Now,political parties must submit accounts,rotate auditors

The accounting regulator has also suggested that while auditors of political parties should be appointed by the Comptroller and Auditor General of India,there should be a rotation of auditors at least after every three years to usher in transparency in statements. Chief Election Commissioner S Y Quraishi has already tasked the I-T department to formulate an action plan for monitoring illegal cash flow during the upcoming polls in Assam,West Bengal,Tamil Nadu,Kerala and Puducherry.

The accounting regulator has also recommended that while all books of accounts must be prepared by political parties on accrual basis as and when transaction happens the parties must prepare consolidated accounts incorporating the financials of branch offices in various talukas,districts and states.

Chopra said that currently,political parties are not governed by any legislation that mandates them to prepare financial statements except for the Income-Tax Act. Also,they dont have any financial year or law for time limit within which they should file the statements. Under the I-T Act,these parties are exempt from paying taxes. However,for claiming exemption,the parties have to maintain proper books of accounts,showing details of donations more than Rs 20,000 and these accounts should be audited by chartered accountants.

Political parties seldom keep a record and even if they do,there is no transparent system of book keeping. Keeping this in mind,the EC had asked the ICAI to study the Reporting Framework of Political Parties two months back. The ICAI submitted the report today and it has been accepted and appreciated by the EC,” Chopra said.

The EC has been batting for getting the accounts of the political parties audited by auditors appointed by the CAG. The report by the ICAI is expected to give fresh impetus to the move. If implemented,the report is likely to bring in significant changes in the way political parties function in India. So far,the debate over parties getting their accounts audited has been brushed under the carpet.

As per the recommendations,the political parties should provide expenditure details by the candidate and the political party to the EC. While suggesting the accrual system of accounting the most transparent way of book keeping since it shows the real picture of transactions the ICAI has also suggested several formats in which the political parties maintain the books. This is to ensure uniformity in book keeping by them, he said.

As regarding related party transaction,the ICAI said any transaction between the party and its workers who hold important posts like party chief,or cabinet minister or state minister or their relatives would all be considered third party transaction and the accounts will have to reflect the same.

All major donations and contributions should be accounted for and the PAN,name and address of the contributor should also be recorded…one of the major way in which they collect fund is through sale of coupons. These coupons are used for arranging rally,etc. there should be proper check and control on the sale of coupons, Chopra said.