Government of Kerala

Abstract

Capacity Building for Municipal Service Delivery in Kerala-Modification to Kerala Municipal

Accounts Manual-orders issued

Local Self Government ( IA) Department

GO (MS) No130 / 2008 / LSGD Thiruvananthapuram , dated 09 . 05.2008

Read: 1. GO (MS) No.8/07/LSGD dated 6-1-07

2. GO (P) No.100/07/LSGD dated 30-3-07
3. GO (MS) No.130/07/LSGD dated 17-5-07
4. Note dated 24.04.2008 from the Project Director, Kerala Sustainable Urban
Development Project, Thiruvananthapuram

ORDER

Govt have issued orders vide reference 1st cited to implement a pilot project to introduce
Double Entry Accrual based Accounting System in all the five Municipal Corporations and the
Municipalities of Thalassery and Alappuzha. Govt have subsequently notified the Kerala Municipality
(Accounts) Rules, 2007 and Kerala Municipal Accounts Manual as applicable to these Local
Governments as Govt Orders read as 2nd & 3rd papers respectively.

The Project Director, Kerala Sustainable Urban Development Project, Trivandrum has
reported as per note read as 4th paper above that on analyzing the functionality of the new system,
some revisions to the Manual are felt necessary. The revisions include changes to the coding
structure as well as the main Manual. Further, the guidelines for valuation of fixed assets issued
after notification of the Manual also have to be included in the Manual.

Govt have examined the proposal of the Project Director, Kerala Sustainable Urban
Development Project and are pleased to accept the proposed modifications as indicated below:
The changes to Kerala Municipal Accounts Manual are given as Appendix 1 to this order.
The additions to the Coding Structures are given as Appendix 2 and the modifications to
Coding Structures are given as Appendix 3.
 The fixed assets valuation guidelines, which will also form part of the Manual, are given as
Appendix 4 to this order.

In the Kerala Municipal Accounts Manual, the following clause will be added as Clause 28 (1)
in Chapter 28-Guidelines for Preparation of Opening Balance Sheet:
"The fixed asset valuation guidelines for the purpose of preparation of opening
balance sheet are given in Appendix 28.1."

Consequent to issue of fixed asset valuation guidelines, there has been some changes to the
depreciation rates. The revised rates of depreciation are given in Appendix 5.

The Kerala Municipal Accounts Manual notified vide GO read as 3rd paper above stands
modified to the above extent.

By Order of the Governor

Sd/-
S.M Vijayanand
Principal Secretary

To
The Accountant General (A&E), Kerala
The Accountant General (Audit), Kerala
The Project Director, Kerala Sustainable Urban Development Project, Trivandrum
The Director of Urban Affairs, Trivandrum
The Director, Local Fund Audit Department, Trivandrum
The State Performance Audit Officer, Trivandrum
The Mayors/Secretaries of Municipal Corporations (Trivandrum, Kollam, Kochi, Thrissur,
Kozhikode)
The Chairman/Secretary, Alappuzha & Thalassery Municipalities

