The Government had vide G.O.Ms.No.92 Rural Development Department dated 26.3.97 issued orders for rationalization of Village Panchayat Accounts and the procedure for operation of the Accounts. This was a great step forward in empowering Village Panchayats since it gave freedom to the President and Vice President to operate the various Accounts of a Village Panchayat free from pre-scrutiny by Block officials as was the earlier practice in which the Village Panchayat Consolidated Fund was maintained and operated in the Block office. However, certain weaknesses were noticed in this new system of maintenance of Village Panchayat Accounts. Several instances of the State Finance Commission Grant and Central Finance Commission Grant released to the Village Panchayats’ Earmarked Grants Accounts being used for less important purposes and not for payment of dues relating to electricity and water charges came to the notice of the Government. Due to this practice, in order to avoid diversion of funds meant for current consumption charges and water supply maintenance, the District Collectors were directed to deduct the charges payable to TNEB and TWAD Board at the district level before releasing money to the Village Panchayats. However this resulted in the following two anomalies:

a. TNEB issued wrong/duplicate bills in some instances which did not get deducted since payment was made at district level without proper check by the Village Panchayat Presidents concerned.

b. The Panchayat Presidents did not evince interest in ways and means of reducing power consumption as they never paid the electricity/water bills of their own.

Several instances also came to notice, wherein Village Panchayat Presidents and Vice-Presidents issued cheques for Scheme funds works/National Rural Employment Guarantee Scheme works without the works same being measured and check-measured and bills being passed by the Block Development Officer (Village Panchayats) concerned. The number of instances of unauthorized drawals was greater on the eve of Local Body elections. Therefore, the Government issued G.O. Ms.No.146 Rural Development and Panchayat Raj Department dt.17.8.2007 by further rationalizing the Village Panchayat Accounts and streamlining the procedures for operation of the Accounts so as to

a. Empower the Village Panchayat Presidents to pay the TNEB and TWAD Board dues from the funds at their disposal and at the same time prevent them from diverting these funds for less important purposes.

b. Prevent unauthorized drawals of money from scheme fund/NREGS fund Accounts without authorization of Block Development Officer(VP) concerned.