Most of us, nowadays, are focussed on the corporate fraud being unveiled almost every day in the US. First it was Enron that was engaged in a massive fiddle in its books and, after that, it’s been like one monsoon flood. GlobalCrossing, Tyco, WorldCom, Xerox . you name the firm, and it’s there. Stories of huge frauds by Indian corporates also abound and, recently, a subsidiary of rating company Crisil reported that of the 639 firms it studied, 139 overstated profits and 87 understated them last year. Yet, the real dirt, in terms of fiddles, probably really lies in India’s public sector.So why don’t you hear too many talking about this? For the simple reason it is assumed that if the public sector does something, it’s fine. Okay, top PSUs may have destroyed tens of thousands of crores in profits over the years, but all this was for the public good, not because of greed, goes the popular view. Accounting fiddles are seen as someone else’s prerogative.Well, guess when the Delhi Vidyut Board (DVB) last had its accounts audited? In 1991-92, and even then the auditor said the accounts were not accurate in all respects. When the erstwhile DESU was transformed into the DVB in 1997, and the Comptroller and Auditor General (CAG) had to certify its accounts, it issued a disclaimer saying it had no idea if the opening balance was accurate! It gets worse. Accounts for five years, from 1996-97 onward, were finalised last year. How do you finalise accounts of a period five years ago? Surely there’s no way to verify expenses so long after the event? And even if there are several mountains of back-up papers, finalising five years accounts means the scrutiny would have been cursory at best.Till 1998-99, DVB said its fixed assets were around Rs 900 crore. And then it showed another Rs 2,500 crore as what’s called ‘work in progress’ — this, by the way, is exactly what it says. It’s work, like building of a new sub-station, that has not been completed. So why were there such huge ‘work-in-progress’ figures? Because, if DVB was to say it was complete, and then add the sub-station to its list of assets, there would be an audit of expenses. So why not avoid the audit by saying the work is not complete.DVB’s method, if you’re scoffing at them, is actually quite smart. If you don’t have accounts, how can they be audited? And if you don’t audit them, how can you catch any fraud in its Rs 6,000 crore of annual expenses? Naa rahega baans, naa bajegi baasori (if there’s no flute, how can you play it?) Why talk of Enron’s fiddles, DVB’s accounts have not even been audited for a decade Of course, it is unfair to single out DVB as if it is the only culprit (it is though, among the category of SEBs). Various reports of the CAG show, year after year, that there are a host of public sector firms and corporations (thankfully there aren’t too many at the central level) in the states which, like DVB, haven’t finalised their returns for 10-15 years. The worst culprits, various CAG reports point out, are states like Bihar, UP, Punjab, Madhya Pradesh, Tamil Nadu and those in the Northeast.In Assam, for instance, the Assam Seeds Corporation has not finalised its accounts for the last ten year — accounts for 1990-91 were finalised in 2001-02; the Assam Livestock and Poultry Corporation has just finalised its accounts for 1985-86 now, while the Assam Government Marketing Corporation finalised its 1982-83 accounts 18 years later. The country’s best-governed state, if you go by its chief minister’s claims, doesn’t fare much better either. The Andhra Pradesh State Textile Development Corporation finalised its returns for 1998-99 only 12 years later.Worse, the Committee on Public Undertakings (COPU), that are supposed to study the CAG’s audit reports, don’t do this either. In Andhra, the CAG made 18 audit ‘paragraphs’ (objections to the accounts), and all 18 remain undiscussed by the COPU. There were six larger reviews of various PSUs done, guess how many of these review reports have not been discussed so far? The answer is six. COPU, in socially-conscious Kerala, was given 25 audit paras to discuss — all 25 remain pending, as do all the four reviews.That’s tens of thousands of crore of investments for which we don’t have audited accounts. And, every year, despite this, state governments dish out additional tens of thousands of crore (Delhi gave its PSUs and corporations Rs 2,609 crore of loans last year) to these PSUs without even knowing where it goes. We’re told it’s all losses but who knows since it’s hardly audited.This may not be a matter of pride, but we could teach the Enrons of the world a few things about doctoring books. And our techniques are a lot less complex.