Forwarded / By Order

Sect Officer

CHANGES TO KERALA MUNICIPAL ACCOUNTS MANUAL
Paragraph
Chapter Existing Paragraph
No.
S. Reference
1 Chapter 3 - 3.13 (i) Statutory deductions like
Significant Income Tax, Value Added
Accounting Tax, Kerala Construction
Policies Workers Welfare Fund etc.
made from the Supplier's
bill to be recognised when
the deductions are made.
2 Chapter 3 - 3.14 (b) Statutory deductions from
Significant salaries including those for
Accounting Income Tax, Profession
Policies Tax, Provident Fund
contribution, etc., shall be
recognised as liability in the
same period in which the
corresponding salary is
recognised as expenditure.
3 Chapter 6 - 6.24 All refunds and remissions
Property & arising under eligible
Other circumstances as provided
Taxes in the Act and regulations
governing the revenues shall
be duly recorded in the
Demand registers
maintained and the details of
the same shall also be
communicated to the
Accounts Department. It is
to be noted that refund/
remission on account of the
reasons referred above
generally granted for the tax
amounts only and the
portion of any other
levy/cess in the original
demand is not
refunded/remitted. The
reversal shall be reflected in
the current year revenue
incase the revision in
demand relates to the
current year and in any other
APPENDIX 1
Revised Paragraph
Statutory deductions like
Income Tax, Value Added Tax,
etc. made from the Supplier's
bill to be recognised when the
deductions are made.
Statutory deductions from
salaries including those for
Income tax, Profession tax,
Subscription to Provident Fund,
etc., shall be recognised as
liability in the same period in
which the corresponding salary
is recognised as expenditure.
All refunds and remissions
arising under eligible
circumstances as provided in the
Act and regulations governing
the revenues shall be duly
recorded in the Demand
registers maintained and the
details of the same shall also be
communicated to the Accounts
Department. The reversal shall
be reflected in the current year
revenue incase the revision in
demand relates to the current
year and in any other case the
reversal shall be accounted as
prior period expenses.
3
 S. Paragraph
Chapter Existing Paragraph
No. Reference
case the reversal shall be
accounted as prior period
expenses.
4 Chapter 12 12.4 (i) Statutory deductions like
- Stores Income Tax, Value Added
Tax, Kerala Construction
Workers Welfare Fund etc.
made from the Supplier's
bill to be recognised when
the deductions are made.
5 Chapter 12 12.46 (c) At the end of the financial
- Stores year, the Stores-in-charge,
the Accounts Officer and the
Auditors shall physically
verify the stock lying in
stores and compare it with
the stock as per the Book
records and in case of any
difference, appropriate
remedial steps as prescribed
by the Municipality shall be
taken;
6 Chapter 13 13. 2 (b) Statutory deductions from
- Employee salaries including those for
Related Income Tax, Profession
Transactio Tax, Provident Fund
ns contribution, etc., shall be
recognised as liability in the
same period in which the
corresponding salary is
recognised as expenditure;
Chapter 14 14.15 At the period-end, the
- Health & Health Department shall
Sanitation ensure that all the bills
received in respect of
expenditures incurred before
the last date of the
accounting period, are
processed and forwarded to
the Accounts Department
for accounting by 30th April
of the next financial year if
the accounting period is a
financial year and in other
cases in 15 days from the
Revised Paragraph
Statutory deductions like
Income Tax, Value Added Tax,
etc. made from the Supplier's
bill to be recognised when the
deductions are made.
At the end of the financial year,
the Stores-in-charge in presence
of the Auditors or in his absence
in the presence of the Accounts
Officer, shall physically verify
the stock lying in stores and
compare it with the stock as per
the Book records and in case of
any difference, appropriate
remedial steps as prescribed by
the Municipality shall be taken;
Statutory deductions from
salaries including those for
Income tax, Profession tax,
Subscription to Provident Fund,
etc., shall be recognised as
liability in the same period in
which the corresponding salary
is recognised as expenditure.
At the period-end, the Health
Department shall ensure that all
the bills received in respect of
expenditures incurred before the
last date of the accounting
period, are processed and
forwarded to the Accounts
Department for accounting and
payment within 15 days from
the end of the accounting period.
4
No
Chapter Existing Paragraph
Reference
end of the accounting
period.
8 Chapter 16 16.5 (e) At the end of the financial
- year, the Implementing
Transferred Officer, Accounts Officer
Institutions and the Auditor shall
physically verify the fixed
assets and stock lying in
stores and compare it with
the records and in case of
any difference, appropriate
remedial steps as prescribed
by the Municipality shall be
taken.
Revised Paragraph
The Municipality shall have a
system of conducting physical
verification of fixed assets of the
Transferred Institutions
throughout the year so that each
fixed asset is verified at least
once during the year. Any
discrepancies with the Fixed
Assets Register should be
reconciled;
f. At the end of the financial
year, the Stores-in-charge in
presence of the Auditors or in
his absence in the presence of
the Accounts Officer, shall
physically verify the stock lying
in stores of the Transferred
Institutions and compare it with
the stock as per the Book
records and in case of any
difference, appropriate remedial
steps as prescribed by the
Municipality shall be taken;
5
 S. Paragraph
Chapter Existing Paragraph
No. Reference
9 Chapter 18 18.23 Creation of Escrow
Account: Where the terms
Borrowing of sanction for raising loan
s or issuing debentures
provide for the
establishment of an Escrow
Account, an amount
equivalent to that stipulated
in the sanction shall be
transferred to the Escrow
Account based on
collections of earmarked
income. For e.g. if a loan
has been taken for building
Water Supply Infrastructure,
then out of the water supply
income collected, an amount
equal to certain percentage
of water tax shall be
deposited into the Escrow
Account. For creation of
Escrow Account, the
Accounts Department shall
pass the following entry:
10 Chapter 19 19.29 (b) The Accounts Officer and
- Special other officer designated in
