Except as hereinafter provided, no payment of any sum shall be made out of the municipal fund unless the expenditure of the same is covered by a budget grant, provided that the following items shall be excepted from this prohibition, namely:--

(a) refunds of taxes and other moneys which the municipal council is authorised by this Act or the rules made thereunder to make;

(b) repayments of moneys belonging to the contractors or other persons held in deposit and of moneys collected or credited to the municipal fund by mistake;

(c) sums which the municipal council is required or empowered by this Act, to pay by way of compensation;

(d) every sum payable, --

(i) under sections 307 and 317 by order of the Deputy Commissioner or Government or Commissioner and under sections 310, 366 and 367 by order of the Government,

(ii) under a decree or order of a civil court passed against the municipal council,

(iii) under a compromise of any suit or other legal proceeding or claim;

(e) expenses incurred in the exercise of powers conferred by clause

(a) of section 88 and sections 248, 249 and 251;

(f) all contributions payable by the municipal council to the Government for the maintenance of water supply, dispensaries, schools and other institutions managed by the Government on behalf of the municipal council or on behalf of the municipal councils and any other local authority or authorities.

¹ [(1) The Chief Officer or the Municipal Commissioner shall, on or before the fifteenth day of January each year, prepare and submit to the municipal council a budget containing a detailed estimate of income and expenditure of the municipal council for the ensuing year commencing on the first day of April next following together with a complete account of the actual and expected receipts and expenditure for the official year ending on the thirty-first day of March next following.]

(2) The municipal council shall thereupon decide upon the appropriations, and the ways and means contained in the budget of the year to commence on the first day of April next following. The budget as passed by the municipal council shall be sent to the Government and a copy thereof sent simultaneously to the Commissioner and in the case of ² [town municipal areas] to the Deputy Commissioner of the district also for information.

(3) In such budget estimate, the municipal council shall among otherthings, --

(a) make adequate and suitable provisions for such service as may be required for the fulfilment of the several duties imposed on the municipal council by this Act or any other law;

(b) provide for the payment, as they fall due of all instalments of principals and interest for which the municipal council may be liable in respect of loans contracted by it;

(c) provide for the payment of all sums payable to the Government under sections 366 and 367 and of all contributions for the maintenance of water supply, dispensaries, schools and other institutions or services managed by the Government on behalf of the municipal council and any other local authority or authorities.

(d) allow for a balance at the end of the said year of not less than such sum as may be required to meet the establishment charges for a period of three months.

(4) If the budget as submitted, fails to make adequate provisions for thematters specified in sub-section (3), the Government may modify any part of the budget so as to ensure that such provision is made.

(5) The Government may also modify the budget or any part thereof soas to secure compliance with any of the provisions of this Act or of the rules made thereunder:

Provided that in the case of a city municipal council the standing committee or any other committee appointed under this Act may, within the budget sanctioned under this section, sanction reappropriations not exceeding five hundred rupees from one sub-head to another or from one minor head to another minor head under the same major head and controlled by the same committee. A statement of such reappropriation shall be submitted to the municipal council at every quarterly general meeting.

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1. Substituted by Act 34 of 1966 w.e.f. 16.1.1967.

2. Substituted by Act 36 of 1994 w.e.f. 1.6.1994.

If, in the course of the official year, the municipal council finds it necessary to modify the figures shown in the budget with regard to its receipts or to the distribution of the amounts to be expended on the different services it undertakes, it may do so, provided that without the approval of the Government, --

(a) no reduction shall be made in the amounts allotted for the several items specified in clauses (b) and (c) of sub-section (3) of section 287; and

(b) the closing balance shall not be reduced below the sum fixed under clause (d) of sub-section (3) of section 287.

(1) Accounts of the income and expenditure of the municipal fund shall be kept, and receipts accepted and payments from the municipal fund made in accordance with the rules prescribed in this behalf.

(2) Expenditure from the municipal fund shall, save as otherwise expressly provided in this Act, be incurred subject to the restrictions, conditions and limitations imposed in the rules prescribed in this behalf.

(3) The municipal council shall, at the general meeting in April or after audit of the past official year's accounts, if such audit has not before that general meeting taken place, pass the accounts of the past official year.

(1) The municipal accounts shall from time to time and once in every year at the least, be audited by an auditor appointed by the Government and also by such other agency, if any, as may be prescribed in the rules of the municipal council.

(2) The auditor or auditors shall, for the purposes of their office, have access to all the accounts and other records of the municipal council.

(3) The municipal council shall pay from the municipal fund such charges for the audit as may be agreed upon, and in the case of a Government auditor, such charges as may be prescribed by the Government.

