within a period of two months, either remedy  the defects or irregularities, if any, 
pointed out therein and place the audit report toge ther with a statement of action taken or 
place the audit report together with a statement of  action proposed 
to be taken thereon before a meeting of the governi ng body of the authority concerned. 
The Executive authority shall also, within a month from the date of the said 
meeting, send to the Director a report of having re medied the said defects or irregularities 
or submit any explanation in regard to such defects  or irregularities. 
(2) On receipt of such report or explanation, the D irector may,— 
(a) accept the report of having remedied the defect s or irregularities or the 
explanation in regard thereto and drop the objectio n; or 
(b) hold that any or all of the defects or irregula rities pointed out in the audit report 
have not been remedied. 
(3) The Director shall, within two months from the date of receipt of the report or 
explanation, or if no such report or explanation is  received, on expiry of the total 
period of three months referred to in sub-section ( 1), pass an order thereon. If the Director 
holds that any defect or irregularity pointed out i n the audit report has not been remedied, 
he shall state in the order,— 
(a) whether the defect or irregularity can be regul arised and, if so, by what 
method; or 
(b) if the defect or irregularity cannot be regular ised, whether they can be 
condoned and, if so, by what authority; and 
(c) whether the amount to which the defect or irreg ularity, relate to, in his opinion, 
be charged and, if so, against whom. 
(4) The local authority or the authority, body or i nstitution which administers the 
local fund shall publish in its next administrative  report, extract of the defect or 
irregularity, if any pointed out in the audit repor t, the explanation, if any, given by the 
Executive authority under sub-section (1) and the o rder passed thereon by the 
Director under sub-section (3) and shall also keep the same open to inspection for the 
public at its office for a period of one month from  the date of the receipt of the 
order of the Director. 
(5) Nothing in this section or section 12 shall pre clude the Director, at any time, 
from bringing to the notice of the Government for s uch action as may be 
necessary, any information which appears to the Dir ector to support a presumption of 
criminal misappropriation or fraud or, which, in hi s opinion, deserves special attention 
or immediate investigation. 
14. (1) The Director may disallow any payment which app ears to him to be contrary to 
any law or order of the Government, or the amount o f any deficiency or loss 
caused by negligence or misconduct or any sum recei ved, which ought to have been 
brought into account but not brought into account a nd surcharge the person or the person 
authorising the same and shall, in every such case,  certify the amount due from such 
person: 
Provided that no such surcharge shall be imposed by  the Director on any person until 
he has been given an opportunity of not less than f ifteen days of showing cause 
against the surcharge. 
Contents of 
audit report. 
Procedure to 
be followed 
on receipt of 
audit report. 
Director to 
surcharge 
illegal 
payments 
and loss 
caused by 
negligence or 
misconduct. 
TAMIL  NADU  GOVERNMENT  GAZETTE  EXTRAORDINARY 98 
(2) Any person aggrieved by the surcharge may, with in one month from the date 
of receipt of the decision of the Director, apply t o the District Court, to set aside the 
surcharge and the Court, after taking such evidence  as is necessary, may confirm, modify 
or remit the same. 
(3) Every sum certified to be due from any person b y the Director under this Act 
shall be paid by such person to the Executive autho rity within one month from 
the date of intimation to him of the decision of th e Director unless, within that time, such 
person has filed an application before the District  Court against the decision under sub- 
section (2) and such amount, if not so paid, or suc h amount as the District Court shall 
declare to be due, may be recovered as if it were a n arrear of land revenue and for the 
purpose of such recovery, the Director shall have t he powers of a Collector under the 
Tamil Nadu Revenue Recovery Act, 1864. 
15. (1) The  Director shall exercise general supervisio n and control over the officers 
and staff of the Local Fund Audit Department. 
(2) The Director shall have the power to settle the  audit objections included in the 
audit report. 