Funds this behalf shall ensure
timely transfer of mandatory
contribution to Special Fund
Bank Accounts.
II Chapter 20 20.33 The schedules of Income
and Expenditure Statement
Investment in respect of the income
s earned from Municipal Fund
Investments are provided
below.
12 Chapter 21 21.42 (c) The Accounts Officer shall
- Fixed have a system of conducting
Assets physical verification of
fixed assets throughout the
year so that each fixed asset
is verified at least once
during the year. Any
discrepancies with the Fixed
Assets Register should be
reconciled;
Revised Paragraph
Creation of Escrow Account:
Where the terms of sanction for
raising loan or issuing
debentures provide for the
establishment of an Escrow
Account, an amount equivalent
to that stipulated in the sanction
shall be transferred to the
Escrow Account based on
collections of earmarked
income. For e.g. if a loan has
been taken for building Water
Supply Infrastructure, then out
of the water supply income
collected, an amount equal to
certain percentage of water
charges shall be deposited into
the Escrow Account. For
creation of Escrow Account, the
Accounts Department shall pass
the following entry:
The Accounts Officer and/or
other officer designated in this
behalf shall ensure timely
transfer of mandatory
contribution to Special Fund
Bank Accounts.
The schedules of Income and
Expenditure Statement in
respect of the income earned
from Investments are provided
below.
The Municipality shall have a
system of conducting physical
verification of fixed assets
throughout the year so that each
fixed asset is verified at least
once during the year. Any
discrepancies with the Fixed
Assets Register should be
reconciled;
6
 Paragraph
Chapter Existing Paragraph
S.
No. Reference
13 Chapter 22 22.30 ( b) The Accounts Officer shall
- Lease & - 2nd have a system of conducting
Hire bullet physical verification of
Purchase fixed assets throughout the
year so that each fixed asset
is verified at least once
during the year.
Additionally, a periodical
confirmation of the assets
held under operating lease
from the lessee shall also be
obtained. Any discrepancies
with the Fixed Assets
Register and the physical
verification sheets or
confirmation shall be
reconciled.
14 Chapter 27 27.3 Preparation of Financial
- Financial Statements comprising of
Statements various reports as stated
below is the responsibility
of the Accounts Officer and
the Secretary, who shall
cause to prepare the same as
per Section 294 (1) of the
Act. However, other reports
such as Auditor's report and
Secretary's report on the
Financial Statements shall
be prepared by the Auditor
and Secretary respectively.
15 Chapter 27 27.4(c) Audit Report
- Financial
Statements
16 Chapter 27 27.4(d) Secretary's Report on the
- Financial Annual Financial Statements
Statements and the qualifications and
comments made in the Audit
Report
17 Chapter 27 27.62 The Secretary shall in his
- Financial report include his comments
Statements on the Audit Report,
including explanations
relating to qualifications
mentioned by the Auditors,
stating clearly the facts of
Revised Paragraph
The Municipality shall have a
system of conducting physical
verification of fixed assets
throughout the year so that each
fixed asset is verified at least
once during the year.
Additionally, a periodical
confirmation of the assets held
under operating lease from the
lessee shall also be obtained.
Any discrepancies with the
Fixed Assets Register and the
physical verification sheets or
confirmation shall be reconciled.
Preparation of Financial
Statements comprising of
various reports as stated below
is the responsibility of the
Secretary, who shall cause to
prepare the same as per Section
294 (1) of the Act. However,
other reports such as Auditor's
report and Secretary's report on
the Financial Statements shall be
prepared by the Auditor and
Secretary respectively.
Audit Certificate
Secretary's Report on the
Annual Financial Statements
and the qualifications and
comments made in the Audit
Certificate
The Secretary shall in his report
include his comments on the
Audit Certificate, including
explanations relating to
qualifications mentioned by the
Auditors, stating clearly the
facts of the matter and the steps
7
 S. Chapter
Paragraph
No. Existing Paragraph
Reference
the matter and the steps
taken in respect of those
qualifications. The Secretary
shall also comment upon the
performance of the
Municipality based upon the
results of the Financial
Performance Indicators. In
respect of any adverse
performance, as reflected by
the result of any
Performance Indicator, the
Secretary shall, in his report,
explain the reason therefore
and shall also state the steps
taken to improve
performance in that area.
18 Chapter 27 27.64 The Standing Committee for
- Financial Finance shall prepare an
Statements Action Taken Report on the
Annual Financial Statements
submitted to it for approval.
The Report shall in addition
to such information as may
be prescribed by the
Government, provide details
of the action taken by the
Municipality in respect of
the qualifications made in
the Report of the Audit
Report and the Secretary's
Report.
19 Chapter 27 27.65 The Action Taken Report
- Financial shall contain a section for
Statements Standing Committee for
Finance's comments on the
comments and qualifications
contained in the Report of
the Director of Local Fund
Audit and the Secretary's
Report.
Revised Paragraph
taken in respect of those
qualifications. The Secretary
shall also comment upon the
performance of the Municipality
based upon the results of the
Financial Performance
Indicators. In respect of any
adverse performance, as
reflected by the result of any
Performance Indicator, the
Secretary shall, in his report,
explain the reason therefore and
shall also state the steps taken to
improve performance in that
area.
27.64 The Standing Committee
for Finance shall prepare an
Action Taken Report on the
Annual Financial Statements
submitted to it for approval. The
Report shall in addition to such
information as may be
prescribed by the Government,
provide details of the action
taken by the Municipality in
respect of the qualifications
made in the Audit Certificate
and the Secretary's Report.
The Action Taken Report shall
contain a section for Standing
Committee for Finance's
comments on the comments and
qualifications contained in the
Audit Certificate issued by the
Director of Local Fund Audit
and the Secretary's Report.
8
 APPENDIX 2

