Political parties failed to follow audit guidelines, disclose finances: ADR

The national parties are yet to declare details of FIs, banks or agencies from whom loans were taken

Audit guidelines of political parties, in order to improve transparency in their finances, largely remain on paper, an ADR report said today.

"ICAI guidelines on auditing of political parties which were also endorsed by the Election Commission of India (ECI) in order to improve transparency in the finances of political parties, remain guidelines only and have not been actively taken up by the political parties as a mandatory procedure to disclose details of their income," it said.

"These guidelines were meant to standardize the format of financial statements of parties apart from improving disclosure of income, expenditure, assets and liabilities of the unique association, political parties," the report released by Anil Verma, the head of Association for Democratic Reforms (ADR), said.

The national parties are yet to declare details of the financial institutions, banks or agencies from whom loans were taken, the report said in its observations, adding that the guidelines specify that the parties should state the 'terms of repayment of term loans on the basis of due date.

Verma said all political parties have not declared details of fixed assets received as donation by the parties such as original cost of the asset, any additions or deductions, depreciation written off, cost of construction, etc, adding that as per the ICAI guidelines, the same should also be declared for fixed assets purchased by the parties.

The ICAI had recommended that details of disclosure should include "classification and disclosure of details of donors (individuals, companies, institutions and others)," but the classification has not been declared by the national parties, the ADR observations said.

The parties have also not disclosed revenue from issuance of coupons of different denominations, the ADR observations and recommendations said after analysis of assets and liabilities of national political parties from financial year 2004-05 to 2015-16.

The ADR recommended changing of auditors every three years, stating that the amended Companies Act, 2013 stated that no company shall have an auditor for more than five years but this rule was not applied for political parties.

"Designating a firm/person for auditing of accounts of parties for long durations is not desirable as there is a feasibility of making finances of parties as opaque as possible," the report said.

"As the income-expenditure statements of political parties are assessed rarely (even those of national parties), authenticity of the accounts submitted remains doubtful," it said.

The report recommended annual scrutiny of documents submitted by political parties.

"The 170th Law Commission report recommended introduction of Section 78A in the Representation of People's Act (RPA) and proposed penalties for political parties defaulting in the maintenance of accounts," it said, adding that this needs to be introduced and implemented.