(3) The  Director may approach the Principal Accoun tant General of the State 
to provide necessary technical guidance and support on the audit and maintenance of 
accounts of a local authority or local fund. 
(4) The Director may condone any payment made from a local fund, of a sum not 
exceeding rupees ten thousand only, as may be presc ribed by the Government, 
which appears to him to be contrary to law, if in h is opinion, there was no negligence or 
misconduct on the part of the person making or auth orising such payment. 
(5) The Director shall also exercise such other pow ers and functions, as may be 
prescribed. 
16. The Director may, by general or special order, dele gate all or any of the powers 
to be exercised or functions to be performed by him  under this Act or the  rules made 
thereunder except the power under sub-section (4) o f section 15 to any other Officer of the 
Local Fund Audit Department, subject to such condit ions, if any, as may be specified in 
that order. 
17. (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 c ost of audit under sub-section (1). 
(3) If the cost of audit due under sub-section (1) is not paid within one year from 
the date of its becoming due, the Government may ad just the same against the grant or 
other sums, if any, payable to such authority: 
Provided that if no grant or other sums is payable to such authority, the cost of audit 
shall be recovered by the Director in such manner a s may be prescribed. 
18. The Director may, when circumstances so warrant, di spense with detailed audit of 
any account or class of transactions and apply such  limited check in relation to such 
accounts or transactions as he may deem fit. 
19. (1) Whenever any defalcation or loss in money or st ores of any local authority or 
authority, body or institution which administers a local fund caused due to 
misappropriation, theft or natural calamities is de tected, the fact shall be promptly reported 
by the Executive authority to the Director giving i n detail the circumstances which led to 
such defalcation or loss. 
(2) On receipt of a report under sub-section (1), t he Director shall immediately 
conduct or cause to be conducted a special audit of  the accounts of that authority: 
Provided that nothing in this section shall prevent  the Executive authority from initiating 
criminal proceedings against any person suspected o f, or involved in, any defalcation or 
loss of money or stores. 
Tamil Nadu 
Act II of 
1864. 
Powers and 
functions of 
Director. 
Delegation of 
powers and 
functions. 
Payment of 
cost of 
audit. 
Power to 
dispense 
with 
detailed 
audit. 
Defalcation or 
loss in 
money or 
stores to be 
reported by 
the Executive 
authority. 
99 TAMIL  NADU  GOVERNMENT  GAZETTE  EXTRAORDINARY 
20. The Director shall submit to the Government annuall y a consolidated report of the 
accounts audited by him containing such particulars  which he intends to bring to their 
notice and the Government shall cause the consolida ted report to be laid, as soon as may 
be, after it is received, along with the Report of the Comptroller and Auditor General, 
before the Legislative Assembly. 
21. Save as otherwise provided in sub-section (2) of se ction 14, no civil court shall 
have jurisdiction to entertain any suit or proceedi ngs in respect of any action  taken or to 
be taken by the Government or the Director or any o fficer in pursuance of any power 
conferred by or under this Act. 
22. All audit of accounts pending at the commencement o f this Act in respect of any 
local authority or local fund shall, notwithstanding anything contained in this Act, be continued 
and completed by the Director, within such time as may be prescribed, as if this Act has 
not been enacted. 
23. The provisions of this Act shall have effect notwit hstanding  anything inconsistent 
therewith contained in any other law made by the Le gislature  of the State for the time 
being in force. 
24. No suit, prosecution or other legal proceedings  sh all lie against the Director or any 
officer for anything which is in good faith done or  intended to be done under this Act or 
any rule or order made thereunder. 
25. The Director or other officers shall be deemed, whe n acting or purporting to act in 
pursuance of the provisions of this Act or any rule  or order to be public servants within the 
meaning of section 21 of the Indian Penal Code. 
26. (1) The Government may make rules for the purpose o f carrying into effect 
the provisions of this Act. 
