The Election Commission (EC) of India is considering a complete overhaul of the accounting practices of political parties and their reporting of donations and funds. These were some of the recommendations of a report submitted by the Institute of Chartered Accountants of India (ICAI) to the election watchdog.
The report, commissioned by EC, suggested a “muscular regulatory” environment to keep tabs on the funds of political parties to ensure accountability, financial discipline and proper end-use. The recommendations were discussed at a high-level meeting called by EC on Wednesday. Central Board of Direct Taxes Chairman Sudhir Chandra also attended the meeting.
The chartered accountants’ body has suggested making it mandatory for all political parties registered with EC to adopt accrual-based — or, real-time — accounting practices. It has recommended increasing the limit for reporting contributions from Rs 20,000 to Rs 5 lakh from a corporate body and Rs 50,000 from individuals.
| POLITICS INC |
| * Must adopt accrual-based accounting, with donation reporting limits increased |
| * Common format for financial statements, with accounts to be made public every year |
| * Accounts to be audited by CAs and filed with EC, with auditors rotated every 3 years |
Further, ICAI said its accounting standards should be applicable to political parties and that they should follow a common format for the presentation of their general purpose financial statements. “It is also recommended that statutes having specific formats for financial reporting by political parties may also modify the same in line with the suggested formats,” ICAI stressed in its report.
ICAI said political parties should also publish their accounts annually, and that these must be made public. It has also recommended that political parties have their accounts audited by a firm of chartered accountants approved by the comptroller & auditor general of India and that they file the audited financial statements with EC. It suggested that these auditors be rotated every three years.
The EC is considering amendments to the Representation of People Act, 1951, with provisions drawn up in harmony with those in other legislation, including the Income-Tax Act, Wealth Tax Act, Foreign Exchange Management Act and Prevention of Money Laundering Act.
