The financial control by the executive could be exercised when estimates are prepared and expenditure is incurred. The heads of subordinate agencies scrutinise expenditure proposals enacting from within in terms of their need and spending capacity.
This process moves upward to the heads of departments who are expected to moderate the estimates in the light of accepted policies of the government and needs of programmes. Under the cabinet system, the central financial agency is entrusted with the responsibility of consolidating the estimate of the various departments.
While discharging this function, the central budget may be able to modify departmental estimates through scrutiny and advice in terms of national policies and priorities, norms of expenditure and constraints of resources.
The powers and influence of the central budget agency may vary from country to country. In India, the central budget agency is the ministry of finance while in Britain it is the treasury.
Notes: The consolidated deficit indicators net out the inter-governmental transactions between the Center and States, and do not equal to the sum of the deficits of the Center and the States. 1990s figures for the Center exclude small savings allocated to the States, to give consistency across the accounting change discussed in the text. N.A. - Not available
The control exercised by the finance ministry of India may be divided into three stages: approval of policies and programmes in principle, acceptance of provisions in the budget estimates and prior sanction to incurring of expenditure subject to such powers as have been delegated to the administrative ministries.
It is the control at the third stage that generally impinges on the day to day working of the administrative agencies.
This control is exercised through three instrumentalities namely, rules of business, a system of internal financial advisers and internal audit. The existing rules of business provide that, with the exception of specific orders issued by the ministry, no department can, without the previous concurrence of the finance ministry, issue any orders involving:
(a) Any abandonment of revenue or incurring of any expenditure for which no provision has been made in the Appropriation Act;
(b) any grant of land or assignment of revenue or concession, grant, lease or license of mineral or forests, right to water, power or any casement or privileges respecting such concession,
(c) The number of grades of posts or the strength of a service or the pay or allowances of government servants or to any other conditions of their service having financial implications; and
(d) Any other financial aspect. In addition the financial code provides that no public servant can spend a single 'paisa' out of the public funds unless the expenditure has been sanctioned by the competent authority and the expenditure to be incurred is within the limit of the appropriations granted by parliament for the current year.
Besides, the finance ministry sends its own finance officers to each ministry (except railway and defence), who exercise control over expenditure through scrutiny and examination of the legality, accuracy and propriety of expenditure.
They also advise the departmental heads upon the financial implications of their schemes and plans and furnish to the finance ministry reports on the financial administration of the ministry to which they are attached.
The departmental control of expenditure takes place through an elaborate system of returns and reports frequently submitted by officers at various levels to their superior officers and ultimately to the head of the department.
The accounts are to be maintained in a prescribed manner. Vouchers are to be certified according to rules. Payment is to be made in accordance with the prescribed procedure. The disbursing officers maintain the record of all accounts and which are examined by the controlling Officer.
The controlling officer prepares a statement and sends it to the head of the department. On the basis of the return received by him, the head of the department prepares an account showing the complete expenditure out of the grant at his disposal upto the end of the preceding month and submits the same to the office of the Accountant-General.