ADDITIONS TO THE EXISTING CODES

Fund

Major Minor
Fund Fund Fund
Code Code
0 3 0 0 Development Authority Fund

Function

Function Sub Sub-Sub

Function Functi
Group on Function Description
Code
Code Code Code
9 0 9 8 0 0 0 0 Entertainment Tax

Account Heads - Income

Detailed Detailed
Major Head Minor Description
Head Head Sub-Head
1 5 0 4 0 0 2 0 0 Other Vehicle Hire Charges
1 8 0 8 0 0 4 0 0 Receipts from postal charges

Account Heads - Expenditure

Detailed
Minor Detailed
Major Head Sub- Description
Head Head
Head
2 1 0 2 0 0 4 0 3 Festival Allowance
2 1 0 2 0 0 4 0 4 Cost of Uniforms
2 2 0 1 2 0 3 0 0 Internet Charges
2 2 0 3 0 0 2 0 0 Travelling Expenses - Secretary
2 2 0 3 0 0 3 0 0 Travelling Expenses - Municipal Engineer
2 2 0 3 0 0 4 0 0 Travelling Expenses - Health Officer
2 2 0 3 0 0 5 0 0 Travelling Expenses - Permanent Staff
2 2 0 3 0 0 6 0 0 Travelling Expenses - Temporary Staff
2 2 0 3 0 0 7 0 0 Travelling Expenses - Contingent Staff
2 2 0 3 0 9 9 0 0 Travelling Expense of others

9
 Detailed
Minor Detailed
Major Head Sub- Description
Head Head
Head
2 3 0 2 0 0 2 0 0 Bulk Purchase of Water for Distribution
2 3 0 5 3 0 1 0 0 Repairs - Vehicles
2 3 0 5 3 0 2 0 0 Fuel charges - Vehicles
2 3 0 5 9 0 1 0 0 Repairs & Maintenance - Machinery
2 3 0 5 9 0 2 0 0 Repairs & Maintenance - Furniture
2 3 0 5 9 0 3 0 0 Repairs & Maintenance - Office
Equipments
2 3 0 5 9 9 9 0 0 Repairs & Maintenance - Other Assets
2 3 0 8 0 0 7 0 0 Expenses for Cutting of dangerous trees
2 3 0 8 0 0 8 0 0 Expenses for removal of unauthorized
construction
2 3 0 8 0 0 9 0 0 Expenses for shifting of posts
2 3 0 8 0 1 0 0 0 Expenses related to removal of
encroachments
2 3 0 8 0 9 9 0 0 Others - Operation & Maintenance
Expenses
2 5 0 4 0 2 0 0 0 Development Fund Programmes-Regional
Economic Development
2 5 0 4 0 2 1 0 0 Development Fund Programmes-IT & E-
Governance
2 5 0 4 0 2 2 0 0 Development Fund Programmes-Slum
Improvement
2 5 0 4 0 2 3 0 0 Development Fund Programmes-Welfare
of Women and Children
2 5 0 4 0 2 4 0 0 Development Fund Programmes-Town
Planning

Account Heads - Liabilities

Detailed
Minor Detailed
Major Head Sub- Description
Head Head
Head
3 1 0 1 0 0 3 0 0 Development Authority Fund
Account Heads - Assets

Major Head Minor Detailed Detailed Description

Head Head Sub-
Head
4 1 2 1 0 0 1 0 1 Capital Work in Progress -Development
Fund -Agriculture
4 1 2 1 0 0 1 0 2 Capital Work in Progress -Development

10
 Major Head Minor Detailed Detailed Description
Head Head Sub-
Head
Fund -Animal Husbandry
4 1 2 1 0 0 1 0 3 Capital Work in Progress -Development
Fund - Minor Irrigation
4 1 2 1 0 0 1 0 4 Capital Work in Progress -Development
Fund - Fisheries
4 1 2 1 0 0 1 0 5 Capital Work in Progress -Development
Fund -Social Forestry
4 1 2 1 0 0 1 0 6 Capital Work in Progress -Development
Fund -Small Scale Industry
4 1 2 1 0 0 1 0 7 Capital Work in Progress -Development
Fund -Housing
4 1 2 1 0 0 1 0 8 Capital Work in Progress -Development
Fund -Water Supply
4 1 2 1 0 0 1 0 9 Capital Work in Progress -Development
Fund -Electricity & Energy
4 1 2 1 0 0 1 1 0 Capital Work in Progress -Development
Fund -Education and Culture
4 1 2 1 0 0 1 1 1 Capital Work in Progress -Development
Fund -Public Works
4 1 2 1 0 0 1 1 2 Capital Work in Progress -Development
Fund -Public Health & Sanitation
4 1 2 1 0 0 1 1 3 Capital Work in Progress -Development
Fund -Social Security and Social Welfare
4 1 2 1 0 0 1 1 4 Capital Work in Progress -Development
Fund Eradication of Poverty
4 1 2 1 0 0 1 1 5 Capital Work in Progress -Development
Fund of SCSI
4 1 2 1 0 0 1 1 6 Capital Work in Progress -Development
Fund -Sports & Cultural Affairs
4 1 2 1 0 0 1 1 7 Capital Work in Progress -Development
Fund -Public Distribution
4 1 2 1 0 0 1 1 8 Capital Work in Progress -Development
Fund -Natural Calamity Relief
4 1 2 1 0 0 1 1 9 Capital Work in Progress -Development
Fund -Co-operation
4 1 2 1 0 0 1 2 0 Capital Work in Progress -Development
Fund -Regional Economic Development
4 1 2 1 0 0 1 2 1 Capital Work in Progress -Development
Fund -IT & E-Governance
4 1 2 1 0 0 1 2 2 Capital Work in Progress -Development
Fund -Slum Improvement
4 1 2 1 0 0 1 2 3 Capital Work in Progress -Development
Fund -Welfare of Women and Children

ii
Major Head Minor Detailed Detailed Description
Head Head Sub-
Head
4 1 2 1 0 0 1 2 4 Capital Work in Progress -Development
Fund -Town Planning
4 6 0 1 0 0 7 0 0 Medical Loan to Employees