(1) The auditor appointed by Government under sub-section (1) of section 290 may, --

(a) require in writing the production of such vouchers, statements, returns, correspondence, notes or other documents in relation to the accounts as he may think fit;

(b) require in writing any salaried servant of the municipal council accountable for, or having the custody or control of such vouchers, statements, returns, correspondence, notes or other documents or of any property of the municipal council or any person having directly or indirectly by himself or his partner, any share or interest in any contract with or under the municipal council to appear in person before him at the municipal office and answer any question;

(c) in the event of an explanation being required from the president or other honorary officer, or member of a municipal council in writing invite such person to meet him at the municipal office and shall in writing specify the point on which his explanation is required.

(2) The auditor may, in any requisition or invitation made under sub-section (1), fix a reasonable period, not being less than three days within which the said requisition or invitation shall be complied with.

(3) The auditor shall give to the municipal council not less than two weeks'notice in writing of the date on which he proposes to commence the audit:

Provided that, notwithstanding anything contained in this sub-section, the auditor may, for special reasons which shall be recorded in writing give shorter notice than two weeks or commence a special or detailed audit on the authority of the Commissioner without giving notice.

(1) Any person who wilfully neglects or refuses to comply with any requisition lawfully made upon him under clause (a), (b) or (c) of sub-section (1) of section 291, shall be punished with fine which may extend to one hundred rupees:

Provided that no proceedings under this section shall be instituted except with the written sanction of the Commissioner:

Provided further that before giving such sanction the Commissioner shall call upon the person against whom the proceedings are to be instituted to show cause why the sanction should not be given.

As soon as practicable after the completion of the audit, but not later than three months thereafter, the Auditor shall prepare a report on the accounts audited and examined and shall send such report to the municipal council concerned and to the Commissioner and the Controller, State Accounts Department.

The Auditor shall include in his 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 beencaused by the gross negligence or misconduct of any person;

(c) the amount of any sum received which ought to have been but is notbrought into account by any person, and

(d) any material impropriety or irregularity which he may observe in theaccounts other than those mentioned in clauses (a), (b) and (c).

(1) On receipt of a report under section 293, the Municipal Commissioner or Chief Officer shall remedy any defects or irregularities which may have been pointed out in the report, and shall, within two months of the receipt of the report, place the report, together with a statement of the action taken or proposed to be taken thereon and an explanation in regard thereto before a meeting of the municipal council. He shall also, within three months of the receipt of the report, send to the Controller, State Accounts Department, intimation of his having remedied the defects or irregularities, if any, pointed out in the report, or shall, within the said period, supply the Controller, State Accounts Department, any further explanation in regard to such defects or irregularities as the municipal council may wish to give.

(2) On receipt of such intimation or explanation the Controller, State Accounts Department may, in respect of all or any of the matters discussed in the report, -

(a) accept the intimation or explanation given by the Municipal Commissioner or Chief Officer and withdraw the objection, or

(b) direct that the matter be re-investigated at the next audit or at any earlier date, or

(c) hold that the defects or irregularities pointed out in the report or any of them have not been removed or remedied.

(3) The Controller, State Accounts Department, shall send a report of his decision to the Commissioner within one month of the date of the receipt by him of the intimation or explanation of the Municipal Commissioner or Chief Officer referred to in sub-section (1) or in the event of the Municipal Commissioner or Chief Officer failing to give such intimation or explanation, on the expiry of the period of three months mentioned in the said sub-section, and shall forward a copy of such report to the Municipal Commissioner or Chief Officer. If the Controller, State Accounts Department, holds that any defects or irregularities have not been removed or remedied he shall state in the report whether, in his opinion, the defects or irregularities can be regularised and, if so, by what method: and if they do not admit of being regularised, whether they can be condoned, and, if so, by what authority. He shall also state whether the amounts to which the defects or irregularities relate should, in his opinion, be surcharged or charged.

(4) The municipal council concerned shall include in its next administration report, such portions of the report under section 293 as deal with defects and irregularities failing under clause (c) of sub-section (2), together with the explanation thereof, if any, given under sub-section (1) and the final report of the Controller, State Accounts Department thereon under subsection (3). Such report of defects and irregularities and explanation shall be open to the inspection of the public at the office of the municipal council for a period of one month from the date of their receipt.

(5) Nothing in this section shall preclude the Controller, State AccountsDepartment, at any time from bringing to the notice of the Commissioner, for such action as the Commissioner may consider necessary, any information which appears to him to support a presumption of criminal misappropriation or fraud or which in his opinion deserves special attention or immediate investigation.