(2) In particular, and without prejudice to the gen erality of the foregoing power, 
such rules may provide for all or any of the follow ing matters, namely: —
 (a) the manner and the form in which the accounts of a local authority or local 
fund shall be kept and presented; 
 (b) the procedure to be followed by the Director i n the conduct of audit and the 
period within which such audit shall be conducted; 
 (c) the manner in which the matters required to be  published under this Act shall 
be published; and 
 (d) any other matter which is required to be or ma y be prescribed under this Act. 
(3) Every rule made or notification or order issued  under this Act, shall, as soon 
as possible, after it is made or issued, be placed on the Table of the Legislative Assembly 
and if before the expiry of the session in which it  is so placed or the next session, the 
Legislative Assembly makes any modification in any such rule, notification or order, or the 
Legislative Assembly decides that the rule, notific ation or order should not be made, the 
rule, notification or order shall thereafter have e ffect only in  such modified form or be of 
no effect, as the case may be, so, however, that an y such modification or annulment shall 
be without prejudice to the validity of anything pr eviously done under that rule, notification 
or order. 
27. If any difficulty arises in giving effect to the pr ovisions of this Act, the Government 
may, by order published in the Tamil Nadu Government Gazette, make such provisions, 
not inconsistent with the provisions of this Act as  appears to them to be necessary or 
expedient for removing the difficulty: 
Provided that no such order shall be issued after t he expiry of a period of two years 
from the date of commencement of this Act. 
Bar of 
jurisdiction 
of civil 
courts. 
Special 
provision for 
pending 
audit. 
Act to over- 
ride other 
enactments. 
Protection of 
action taken 
in good faith. 
Central Act 
XLV of 1860. 
Power to 
remove 
difficulties. 
Power to make 
rules. 
Laying of audit 
report. 
Director or 
other officers 
to be 
deemed to 
be public 
servants. 
TAMIL  NADU  GOVERNMENT  GAZETTE  EXTRAORDINARY 100 
28. The Government may, by notification, include any bo dy, authority or institution or 
fund established by or under any law or order of th e Government in the Schedule to 
this Act: 
Provided that no body, authority or institution or fund shall be omitted from the Schedule 
except by the authority of law made by the State Le gislature. 
29. The provisions of this Act shall not apply to any c ase, suit, appeal, revision petition 
or any other proceeding that may be pending at the commencement of this Act before the 
Director of Local Fund Audit, the Government or Civil Court and the law in force immediately 
before the commencement of this Act shall, notwiths tanding anything contained in this Act, 
continue to apply to such cases, suits, appeals, re vision petitions or other proceedings. 
THE SCHEDULE. 
(See clauses (g) and (h) of section 2) 
I.  Local authorities. 
1. All City Municipal Corporations. 
2. All Municipalities. 
3. All Town Panchayats. 
4. All District Panchayats. 
5. All Panchayat Unions. 
6. All Village Panchayats. 
7. All Universities. 
8. All Local Library Authorities. 
9. All Market Committees including the Tamil Nadu Sta te Agricultural Marketing 
Board. 
10. All Local Planning Authorities. 
11. The Tamil Nadu State Council for Higher Educatio n. 
12. The Treasurer of Charitable Endowments. 
13. Arasar Chatram. 
14. Raja Vedapadasalai. 
II. Local Funds. 
1. The Tamil Nadu Municipal Employees Health Fund. 
2. The Tamil Nadu Town Panchayat Employees Health Fu nd. 
3. The Tamil Nadu Panchayat Union Employees Health F und. 
4. The Tamil Nadu Municipal Employees House Building  Advance Family 
Benefit Fund. 
5. The Tamil Nadu Municipal Corporation Employees Ho use Building Advance 
Family Benefit Fund. 
6. National Social Welfare Schemes. 
(By order of the Governor) 
G. JAYACHANDRAN, 
Secretary to Government, 
Law Department. 
Power to 
amend 
Schedule. 
Savings. 

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