The audit reports of two regional parties from Meghalaya, UDP and HSPDP, have not been available on the website of the Election Commission of India.
This was revealed by the Association for Democratic Reforms (ADR) in its latest report titled “Analysis of Assets & Liabilities of Regional Parties – FY 2020-21 & 2021-22”.
According to the ADR, for Financial Year 2020-21, audit reports of nine regional parties namely UDP, IUML, JKNC, JKNPP, UPPL, LJSP, MNF, RLSP and RSP are unavailable on the website of the Election Commission of India. It also said that 38 parties have delayed their submission by several days, ranging from one day to 590 days.
For Financial Year 2021-22, the audit reports of 17 regional parties namely HSPDP, AIMIM, BPF, IUML, IPFT, JKNC, JKNPP, LJSP, MNF, MPC, RLSP, RLTP, RSP, SHS, SKM, UDP and ZNP are unavailable on the website of the Election Commission of India. 17 parties have delayed their submission by several days, ranging from two days to 346 days.
“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 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 Election Commission of India, 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 of items of income, expenditure, assets and liabilities in the financial statements of political parties,” the ADR report said.
The ADR also observed that regional parties failed to adhere to the ICAI guidelines that direct parties to declare details of the financial institutions, banks or agencies from which loans were taken. The guidelines specify that the parties should state the “terms of repayment of term loans” on the basis of the due date such as a year, 1-5 years or payable after five years.
“Details of fixed assets received as donations by the parties should be declared such as the original cost of the asset, any additions or deductions, depreciation written off, cost of construction, etc. The same should also be declared of fixed assets purchased by the political parties – not all regional parties declared this information. Details of loans given by the parties in cash/ kind should be specified and if it constitutes more than 10 per cent of the total loans, the nature and amount of such loans should be declared specifically by the parties. This was not declared by all regional parties,” the ADR observed.
The ADR also said that ICAI guidelines, on auditing of political parties which were also endorsed by the Election Commission of India 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.
These guidelines were meant to standardise the format of financial statements of parties apart from improving disclosure of income, expenditure, assets and liabilities of the unique association, political parties. Details of disclosure included: Classification and disclosure of details of donors (individuals, companies, institutions and others); Revenue from issuance of coupons of different denominations to be disclosed separately; Computation of income/expenditure by Accrual method of accounting and not cash-flow method of accounting, where the former method provides more scope for transparency; Valuation of fixed assets, annually, to have a clear idea of appreciation/ depreciation.
