By now, the Aam Aadmi Party (AAP) has probably realised that politics in India is a very different ball-game. The party has already been criticised for everything — from doing a flip-flop on their pre-election vow to form a Government only if they secure an absolute majority to the excessive zeal of its ministers. Even chief minister Arvind Kejriwal has had to face flak on various fronts, from his economic policies to his defence of his ministers.

There can be no doubt in anyone’s mind that a movement like AAP — with its strong anti-corruption stand and middle-class values — is exactly what the country needs at the moment. In that sense, AAP has got its timing bang-on, but it would need to do much more to maintain the initial momentum. It could start with balancing its books of account.

Showing the way In 2012, the Institute of Chartered Accountants of India (ICAI) brought out a Guidance Note on Accounting and Auditing of Political Parties, which gives comprehensive instructions on the nuances of accounting and techniques of auditing. Though a note from the ICAI cannot be said to be the Bible for accounting for political parties, those with the political will to change (which is the essence of the AAP’s mission) can look at the Note for guidance.

The Note debates and concludes that the accrual system of accounting is what political parties should go for. Of the 32 accounting standards issued by the ICAI, the Guidance Note states that 12 of them would not be relevant for political parties — the ones on construction contracts, amalgamations, borrowing costs, segment reporting, EPS, consolidation, taxes, investments in associates and joint ventures, discontinuing operations, interim financials and impairment of assets are listed as irrelevant.

The Note offers formats for financial statements and audit reports. If parties can follow the accrual system of accounting, prepare financial statements as suggested in the Note and publish results, it can be considered a good start. The AAP is best positioned to do so. BJP leader Gopinath Munde set the cat amongst the pigeons by making a nonchalant remark that he spent around Rs 8 crore in the 2009 edition of the elections. AAP should publish financial statements that clearly disclose such expenditure. The Guidance Note is comprehensive enough to mandate disclosure of expenditure on helicopters separately.

Best practices The AAP lists on its website the total amount of donations that have been received — there is a separate live call-out for the amount of donation received everyday and also a table which tabulates the top six countries from which donations have been received. It is no surprise that 76 per cent of the donations are from India. Their website makes a statement that the AAP “will operate with 100 per cent transparency in its financial procedures and practices. Every single rupee donated to the party will be published on the website immediately along with the details of the donor. Every expense done by the party will also be published on the website immediately.”

While the donor list and total donations received are clearly visible, the expenses incurred by the party do not seem to be available as easily on the website — at least not immediately as stated. It’s not going to be long before critics start off on the lack of disclosure of amounts spent.

The party which has set a trend with its anti-corruption stance can do an encore with its accounting and governance practices by implementing the ICAI Guidance Note. And for guidance on how to do this, it cannot ask for a better person that the ex-director and CFO of Infosys, who has joined the AAP.

Contesting the Lok Sabha polls would mean that the party would grow in size — and size brings with it its own separate set of problems. The AAP would do well to walk the talk and focus on governance too, before people start calling it JAPP- Just Another Political Party.

The author is Director, Finance, Ellucian

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