12
 APPENDIX 3

MODIFICATIONS TO THE CODING STRUCTURE

Account Heads - Income

Detailed
Major Minor Detailed
Sub- Description Modifications
Head Head Head
Head
1 2 0 1 0 0 2 0 0 Basic Taxes & Duties Words "Basic
collected by Others Taxes" have been
added
1 2 0 1 0 9 9 0 0 Others - Taxes & The words "by
Duties Collected by Others" added
Others
1 4 0 5 0 0 1 0 1 Water Connection Detailed Head
Charges changed from "02"
to "01 it
1 4 0 5 0 0 1 0 2 Rent of Meter and Detailed Head
Inspection Charges changed from "03"
to "0 111

1 4 0 5 0 0 2 0 0 Electricity Charges Detailed Head

changed from "04"
to "02"
1 4 0 5 0 0 2 0 1 Electricity Service Detailed Dead
Connection Charges changed from "05"
to "02"
1 4 0 5 0 0 2 0 2 Electricity Detailed Head
Reconnection Charges changed from "05"
to "02"
1 4 0 5 0 0 3 0 0 Cattle Pound Charges Detailed Head
changed from "07"
to "03"
1 4 0 5 0 0 4 0 0 City Ferries Charges Detailed Head
changed from "08"
to "04"

1 4 0 5 0 0 5 0 0 Public Sanitation Detailed Head

Charges changed from "09"
to "05"

1 4 0 5 0 0 6 0 0 Market Fees Detailed Head

changed from "10"
to "06"

1 4 0 5 0 0 7 0 0 Bus Stand Fees Detailed Head

13
 Detailed
Major Minor Detailed
Sub- Description Modifications
Head Head Head
Head
changed from " 1 1 "
to "07"
1 4 0 5 0 0 8 0 0 Slaughter House Fees Detailed Head
changed from "12"
to "08"

1 4 0 5 0 0 9 0 0 Lorry, Taxi, Auto and Detailed Head

Other Vehicle Stand changed from "13"
Fees to "09"
1 4 0 5 0 1 0 0 0 Receipts on account of Detailed Head
cost of services changed from " 14
rendered to "10" and
the word " of' has
been added
1 4 0 5 0 1 1 0 0 Receipts from Detailed Head
Housing Projects changed from "15"
to "11"
1 4 0 5 0 1 2 0 0 Receipts from Detailed Head
Libraries changed from " 16"
to "12"

1 4 0 5 0 1 3 0 0 Receipts from Schools Detailed Head

changed from " 17"
to "13"

1 4 0 5 0 1 4 0 0 Receipts form Detailed Head

Hospitals & changed from "08"
Dispensaries to "14"
1 4 0 5 0 1 5 0 0 Receipts from Detailed Head
Veterinary Poly Clinic changed from "09"
to "15"

Account Heads - Expenditure

Detailed
Major Minor Detailed
Sub- Description Remarks
Head Head Head
Head
2 1 0 2 0 0 4 0 1 Uniforms Allowance "Allowance" added
2 1 0 5 0 0 0 0 0 Other Establishment "Establishment
Expenses Expenses" have
been added
2 1 0 5 0 0 1 0 0 Remuneration to Added "to persons
persons engaged on engaged on daily
daily wages wages"

14
 Detailed
Major Minor Detailed
Sub- Description Remarks
Head Head Head
Head
2 2 0 1 0 0 1 0 0 Rent - Expenses Added "expenses"
2 2 0 1 0 0 1 0 1 Rent of Buildings - Added "expenses"
Expenses
2 2 0 1 0 0 2 0 1 Land Revenue - Added "expenses"
Expenses
2 2 0 1 1 0 2 0 0 Water Charges - Added "expenses"
Expenses
2 5 0 4 0 1 0 0 0 Development Fund "& Culture " added
Programmes -
Education & Culture
2 5 0 4 0 1 3 0 0 Development Fund "Social Security"
Programmes - Social added
Security & Social
Welfare
2 8 0 8 0 0 0 0 0 Other Prior Period Added " Prior
Expenses period"

Account Heads - Liabilities

Detailed
Major Minor Detailed
Sub- Description Remarks
Head Head Head
Head
3 5 0 3 0 9 9 0 0 Other Government "Government Dues "
Dues Payable added
3 5 0 4 0 0 4 0 4 Refund Payable - Rent Detailed Sub-Head
from lease of lands changed from "99" to
"04"
3 5 0 4 0 0 4 9 9 Refund Payable - Other Detailed Sub-Head
rents changed from "05" to
"99"

15
Account Heads - Assets

Major Minor Detailed Detailed Description Remarks

Head Head Head Sub-
Head
4 6 0 1 0 9 9 0 0 Miscellaneous Loans & " to
Advances to employees employees"
added &
detailed head
changed to 99
4 8 0 3 0 0 0 0 0 Others - Miscellaneous "Miscellaneou
Expenditure to be s Expenditure
written off to be written
off"added

16
 APPENDIX 4

VALUATION OF FIXED ASSETS

1. Fixed Asset represents those Assets of the Municipalities which are meant for use
over and extended period. These are assets held for providing services and are not held
for resale in the normal course of operations of the Municipalities. The opening balance
sheet shall reflect the written down value of the fixed assets. The written down value
represents the original cost of acquisition less the accumulated depreciation.

