Anna Hazare's victory in forcing the Government to accept his list of inclusions in the Lokpal Bill was celebrated with as much fervour as India's triumph in the Cricket World Cup proving that corruption and cricket occupy pivotal positions in the national psyche. The current crusade against corruption intends to send a message to the people in power that they should no longer feel they are riding a gravy train. Election expenses could well be the next target of the supporters of good governance.

Auditing election expenses

Expenses incurred on elections have always remained a mystery in India. The Election Commission of India (ECI) can take a cue from the Electoral Act in New Zealand to attempt and develop best practices during elections. The Act puts a cap on the total expenditure that can be incurred in a general election-$1,032,000 (including GST) plus $25,000 (including GST) per electorate contested by the party and warns that it is a serious offence to spend more than this.

Advertising, travel and stay costs would constitute a major portion of normal election expenses and the Act provides detailed and minute guidelines on them. Interestingly, the Act states that expenses cannot be apportioned between elections.

If materials such as banners are purchased and then re-used in subsequent elections, at each subsequent election the party must account for the reasonable market value of the materials as an election expense.

The Secretary of the party is required to file a return of the election expenses within a time-frame which needs to be audited. The requirements regarding audit match the requirements of a normal audit engagement.

Section 206L of the Act lays down that the auditor must state in the report the position shown by the return in respect of the requirement that the party's total election expenses not exceed the maximum amount prescribed, whether, in the auditor's opinion, the position stated vis-a-vis expenses is correct or that the auditor has been unable to form an opinion. The auditor must have access at all reasonable times to all records, documents, and accounts that relate to the party's election expenses and that are held by the party or the party secretary may require the party secretary to provide any information and explanations that may be necessary to enable him to prepare the report. The auditor needs to be a qualified chartered accountant and persons related to the elections, parties or candidates cannot be appointed as auditors.

Indian scenario

The Election Commission of India has done all it can to ensure that elections are held in a free and fair manner. Election expenses permitted can vary between Rs 5 lakhs and Rs 10 lakhs depending on the constituency.

There certainly seems to be a case for a liberal increase in these limits as it is common knowledge that these limits are exceeded through clandestine expenditure.

The increased limit should come with a requirement for audited statement of accounts. It identifies two major types - advertising and other expenses incurred for the elections which are permitted subject to the limits and the impermissible expenses such as luring voting through cash and cash equivalents which are mainly items which suffer sin taxes, surrogate advertisements and paid news.

The Election Expenditure Monitoring Mechanism mandates day-to-day maintenance of election expenditure and the formation of Expenditure and Assistant Expenditure Observers, Accounting and surveillance teams and an Expenditure Monitoring Cell.

Having done so much, the ECI can insist on an audited statement of accounts of election expenses either through a resurgent Comptroller and Auditor General of India or the Institute of Chartered Accountants of India or a combination of both.

(The author is a Bangalore-based chartered accountant.)

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