(1) The Commissioner may, after considering the recommendation of the Controller, State Accounts Department, and after taking the explanation of the person concerned, or making such further enquiry, as he may consider necessary, disallow any item which appears to him to be contrary to law and surcharge the same on the person making, or authorising the making of the illegal payment; and may charge against any person responsible therefor 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 is not brought into account by that person and shall, in every such case, certify the amount due from such person.

(2) The Commissioner shall state in writing the reasons for his decision in respect of every surcharge or charge and shall send by registered post a copy thereof to the person against whom it is made.

(3) If a person to whom a copy of the Commissioner's decision is sent under sub-section (2) refuses to take delivery thereof he shall be deemed to have duly received it on the day on which it was refused by him.

(1) Every sum certified by the Commissioner to be due from any person under sub-section (1) of section 296 shall be paid by such person into the treasury or bank in which the funds of the municipal council concerned are lodged, within one month from the receipt by him of the decision of the Commissioner, unless within that time such person has applied to the court or to the Government as provided in section 298.

(2) The said sum, if not duly paid, or if an application has been made to the Court or to the Government against the decision of the Commissioner as provided in sub-section (1) of section 298 such sum as the court or the Government shall declare to be due, shall be recoverable, on an application made by the Deputy Commissioner to the Court, in the same manner as an amount decreed by the court in favour of the Deputy Commissioner.

(1) Any person aggrieved by any order of surcharge or charge made by the Commissioner under sub-section (1) of section 296 may, within one month from the receipt by him of the decision of the Commissioner either, --

(a) apply to the District Court to set aside such order; and the court, after taking such evidence as it thinks necessary, may, confirm, modify or remit such surcharge or charge and make such orders as to costs as it thinks proper in the circumstances; or

(b) in lieu of such application apply to the Government which shall pass such orders thereon as it thinks fit.

(2) Pending disposal of the application all proceedings on the certificate shall be stayed if the person aggrieved makes out a prima facie case to the satisfaction of the District Court or the Government for the issue of a stay order.

All expenses incurred by a municipal council in complying with any requisition of an auditor under sub-section (1) of section 291 shall be payable out of the municipal fund.

The municipal council shall, as soon as the annual accounts have been finally passed by it, transmit to the Government, or any officer duly authorised by it in this behalf, a copy thereof, or an account in the form prescribed in this behalf, and shall furnish such details and vouchers relating to the same, as the Government or such officer may, from time to time, direct.

The quarterly and annual accounts of receipts and expenditure, and the budget estimates when sanctioned, shall be open to public inspection, and shall be published in such manner as may be prescribed in this behalf.

(1) As soon as may be after the first day of April in every year and not later than such date as may be fixed by the Government, a town municipal council shall submit to the Deputy Commissioner and the Commissioner and a city municipal council shall submit to the Commissioner and to Government a report on the administration during the preceding official year in such form and with such details as the Government may direct.

(2) The Municipal Commissioner or Chief Officer shall prepare the report and place it before the municipal council for consideration, and forward it to the Deputy Commissioner, Commissioner and Government as specified in sub-section (1) along with the resolution of the municipal council thereon.

(3) The report may be published in such manner as the municipal council may direct.

¹[302A. Preparation of Development Plan.--

Every municipal council shall prepare every year a development plan and submit to the District Planning Committee constituted under section 310 of the Karnataka Panchayat Raj Act, 1993, or as the case may be, the Metropolitan Planning Committee constituted under section 503B of the Karnataka Municipal Corporations Act, 1976.

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1. Sections 302A and 302B inserted by Act 36 of 1994. Notification bringing them into force not available.

(1) The Finance Commission constituted under section 267 of the Karnataka Panchayat Raj Act, 1993 shall also review the financial position of the municipal councils and Town Panchayats and make recommendations to the Governor as to, --

(a) the principle which should govern, --

(i) the distribution between the State and Municipal Council and Town Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the Government which may be divided between them and allocation between the municipal councils and town panchayats their respective shares of such proceeds;

(ii) the determination of the taxes, duties, tolls, fees which may be assigned to or appropriated by the municipal councils and Town Panchayats;

(iii) the grant-in-aid to the municipal councils and town panchayats from the consolidated fund of the State;

(b) the measures needed to improve the financial position of the municipal councils and town panchayats;

(c) any other matter referred to the Finance Commission by the Governor in the interest of sound finance of the municipal councils and town panchayats.

(2) The Governor shall cause every recommendation made by the Commission under this section together with an explanatory memorandum as to the action taken thereon to be laid before both the Houses of the State Legislature.]