2. The valuation of fixed assets given herein is not as per the guidelines prescribed
under National Municipal Accounts Manual (NMAM). However, we suggest and
encourage the use of actual cost of acquisition for ascertaining the original cost of fixed
asset.

3. The fixed assets can be either movable or immovable depending on their nature. The
following are some of the fixed assets in the balance sheet of an Municipality

➢ Immovable Assets
■ Land
■ Buildings including School Buildings, Hospital Buildings, etc.
■ Shopping Centres
■ Gardens
■ Playgrounds/ Open Grounds
■ Crematorium/ Burial Grounds
■ Staff Quarters
■ Auditoriums
■ Markets
■ Town Halls/ Community Halls
■ Cattle Pounds
■ Public Toilets
■ Workshops/ Garages
■ Stadiums
■ Art Galleries
■ Slaughter Houses
■ Roads, including, Mud Roads, Tar Roads and Concrete Roads

17
 ■ Footpaths
• Bridges
■ Sub-ways
■ Drains (Open & Closed)
■ Culverts
■ Water Pipelines

■ Street Light Posts

➢ Movable Assets
■ Vehicles including Cars, Buses, Jeeps, Ambulances, Motorcycles, etc.
■ Office Equipment including Computers , Printers and Peripherals,
Photocopiers , Air conditioners, etc.
■ Furniture & Fixture including Electric fitting and installations
■ Hospital Equipment
■ Garden Equipment
■ Equipments of the Town Planning Department
■ Equipment used by the Engineering Department
■ Equipment of the Conservancy Department

VALUATION GUIDELINES

Ascertainment of Original Cost

4. Valuation of Assets will be done as per the following order of preference.

➢ If both the cost and date of purchase/ construction is available / ascertainable -

Original cost.

➢ If cost is not available /unascertainable but the date of construction / purchase

is available:

■ If the asset has outlived its estimated useful life , then it will be valued at
Re. 1/-. Estimation of useful life will be done by the Engineers of the
Municipality.

■ For Assets that have not outlived its useful life, valuation shall be done
based on the rates prescribed by PWD for that year . The engineers of the
Municipality shall conduct the exercise of estimation of value and provide

18
 it to the implementation committee. The value so obtained shall be the
cost of asset.
■ In case PWD rates for a particular year are not available, the current
replacement cost based on the recent rates as prescribed above shall be
taken. This will be deflated till the year of construction based on
wholesale price index (index rates are provided in Annexure 1) to arrive at
the original cost.
■ In case of those class of assets for which PWD rates are not prescribed,
current replacement cost will be used. This will be deflated to the year of
construction/ purchase based on wholesale price index (index rates are
provided in Annexure 1) to arrive at the original cost of asset. Current
rates from other manufacturers can be taken e.g. in case of vehicles.
■ In case neither the cost nor the date of purchase/ construction is available,
valuation will be at Re I/- , the same being considered as the residual
value.

5. For fixed assets acquired during 2006-07 and later, the Municipalities shall value
the assets based on the actual cost.

6. The guidelines with regard to ascertainment of cost of acquisition, improvement,

the date of acquisition shall be as given in the "Note on Guidelines to Preparation of
Opening Balance Sheet". The relevant extracts of which are given in Appendix 2.

7. It is suggested that the Municipalities undertake the valuation of the fixed assets
in the following order

➢ All Commercial Buildings like Shopping Complexes, Auditorium, Bus Stands

etc.
➢ Buildings constructed in the last twenty years.
➢ Movable Fixed Assets acquired in the last five years
➢ All other fixed assets including land.

8. The assets related to the Transferred Institutions shall also be included in the
valuation and the same shall be valued at Re. 1.

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 Depreciation

9. Depreciation shall be charged by Straight Line Method (SLM) on all fixed assets
except land. The rate of depreciation for each type of fixed assets will be based on the
estimated useful life and will be as given in Appendix 21.1 to Chapter 21 - Fixed Assets.
All assets costing less than Rs.5,000 shall be depreciated at 100% in the year of purchase.

10. All assets which have been fully depreciated shall be carried at a Book value of
Re. 1 /-.

11. Depreciation shall be provided at full rates for assets, which are purchased /
constructed before October 1 of an Accounting Year. Depreciation shall be provided at
half the rates for assets, which are purchased / constructed on or after October 1 of an
Accounting Year.

General Principles

12. Land that are acquired free of cost from the government or provided by
individuals or institutions under endowment for specific purposes shall be valued at Re.
1 /-.

13. Where the ownership of the asset has not been transferred in favour of the
Municipality, but the asset is in the permissive possession of the Municipality, it shall be
included in the Fixed Asset Register with Re. 1/- as its value. However there should be a
clear mention in the Register that in case the Government takes back the asset at any
point of time in future, reversal of entry shall be made in the Fixed Asset Register. Cost
of developing such assets, if any, shall be Booked under the respective head of accounts.

14. Statues and Heritage Assets - Statues and valuable works of art shall be charged at
original cost and no depreciation shall be charged thereon.

15. Land pertaining to Parks and Playgrounds including the cost of development of
land shall be Booked under land. Other amenities to Parks and Playgrounds shall be
capitalised as `Parks and Playgrounds'.

