The Comptroller & Auditor General of India has identified several recurring instances of misclassification of capital and expenditure, reflecting the government’s shoddy accounting work.
The CAG’s latest report on the Centre’s finance accounts also detected cases of unauthorised fund transfers and understating or overstating of expenditure, raising concerns over the quality of public expenditure management. If departments and ministries’ still fumble at basic accounting classification, the upcoming Budget, which is doing away with the archaic plan and non-plan distinction, is bound to have a higher margin of error. Or is it that corrupt officials are making the most of lax regulations to route funds out of the system, creating inappropriate accounting entries?
During FY16, the incorrect revenue and capital expenditure meant the revenue deficit was understated by Rs 1,582.78 crore. revenue deficit increases borrowing without corresponding capital asset formation. Incorrect data misleads policy makers and should be avoided.
The CAG’s audit also revealed that in 13 cases pertaining to departments like telecom, defence and space, `1,600-odd crore revenue expenditure was under classified. In fact, cases of incorrect classification had been pointed out in the CAG’s past reports since FY11. However, departments continued to obtain incorrect parliamentary authorisation, leading to misclassification of final expenditure. This is worrying, as the revenue-capital separation allows the effective use of borrowed funds for asset creation and not to pay salaries and interest. But continuity in classification errors either indicates bureaucratic lethargy or intentional efforts to trick the system for personal gains.
During FY16, the Ministry of Defence was found to have undertaken a Rs 1,976.72 crore unauthorised fund transfer from the capital grant to the revenue grant. The CAG last year pointed out that such an incorrect practice was simply unacceptable. However, no corrective measures were taken. The ministry augmented funds of Rs 511.86 crore without obtaining prior Parliament approval.
As for the Department of Space, the CAG simply couldn’t understand how their accounts were prepared. And the ministries of coal and power have made incorrect transactions passed through the Consolidated Fund of India instead of the Public Account of India to the tune of Rs 1,100 crore and Rs 76.83 crore respectively.
In 35 cases across 13 grants/appropriations, Rs 387.32-crore funds were incorrectly classified, while in the case of the Ministry of Tribal Affairs, Rs 1,250 crore under the Special Central Assistance was booked under an inappropriate head. Such deficiencies amount to the violation of constitutional provisions, impact the accuracy of the compiled accounts and hamper project implementation. On a standalone basis, each department’s incorrect entries may appear small, but collectively, it may translate into a giant mass of financial mismanagement.