The revelation by the Comptroller and Auditor General (CAG) that the government has been overstating the spending on its flagship programmes and other schemes meant for the welfare of the aam aadmi (common man) is distressing, but not a surprise. The report, released two weeks ago, said that funds worth over Rs 51,000 crore allocated for these programmes in 2007-08 were actually transferred to the bank accounts of non-government organisations (NGOs), autonomous bodies and district authorities. The government was apparently clueless as to how these funds were actually used, as the accounts of these agencies were not subjected to any official checks. It was not surprising, therefore, as pointed out by the CAG, that these funds either remained unspent or were diverted to other, usually unspecified, purposes, thereby depriving the intended beneficiaries, mostly the poor. The CAG discovered that part of the money from the Social and Infrastructure Development Fund (SIDF) was actually spent on cultural activities, including celebration of the 150th year of the 1857 revolt, now called the first war of independence. To take another instance, of the Rs 20,000 crore or so collected under the Universal Service Obligation Fund between 2003 and 2008, by imposing a 5 per cent levy on telecom licensees’ gross revenues, only Rs 6,000 crore were used for the intended purpose of subsidising rural telephony. The remaining amount was not even deposited in the Fund. Whether it was retained by the government and spent on other activities is unclear, though that should be the supposition. Undeterred by this history, the government has substantially raised the allocations for most of these programmes. Since the government has not changed its ways, what the fate of these funds will be is not hard to imagine.
It used to be an old trick in both central and state governments for various departments to look for ways of making sure that money, which had been allocated for the year but remained unspent, would not lapse. One convenient method was to move the cash into the bank accounts of associated bodies; while some financial tightening has been done to prevent such parking of funds, it may well be that the old games continue to be played, and NGOs could therefore be a useful ally. It is well known that in the thicket of NGOs that have sprung up to take advantage of government funding, many do not observe proper accounting norms or auditing discipline. And without these, the government cannot, of course, certify to the correct and timely end-use of the allocated money.
A systemic solution is needed, which the CAG report will hopefully prompt. The government has put in place a sound mechanism for tracking expenditure on Central schemes at every stage of their implementation by the different ministries; perhaps there could be some way of extending this to NGOs which take government money. Going by the government’s own statement on fiscal responsibility laid in Parliament last week, along with the Interim Budget for 2009-10, all sanctions issued by ministries for Central schemes are identified with a unique ID under the ‘e-lekha portal’, so that internal auditors can track fund-use by the official implementing agencies. It should, therefore, be possible to devise a similar monitoring system for the NGOs involved in implementing out social sector schemes with government-funding. Moreover, given that the involvement of volunteer organisations in the implementation of welfare programme is, per se, not a bad idea, a more careful selection of these partner-bodies is essential. Only those organisations which have a credible record and are willing to subject themselves to scrutiny through financial and social audit, should be favoured with government-funding. Otherwise, no one will know when and how the money has been spent.