16. Any building /structures/ plant and machinery, etc., constructed/ installed in the
Parks and Playgrounds and used for other purposes shall be Booked under the appropriate
heads of account.

17. Land under road shall be classified under land and shall not be included under
Roads.

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18. The valuation report shall contain the methodology adopted for valuation and
shall give justification for each of the item.

19. The valuation report shall be placed before the Council for approval before the
same is incorporated in the opening balance sheet.

ILLUSTRATION

20. The following example illustrates computation of actual cost in various scenarios,
computation of depreciation and arriving at the written down value.

a. Scenario 1 - Where the Actual Cost of Acquisition is available

Actual cost of acquisition refers to the cost paid for acquiring the asset and
any capital expenditure incurred after its acquisition. For example, let us
assume that the construction of a Shopping Complex was completed on 30`x'
June, 1990. The date of capitalization therefore shall be 30`h June 1990. On
verification of the relevant documents and records, it was found that the
total cost of construction was Rs.20,00,000/- and no major improvement
was carried out in the later years.

The depreciation shall be computed as given below

Date of Capitalisation - 30`h June 1990

Cost of Acquisition (A) - Rs.20,00,000/-
Rate of Depreciation (B) - 2%
Depreciation Per Year (C _ (A) x (B) - Rs.40,000/-
Number of Years till March 2007 (D) - 17 Years
Depreciation till March 2007 (E) = (C) x (D) - Rs.6,80,000/-
Written Down Value as on 31st March 2007 - Rs.13,20,000/-
(A) - (E)
b. Scenario 2 - When Actual Cost of Acquisition is not available

Assuming in the above example, the actual cost of acquisition is not

available, the cost of acquisition shall be computed in the following manner.

i. The cost of acquisition shall be done on the basis of PWD rates

prescribed for the year in which the asset is constructed. In the above
example, the rates prescribed for the year 1990 shall be taken as the
basis for computation of cost of asset. The cost so arrived shall be the
cost of acquisition / construction and the depreciation shall be
calculated accordingly.

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 ii. If the PWD rates for 1990 are not available , the next nearest year for
which the rates are available shall be taken . Assuming, in this
situation , the next nearest year for which the rates are available is
1995, the value of asset shall be computed as per 1995 rates and will
then be deflated using the WPI indices given in Annexure I to 1990
rates to arrive at the cost of acquisition. The same is explained below

a. Cost as per 1995 Rates - Rs. 30,00,000/-

b. WPI for 1994-95 - 1778.2

c. WPI for 1990-91 - 1164.4

d. Cost of Asset the shall be computed using the formula -

(Index of the Year in which the asset is Constructed x Cost as

computed for the next nearest year)

Index for the next nearest year for which PWD rates are available

Therefore the cost arrived at as per the method above, in this case,
shall be

1164.40 x 3000000
Cost of Building = = Rs. 19,64,478/-
1778.2
The depreciation shall then be calculated on Rs.19,64,478 / - in the
manner explained above.

iii. If PWD rates are not available for any class of assets, the
current replacement cost of the asset shall be used and shall
be deflated in the manner explained above.

c. If the year of acquisition or construction is not available, the asset shall be

valued at Re. I and no depreciation shall be calculated on that asset.

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 ANNEXUREI

WHOLESALE PRICE INDEX

FINANCIAL YEAR INDEX

1952-53 100.0
1953-54 104.6
1954-55 97.5
1955-56 92.4
1956-57 105.3
1957-58 108.4
1958-59 112.8
1959-60 117.1
1960-61 124.8
1961-62 125.1
1962-63 129.9
1963-64 137.9
1964-65 153.0
1965-66 164.6
1966-67 187.5
1967-68 209.3
1968-69 206.9
1969-70 214.7
1970-71 226.6
1971-72 239.2
1972-73 263.3
1973-74 316.5
1974-75 396.2
1975-76 391.9
1976-77 400.1
1977-78 420.9
1978-79 420.9
1979-80 493.0
1980-81 582.9
1981-82 637.3
1982-83 668.5
1983-84 718.9
1984-85 765.4

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 FINANCIAL YEAR INDEX
1985-86 799.2
1986-87 845.7
1987-88 914.5
1988-89 982.7
1989-90 1056.0
1990-91 1164.4
1991-92 1324.3
1992-93 1457.5
1993-94 1579.2
1994-95 1778.2
1995-96 1920.3
1996-97 2008.8
1997-98 2097.2
1998-99 2222.0
1999-00 2294.6
2000-01 2458.9
2001-02 2547.3
2002-03 2634.2
2003-04 2777.9
2004-05 2957.9
2005-06 3087.4

Note:
a. Base Year 1952 -53 - 100
b. The indices for the years later than 1961-62 were converted using the arithmetic
conversion method. The linking factor and the years are given in the table below.

Years Base Year on which the Linking Factor

indices were computed
1962-63 to 1970 -71 1961 -62 1.251
1971-72 to 1981-82 1970-71 2.265
1982-83 to 1993-94 1981-82 6.373
1994-95 to 2005-06 1993-94 15.792

Source: Office of Economic Advisor, Government of India.

