HVK Archives: Where has all the money gone?
Where has all the money gone? - Sunday
Sourabh Sen (Calcutta)
()
22-28 June 1997
Title: Where has all the money gone?
Author: Sourabh Sen (Calcutta)
Publication: Sunday
Date: June 22-28, 1997
(CAG's report on West Bengal's finances leaves the Jyoti Basu government
red in the face)
Twenty years is a long time in politics and two decades of uninterrupted
rule surely calls for celebration. But it's been a different kind of
fireworks for West Bengal's Left Front government which rode to power on 21
June in 1977 and has been there ever since. Instead of going to town on
the 20th anniversary o its long rule with a grand show of pomp and
pageantry, chief minister Jyoti Basu's embarrassed government is forced to
seek cover as charges of gross financial humbug are bursting like crackers
beneath its seat.
In a detailed report submitted to the West Bengal Assembly on the 10th of
this month, the Comptroller and Auditor General of India (CAG) has observed
that, for nearly a decade now, the
Marxist regime has been systematically siphoning off central development
funds, and that no one knows where the money has gone.
Even by conservative estimates, the amount involved is believed to be a
staggering Rs 2,500 crore, which pales most previous scandals ranging from
the Rs 64-crore Bofors kickbacks to the Rs 950-crore fodder seam of more
recent times. And, according to the CAG, this covert milking of the state
exchequer has been going on with the full knowledge of the state finance
ministry.
What's more, the CAG has identified the main loophole - a thing called the
Personal Ledger account - through which the money has been pumped out. The
report has thus exposed gross violations of financial norms and discipline,
although state finance minister Asim Dasgupta has all along claimed
"transparency" in the working of his department.
The CAG has discovered gross anomalies in a host of departments such as
health, education, relief, public works, fisheries, forest, panchayats etc,
where cash balances in account books don't match actual reserves. Nor are
there clear documents to show how the money had been spent, who the
recipients were, and the exact purpose for which the money was disbursed.
Some of the cases bear a striking resemblance to the fodder seam - money
paid for dubious bills raised for things that were never supplied or
projects never undertaken.
In other words, the CAG report suggests that the West Bengal treasury has
been quietly looted for years by a crafty bureaucrat-politician nexus.
MODUS OPERANDI
The method adopted is subversive, to say the least, and to understand its
working, one must first have an idea of the maze of procedures that is
supposed to hold the government's financial system in place.
Rules require that all government transactions be made through the
treasury. Just as commercial banks have different types of accounts such
as current, savings and fixed deposits, a government treasury has one that
is called the personal ledger (PL) account.
PL accounts play a specific role in the financial set up. They are
specially created in government departments to meet unforeseen and
emergency expenses. Usually, PL account funds are not subjected to the
kind of stringent monitoring applicable to other accounts.
And it is precisely because of this reason, a PL account needs very special
sanctions in order to be opened. A department that needs this facility
must first get the finance ministry's approval and, secondly, the finance
ministry's clearance has to have the accountant-general's (AG) concurrence.
To open this account, the AG, which reports to the CAG, has to be told how
much money is being put in it, the purpose for which the account is being
opened, and the DDO (drawing and disbursing officer) who is to operate it.
But CAG points out that a large number of PL accounts have been opened by
various departments since l991 and a majority of them without the AG's
approval.
Notably, the largest number of these PL accounts have been opened at the
lower levels of the administration - at the zilla parishad and panchayat
levels. In fact that there are so many of them that there is no way of
knowing how many are actually there.
With a huge number of undisclosed (and therefore unauthorised) PL accounts
in place, the state government has been merrily transferring funds from the
treasury to these not-so-closely-monitored accounts in order to obfuscate
the identity of the ultimate recipients.
According to accounting norms, once any sum of money is taken out of the
treasury, it is considered to have been spent for the purpose for which it
was allocated in the Budget. Direct payments from the treasury must,
however, be supported by bills and vouchers, identifying the recipients and
specifying the purpose for which the payment is made. In the case of PL
accounts, these checks do not always apply.
So at the behest of ruling party, leaders, ingenious officials have been
first transferring money from the treasury to the PL accounts and then
making payments from the latter. Hence, in the absence of supporting bills
and vouchers, there is no clue as to where some of the money has gone.
And the violations don't quite end here' It is mandatory to close every PL
account as on 31 March by transferring all unspent amounts back to the
treasury. But in West Bengal, hundreds of PL accounts have not been closed.
