Subverting the system

New Delhi’s official auditor has detected J&K government compromising the expenditure processes in such a way that it skips spending the budgeted funds for development and exceeds its unproductive expenditures, a Kashmir Life report.

It has not given it a name but Comptroller and Auditor General (CAG) has detected an alternative system of spending that is in conflict with the respective budget. In fiscal 2009-10, J&K booked an excess expenditure of Rs 1390.54 crore to reach an all time high of Rs 26214.22 crore in its yearly expenditures. However, what is disturbing in the trend is that government was caught saving from the capital expenditure to fund state’s ever-increasing non-productive expenditure, mostly salaries and debts.

The government saved Rs 2672.03 crore in the year. Of this Rs 2200.12 crore were saved in 12 grants, mostly supposed to fund developmental activities. Some of the grants belonged to critical sectors like education, planning and development, power, agriculture, irrigation, and urban and housing development departments.

For the fiscal 2009-10, the state legislature – the only and final authority on approving or rejecting the voted part of yearly spending of the state – had approved a modest plan of Rs 5500 crore besides the Rs 1200 crore from the Prime Minister’s Rehabilitation Programme (PMRP). The state government has a record of never spending its PMRP allocations in a year. With this modest amount, the government saved Rs 2672 crore which means only peanuts were actually spent on developmental activities.

The CAG has identified 10 departments which have consistently saved part of allocations every year for last five years. In 2009-10, these departments saved 1081.33 crore. In its report, tabled in the state legislature, the CAG has offered record of last five years of education, planning, revenue, housing, information and finance departments pointing out that these have always failed in spending their yearly allocations.

Departments are supposed to surrender the unspent amount to enable the government to fund other activities. But in 2009-10, the entire unspent allocations remained ‘saved’. In certain departments and districts the saved funds were traced in bank accounts.

In contrast, the state government booked an excess expenditure of Rs 4062.58 crore under various heads. The excess expenditure, the CAG says was mainly due to part clearance of overdraft of Rs 3517.55 crore obtained during the year by the state government from the J&K Bank. After many decades of working with J&K Bank, which was state’s banker, the government finally accepted the ways and means system of the RBI in lieu of a one-time Rs 1000 crore grant by the finance ministry. The RBI has taken over as state government’s debt manager from April 1, 2011.

Under Article 205 of the Constitution of India, all the excess expenditures are to be regularized by the state legislatures. There is no time frame, however. Interestingly, J&K has a staggering Rs 74366.04 crore of excess expenditure booked between 1981 and 2009 that has not been regularized so far.

CAG has identified yet another trend. Apparently very particular to J&K, there is rush of expenditure in the last quarter in general and last month (March) in particular. This goes in direct conflict with state’s financial code. CAG detected 15 departments implementing 17 grants comprising Rs 2009.78 crore for the year. They spent Rs 1352.36 crore – 67.29 percent – in 31 days of March alone.

Explaining the behaviour of departments on this front, the CAG reviewed the expenditure systems in vogue in the education department. For three subsequent years this department saved funds – mostly from the capital expenditure meant for developmental activities. It includes a saving of Rs 40.54 crore in 2007-08, Rs 207.39 crore in 2008-09 and Rs 215.81 crore in 2009-10. While it failed to spend the allocated money, the education department raised demand for Rs 213.80 crore of supplementary grants.

The department decided almost arbitrarily in increasing the expenditures on select items. Sainik School in Nagrota was initially entitled to a grant of Rs 55 lakh for repairing its building but it eventually ended up getting Rs 64.49 crore. In two grants related to mid-day meals, the department ended spending Rs 65.26 crore, an excess of Rs 16.76 crore in 2009-10 alone. CAG says the department skipped even touching six grants worth Rs 25.34 crore but got the distinction of spending rupees one crore grant in adult education almost seven years after it was ‘saved’. Interestingly, the central government had rolled back the scheme many years back.

The central government, the CAG says, is transferring a good amount of funds under various sponsored schemes to the implementing agencies directly which are neither being routed through the state budget nor are they captured by the annual finance accounts. While Rs 1140.25 crore was transferred in 2008-09, CAG says Rs 1171.54 crore were provided to the state in 2009-10. The state government, interestingly, is not maintaining a consolidated data base at apex level and these devolutions are yet to be verified to the CAG by the implementing agencies. There is no system in place to ensure proper accounting of these funds.

Meanwhile, CAG is waiting for 245 accounts with 29 state-run authorities and bodies for audit. Some of them are in arrears since 1988.

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