Press Release: Analysis of Assets and Liabilities of Regional Parties, FY 2016-17 & 2017-18

9 views

Skip to first unread message

ADR India

unread,

Oct 7, 2019, 4:38:49 AM10/7/19

to national...@googlegroups.com, national-el...@googlegroups.com

Press Release

7th October 2019

Analysis of Assets and Liabilities of Regional Parties - FY 2016-17 & 2017-18

Complete report containing Party-wise information related to assets, liabilities and capital is attached in English. Executive Summary of the report in Hindi is also attached for your reference.

Introduction

There are a set of accounting standards set for commercial, industrial and business enterprises and these accounting standards are issued by the Institute of Chartered Accountants of India (ICAI). Political parties fall under the non-commercial, non-industrial or non-business entity. Thus, the standard accounting formats of the other entities are not applicable to political parties.

The Election Commission of India (ECI) requested the ICAI for recommendations to bring uniformity in the accounting and auditing practices of political parties. Thus, the “Guidance note on Accounting & Auditing of political parties” or the “Accounting guidelines” were formulated in February, 2012 by the ICAI on the request of the ECI, in order to improve accounting and auditing standards of political parties and improve transparency in their finances. These guidelines lay down principles of recognition, measurement and disclosure items of income, expenditure, assets and liabilities in the financial statements of political parties.

Association for Democratic Reforms (ADR), in its previous report dated 9^th March, 2018, analysed the assets and liabilities declared by the 22 Regional Parties between FY 2011-12 to 2015-16. Recently, ADR also released a report on the Analysis of IT Returns: Assets and Liabilities of National Parties – FY 2016-17 & 2017-18 dated 31^st July, 2019.

This report analyses the assets and liabilities declared by the 39 Regional Parties in FY 2016-17 and 41 Regional Parties in FY 2017-18.

To access the report on website, please go to: https://adrindia.org/content/analysis-assets-liabilities-regional-parties-%E2%80%93-fy-2016-17-and-2017-18

Executive Summary

Declaration of assets by the Regional Parties – FY 2016-17 & 2017-18

Chart: Total assets declared by the Regional Parties, FY 2016-17 & 2017-18

The total assets declared by the 39 Regional Parties during FY 2016-17 amounted to Rs 1267.81 cr and Rs 1320.06 cr for 41 Regional Parties in FY 2017-18.
During FY 2016-17, the highest assets declared by SP totalled Rs 571.12 cr and increased by 2.13% to Rs 583.29 cr during FY 2017-18, followed by DMK with total assets of Rs 183.36 cr in FY 2016-17 and Rs 191.64 cr in FY 2017-18.
During FY 2016-17 and 2017-18, the total assets of JDU (298.3%), JDS (102.9%) and TRS (100.4%) increased by more than 100%.
SHS is the only party among the top 10 parties to show a decrease in their declared annual assets by 1.2%, from Rs 52.56 cr to Rs 51.92 cr between FY 2016-17 and 2017-18.

Chart: Assets declared by top 10 Regional Parties, FY 2016-17 and 2017-18

Declaration of liabilities by the Regional Parties – FY 2016-17 & 2017-18

Chart: Total liabilities declared by the Regional Parties, FY 2016-17 and 2017-18

The total liabilities for FY 2016-17 declared by the 39 Regional Parties amounted to Rs 40.33 cr and Rs 61.61 cr for 41 parties in FY 2017-18.
During FY 2017-18, the highest liabilities were declared by TDP amounting to Rs 22.71 cr, an increase of 190% from the previous financial year, while in FY 2016-17, DMK declared the highest liabilities worth Rs 8.05 cr.
Between FY 2016-17 and 2017-18, the total annual liabilities declared by YSR-C and SAD showed an increase of 48.86% and 34.77% respectively.
AAP is the only party among the top 10 parties to show a decrease in their declared annual liabilities by 21.31%, from Rs 1.22 cr to Rs 0.96 cr between FY 2016-17 and 2017-18.

Chart: Top 10 Regional parties with highest liabilities, FY 2016-17 & 2017-18

Capital/ Reserve Funds declared by the Regional Parties – FY 2016-17 & 2017-18

The total Capital/ Reserve fund set aside by the Regional Parties during FY 2016-17 was Rs 1227.59 cr, and Rs 1258.45 cr for FY 2017-18, after adjusting for liabilities for the respective years, from the total assets of the parties.
For FY 2017-18, SP declared the highest capital of Rs 583.22 cr followed by Rs 189.41 cr of AIADMK and Rs 183.59 cr of DMK.
During FY 2016-17, JDU declared the lowest capital fund of Rs 2.887 cr followed by MNS (Rs 8.218 cr) among the top 10 regional parties.
The reserve funds of JDS increased by 1281.97% from Rs 0.61 cr in FY 2016-17 to Rs 8.43 cr in FY 2017-18 while that of JDU increased by 357.64%. In case of SAD, the reserve funds decreased by 339.62% between FY 2016-17 and 2017-18.

Chart: Status of Capital/reserve funds of Regional Parties, FY 2016-17 and 2017-18

Recommendations of ADR

1. Changing of auditors every three years:

The amended Companies Act, 2013, which came into force on 29^th Aug, 2013, stated that no Company shall have an auditor for more than 5 years but this rule was not applied for political parties. Once a firm/person is responsible for auditing of accounts of parties for long duration, there is a possibility that finances of parties could be made as opaque as possible.
Indian laws do not permit foreign auditing firms to operate directly in India but might have a tie-up with domestic auditing firms. This becomes a worrisome factor if the domestic firm is auditing Indian parties’ accounts. By having no provision to change auditors frequently, foreign companies might have a bird’s eye view of the parties’ internal accounting.
The accounts of political parties should be “audited by a qualified and practicing Chartered Accountant from a panel of such accountants maintained for the purpose by the Comptroller and Auditor General.” This differs from the current practice where political parties choose their auditors entirely on their own.

2. As the income-expenditure statements of political parties are assessed rarely (even those of National Parties), authenticity of the accounts submitted remains doubtful. When the authenticity is not verified, the auditors who might be under-reporting the accounts, remain out of purview of punishment. With online submission of IT Returns, political parties do not submit details of income, expenditure and assets and liabilities as attachments. Thus, the IT department too does not have enough information on the finances of political parties. Annual scrutiny of documents submitted by political parties is recommended.

3. The 170^th Law Commission report recommended the introduction of Section 78A in the Representation of the People Act, 1951 and proposed penalties for political parties defaulting in the maintenance of accounts. This needs to be introduced and implemented.

4. Section 276CC of the IT Act penalizes individuals who fail to submit their IT returns. Similar legal provisions should be applicable to political parties too. Supreme Court judgement in Common Cause vs. Union of India & ors. had stated that when parties default in filing their returns, prima facie they violate provision of the IT Act. For FY 2016-17, Audit reports of 5 regional parties namely AJSU, AIFB, JKNPP, RSP & UDP are unavailable and are incomplete for 3 parties (IUML, KCM & AIMIM) on the website of the ECI. While 29 parties have delayed their submission by several days, ranging from 13 days to 299 days.

5. For FY 2017-18, Audit reports of 5 regional parties namely JKNC, PDA, RSP, UDP & MGP are unavailable and are incomplete for 2 parties (KCM & AIMIM) on the website of the ECI, till the date of preparation of this report. While 23 parties have delayed their submission by several days, ranging from 1 day to 279 days.

Please Note: For any queries related to the attached reports, please contact at +91 9910114320.