Crores at Risk, systemic failure flagged: Himachal Assembly panel pulls up Urban Bodies over accounting lapses

Crores at Risk, systemic failure flagged: Himachal Assembly panel pulls up Urban Bodies over accounting lapses

Shimla, March 28 — At a time when Himachal Pradesh continues to operate under fiscal stress and austerity, a fresh report of the Local Fund Accounts Committee of the Vidhan Sabha has flagged a serious and long-standing failure in financial governance across urban local bodies, warning that the state’s municipal system is functioning without reliable financial transparency. The committee, in its third report for 2025–26 presented in the House on March 28, has pointed to systemic non-compliance in the implementation of the double entry accounting system—considered a basic requirement for modern public finance management—raising concerns over accountability, audit integrity and potential financial risks.

The report reveals that despite repeated directions and years of policy push aligned with the National Municipal Accounts Manual, the overwhelming majority of urban local bodies in the state continue to rely on the outdated single-entry accounting system. Shockingly, out of all urban local bodies, only two municipal corporations—Shimla and Solan—have implemented the double entry system, while nearly 58 others, including municipal councils and nagar panchayats, have failed to adopt it. This, the committee notes, is not a procedural delay but a deep-rooted administrative failure that has persisted despite continuous audit objections flagged year after year.

Citing repeated audit paras and observations from the Comptroller and Auditor General (CAG), the committee has underlined that the inability to shift to accrual-based accounting has severely compromised the ability of these bodies to present a true and fair picture of their financial position. Without proper recording of assets and liabilities, the actual fiscal health of urban institutions remains opaque, increasing the risk of financial mismanagement, irregularities, and weak oversight of public funds. The report categorically states that such prolonged non-compliance reflects not just inefficiency at the institutional level but also a breakdown of the departmental monitoring mechanism.

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The Urban Development Department’s response has come under sharp criticism, with the committee observing that no concrete, verifiable reasons were provided for the failure, nor was any time-bound action plan submitted to ensure implementation. The department’s justification citing shortage of trained accounting personnel and ongoing training initiatives has been rejected as inadequate, with the panel noting that such gaps should have been addressed years ago when the transition was first mandated. The committee has also expressed concern over the absence of any disciplinary action against officials or bodies responsible for the delay, terming it a serious lapse in enforcing accountability.

In a strong observation, the panel has warned that continuing with the single-entry system undermines financial discipline and violates the core principles of transparency and public accountability. It has stressed that the issue is not merely technical but has direct implications on governance quality and public trust, especially when urban bodies are handling increasing volumes of public funds, including central and state grants.

Taking a firm stand, the committee has recommended strict timelines for implementation, directing that upgraded municipal corporations complete the transition within six months, municipal councils within nine months, and nagar panchayats within one year. More significantly, it has proposed linking compliance with the release of state financial assistance, recommending that grants be curtailed or withheld in cases of continued non-compliance. The panel has also called for the identification of responsible officers and initiation of disciplinary proceedings within three months, along with the establishment of a dedicated monitoring cell and an online dashboard to track progress in real time.

The report makes it clear that unless urgent corrective measures are taken, the state risks continuing with a fragile and opaque municipal financial system where audit red flags persist without resolution. With repeated warnings from audit authorities and now a strong legislative push, the spotlight is firmly on the Urban Development Department to enforce accountability and restore credibility in the financial functioning of urban local bodies.