Principles of Financial Administration:
In a federation, there are two or three layers of government- federal, state, and local. It means the financial administration is also decentralized in a federation. There is one federal financial administration for the whole of the country, state financial administrations for individual states, and local bodies financial administration for their respective jurisdiction. There is one budget of the federal government, one budget each for every state. In a federal setup, there is a multi-unit budget system. Under such a system, the need arises for cooperation and coordination between different layers of financial administration for the effective implementation of financial policies. There also arises a need for standardizing the various procedures of financial administration, like the form and classification of budgets. It will help in presenting the finance of the country as a whole in a systematic way.
Guiding Principles of Financial Administration:
In most federal Constitutions, there are three fundamental provisions in the field of financial administration that safeguard the interest of the taxpayers. These principles guide the operations of financial administration.
(1) No tax shall be levied or collected unless it is approved by the representatives of the people. In the Constitution of India, it has been mentioned as “No tax shall be levied or collected except by authority of law.”
(2) No expenditure out of public revenue is incurred unless it is sanctioned by parliament. In the Constitution of India, it has been mentioned as “No money out of the Consolidated Fund of India or the Consolidated Fund of a State shall be appropriated except in accordance with the law and for the purpose and the manner as passed by Legislature.
(3) The executive spends the money exactly in the manner as passed by Parliament. In order to check the abuses of power on the part of the executive, the Auditor-General audits the accounts of the Government to place before the Legislature a report to show that the executive has spent the money for the purposes for which parliament sanctioned. Thus, the provision for the appointment of a Comptroller and Auditor-General is laid down in the Indian Constitution to achieve the above objective.