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 APPENDIX 5

Rates of Depreciation

Estimate
S. Description of Details of Assets that are to be Depreciation
d Life (in
No. Assets included Rate
Y
1 Land Parks, Burial Grounds, Play
grounds Roads etc. and any
vacant site on which no
construction available and kept
as vacant site. This includes the
open space donated by the
layout promoters, to the council
by transfer deeds
2 Building-Class I Office Buildings, School 50 2.00%
Civil Structures Buildings, Public conveniences,
(Structure with R.C. Hospitals, Dispensaries, Clinics,
roof) Maternity & Child Welfare
centers, Swimming pool,
Market places, Slaughter
houses, Stadia, Shopping
complexes, Zoo, Bus stand,
Town hall, Community hall,
Lodging Houses, Cinema
theatre, Staff quarters etc.
3 Building-class-II Nutritious meal centers, 15 6.67%
Civil Structures Compound walls
(Structure with roof
other than R.C. or
without roof)
4 Subways and Cause Cause ways, vehicular subways, 15 6.67%
ways pedestrian over bridges
5 Bridges and Bridges and Flyovers 40 2.50%
Flyovers
6 Storm water Drains- Storm water Drains - open 15 6.67%
open Drains & Drains & Culverts
Culverts
7 Heavy Vehicles Lorry, Tractor, Tipper, Bus, etc. 10 10.00%
8 Light Vehicles Jeeps, Cars, Power Tillers, 10 10.00%
Motorcycles, Mini lorry, Auto
rickshaw etc.
9 Other Vehicles Single driven RC, Double 5 20.00%
Driven RC, Cart etc (RC-
Rubbish cart), Bi-cycles, Tri-
cycles

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 Estimate
S. Description of Details of Assets that are to be Depreciation
d Life (in
No. Assets included Rate
ears
10 Furniture, Fixtures, Steel chairs, Steel Tables, 10 10.00%
Office Equipments Wooden chairs, Wooden tables
etc. Steel racks, Wooden racks,
Steel cupboards, Typewriters,
Duplicators, Xerox machines,
Communication Equipments,
Calculators, Air conditioners,
Water coolers, Refrigerators,
Fans, Electrical fittings, Other
Office equipments, Radios,
TVs, Stools, Public address
systems, Wireless equipments,
etc.
11 Plant / Machinery & Road rollers, Bulldozers, 10 10.00%
Equipment Mechanical Sweeper, Pay
(excluding office Loader, Submersible pumps,
equipment) Mixing mortars, other Civil
Engineering equipments,
Medical equipments in
Hospitals, Dispensaries &
Maternity centers, School
equipments public health
equipments, Tower clocks,
electrical equipments including
generators, Motor pumps, other
Plant & Machinery etc.
12 Roads & Pavements 10 10.00%
Concrete (including
barricades)
13 Bituminus road over 3 33.33%
Jhama metal /
Stone metal
14 Road with Jhama 2 50.00%
metal only
15 Roads & Pavements 6 16.67%
black topped
(including
amenities)
16 Roads & Pavements 3 33.33%
asphalt & WBM
17 Roads & Pavements 50 2.00%
concrete, black
topped, sub grade

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 Estimate
S. Description of Details of Assets that are to be Depreciation
d Life (in
No. Assets included Rate
ears)
18 Pavements with 50 2.00%
Brick & Brick
Paved Road
19 Amenities of parks 5 20.00%
and play grounds
20 Light post 10 10.00%
21 Electrical HT & LT 20 5.00%
installation
Transformers,
Cables
22 Electrical Mercury Vapour, Sodium 10 10.00%
Installations Vapour,
Tube Light 3 33.33%
23 Computers Computer Machinery, 5 20.00%
peripherals like printers, mouse
etc.
24 Carts Single & Double Bullock carts 3 33.33%
25 Wheel Barrow 2 50.00%
26 Water Supply pipe M.S/G.I/ C.I/D.I 40 2.50%
line Asbestos / Plastic 10 10.00%
27 Pumps and Motor 10 10.00%
28 Water Reservoir 40 2.50%
29 a) Deep Tubewell 10 10.00%
b) Hand Tubewell 5 20.00%
30 Water Supply 1. Reservoir 33 3.03%
Source and 2. OHT/GLR 33 3.03%
Transmission 3. Ground Water Wells/ Deep 20 5.00%
System bore wells
4. Channels 40 2.50%
5. Conduits 50 2.00%
31 Water Distribution Pipelines
System 1. Upto 200 m.m 40 2.50%
2. Above 200 m.m 60 1.67%
1. M.S Steel Tanks 5 20.00%
2. India Mark II Pumps 5 20.00%
3. Hand Pumps 5 20.00%
4. Public Fountains 5 20.00%
32 Sewerage Sewerage Lines 30 3.33%
Collection &
Transmission
System

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 S. Description of Estimate
Details of Assets that are to be Depreciation
No. d Life (in
Assets included Rate
ears
33 Plant and a) Water Supply 10 10.00%
Machinery 1. Mechanical Filters
2. Filter Beds
3. Head works, Well points
4. Generator of Booster Station
b) Sewerage
1. Pumping Machinery
2. Treatment Plants
34 Laboratory All equipments in the 10 10.00%
Equipments Laboratories maintained for the
Water Supply and Sewerage
system

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