In a bid to streamline money usage and ensure transparency, the Centre is considering bringing all large municipal bodies under the new treasury single account (TSA) system for fund release, an Economic Times report said.
A senior official told the media house that municipal finances are next on the reform agenda, and bringing them to TSA will improve transparency in the use of funds.
This could also be included in the terms of reference (ToR) for the 16th Finance Commission, which will be formed later this year, sources added.
The TSA system aims to improve fund flow efficiency by releasing funds to ministries and departments only when they are needed. This reduces the amount of floating funds in the system, which lowers borrowing and yields interest savings.
The finance ministry has already begun internal discussions on the subject, following reports of inefficient fund utilisation by some municipal bodies, as well as poor accounting and record keeping, from various sources.
The Reserve Bank of India (RBI) also raised the issue in its latest report on municipal finances, citing significant data gaps and missing entries.
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"The data for central and state transfers to municipal corporations were not reported by many corporations and amongst those that have reported, the respective share of central and state transfers were not reported," the RBI said in the report published in November 2022.
It further said that most corporations' budgets were either not available online or were only available in their respective regional languages, making cross-checking their budget online "untenable".
Multiple state finance commissions have also previously raised concerns with accounts of municipal bodies.
While accounts of many municipal bodies have not been updated in the last 3-4 years, there were also several instances of funds being diverted for other purposes, leaving insufficient for mandatory activities.
