Come clean on election expenses

BJP leader Gopinath Munde’s recent statement on the amount he spent in the previous Lok Sabha elections was surprising in one respect — the figure of Rs 8 crore.

One does not need to be a qualified accountant to say that sums spent on poll campaigns are humungous and under-stated on the books. The BJP leader’s nonchalant remark at a book launch has stirred a hornet’s nest.

But expecting political parties to come clean and disclose all is a triumph of hope over experience. There are calls to increase the limit for election expenses (which stands at Rs 40 lakh in bigger States), but this may not resolve the issue, as prospective candidates normally do not look at money as an impediment in a no-holds-barred contest.

They would know how to work their way around such limits. And, any attempt at reform would be met with resistance by politicians themselves.

ICAI Guidance Note

However, if political parties want to embrace good accounting and governance practices, there is enough material to assist them.

In 2012, The Institute of Chartered Accountants of India (ICAI) brought out a Guidance Note on Accounting and Auditing of Political Parties which provides comprehensive instructions on the nuances of accounting and the techniques of auditing.

Though a Note from the ICAI cannot be enforced in a court of law, parties with the political will to change 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, and it also provides the accounting framework that they have to follow.

It also lists out all the 32 accounting standards issued by the ICAI and 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 provides formats for the financial statements and the audit reports.

To start with, if political parties can follow the accrual system of accounting and the accounting standard on revenue recognition, a beginning would have been made.

Increase the deposit

As per Section 34 1 (a) of the Representation of Peoples Act, 1951, every candidate is required to make a security deposit of Rs 25,000 for the Lok Sabha elections.

This amount is too miniscule when mapped with the election expenses.

The Election Commission should increase this limit to an extent where it dissuades the also-rans from entering the electoral fray and provides enough ammunition to the regulators and the tax department to question candidates on the source of their funds. Even a deposit of Rs 10 lakh would not sound far-fetched.

Promotional expenses

In the past, the Election Commission of India (ECI) has done all it can to ensure that elections are held in a free and fair manner.

It identifies two major types of expenses — advertising and other expenses incurred, which are permitted subject to the limits, and the impermissible expenses such as luring voting through cash and cash equivalents, which mainly suffer sin taxes, surrogate advertisements and paid news.

The election expenditure monitoring mechanism mandates day-to-day maintenance of election expenditure.

This includes expenditure and assistant expenditure observers, accounting and surveillance teams and an expenditure monitoring cell.

Having done so much for the ensuing elections, 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, and making these financial statements public. While none of the parties is expected to bag awards for disclosure and corporate governance, something is better than nothing.

Huffing and puffing, the present Government has reached the home stretch of its tenure, peppered with a number of corruption charges.

Opening up its books in a transparent manner could earn it a few brownie points before the hustings — who knows, it could also get them though.

(The author is Director, Finance, Ellucian.)

COMMENT NOW