TELL-TALE CASH BOOKS
The proliferation of non-interest bearing PL account is, however, hot the
only sign of the state government's crooked financial practice. At the
lower end of administration, cash books tell a tell-tale story. The cash
books are supposed to record the flow of money, but the AG has discovered a
number of cases in which amounts in office vaults or chests are at variance
with figures in the cash-books.
In March 1997, the AG's office wrote to the state principal secretary
(finance), saying that surprise checks would be conducted at different DDO
offices to see if the cash in chests tallied with the cash books.
Accordingly, an inspection drive was started. But at several places, DDOs,
unnerved by this move, refused to let the AG's staff tally the books.
In places where checking was possible, varying amounts of money were found
missing. The AG's staff also unearthed what was called "unpaid vouchers",
a contradiction in terms as vouchers cannot remain unpaid.
There are at least 2,500 departmental cash chests in different parts of the
state. And after checking merely 15 such offices, the AG discovered a
discrepancy of around Rs 50 lakh. If all the chests were to be checked,
the amount of missing money could turn out to be of astronomical proportions.
The AG's office has also come across several instances in which advance
contingency (AC) bills have not been squared up. AC bills are raised at
the time of taking advances. After the money is spent, officers are
supposed to submit detailed contingency (DC) bills showing how the money
was spent. So, normally, for every AC bill, there has to be a
corresponding DC bill. AG's office has found out that state departments,
for some time now, have been drawing funds on the basis of AC bills but not
filing the corresponding DC bills.
In its audit objections, the AG has repeatedly pointed out that it was not
getting the bills needed to justify certain government expenditure. These
objections have also been studied by the state Assembly's Public Accounts
Committee (PAC). Since 1986-87, the PAC, too, has been seeking
clarifications from the state government, but it is yet to get a reply.
MUSHROOMING ACCOUNTS
Significantly, a mushrooming of PL accounts has been noticed since 1991.
This, according to one explanation, was because of a spurt in the flow of
central development funds under the Jawahar Rozgar Yojana (JRY), EAS
(Employment Assurance Scheme) etc. A good portion of this money was
apparently parked in PL accounts.
In volume 3 (civil) of the report, the CAG observes: "EAS (Employment
Assurance Scheme) funds were to be kept in exclusive savings bank accounts
and interest earned treated as additional EAS funds. However, in three
zilla parishads, Siliguri Mahakuma Parishad and 18 Panchayat Samitis, these
were kept in non-interest bearing Personal Ledger accounts in treasuries
with consequential loss of interest of Rs 37.59 lakhs."
A utilisation certificate is needed to draw money for such schemes. For
central government schemes, a financial utilisation certificate is issued
as soon as the money is withdrawn from the treasury. That, however, has
nothing to do with the actual completion of a project.
This has inspired many departments to open PL accounts to park development
funds by withdrawing them from the treasury. The method guarantees prompt
utilisation certificates and a steady, flow of funds every year.
CPI(M) MP and former state finance minister Ashok Mitra told SUNDAY that
this has been a fairly common practice. "There is no uniformity in the flow
of central funds. At times funds reach at the last moment, when the fiscal
year is about to end. Funds are then kept aside for future use, to be
followed by the accounts. Worldwide, this is a standard device," he explains.
But Atish Sinha of the Congress, who is also the leader of the Opposition
in the state Assembly, doesn't see eye to eye. "Our suspicion is that
funds were diverted for unauthorised use. Central funds for rural
development have been diverted for illegal purposes and maybe also for.
meeting illegal party expenditure," he says.
The Opposition parties were, however, rather slow to react to the CAG
report which was scooped by the Bengali daily Ananda Bazar Patrika long
before it was placed before the Assembly. Speaking on the controversy,
Congress MLA Sougata Roy observed, "One has to establish whether this is a
procedural lapse or a case of defulcation." However, PCC president Somen
Mitra has already demanded a CBI enquiry and Mamata Banerjee has written to
Prime Minister I.K. Gujral demanding a thorough probe.
For its part, the BJP has threatened to launch a national campaign to
"expose the corruption" in Jyoti Basu's government.
Interestingly, some of the Left Front partners such as the CPI and the
Forward Bloc, too, have sought a discussion on the matter in a Front meeting.
For years, people of the state were mystified by the growing prosperity of
CPI(M) panchayat leaders, those close to them, and the party's soaring
assets. Jyoti Basu's detractors had often sought explanations but none was
ever offered. Now, the CAG report seems to solve part of the mystery. Its
findings indicate that the state's entire financial system has been open to
abuses.
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