States misuse, divert relief funds -- CAG
PRESS TRUST OF INDIA

NEW DELHI, DECEMBER 12: As a political battle rages over funds for calamity relief in cyclone-hit Orissa, the Comptroller and Auditor General (CAG) has come out with a damning indictment of the misuse, diversion and fraud in relief funds in various states while tackling natural calamities.

A test audit undertaken by the CAG in some states revealed that many of them credited amounts released for Calamity Relief Fund (CRF) as revenue of their governments which aggregated to Rs 1,172 crore.

Many states credited the receipt from CRF of Rs 755 crore into their general revenue and treated it as `receipts'. Many parked Rs 417 crore in personal ledger accounts and civil deposits. The sample check also disclosed that State Governments did not credit their share of CRF in many cases. These findings have been recorded by the CAG in its report for 1998 on the `performance appraisals' of the Union Government (Civil) tabled in Parliament recently.

The report said there was a tendency among most states to book alltypes of expenditure, not related to calamity relief. The improprieties of misuse and diversion of Rs 670 crore on items not connected with calamity relief like salaries, office furniture, transport, maintenance and renovation of assets not related led to denial of relief to that extent. The CAG found that many states spent over Rs 133 crore out of Rs 670 crore in areas where no calamity had occurred and that administrative discretion rather than urgency to provide succour to victims guided the expenditure.

Large number of cases of misappropriation, defalcation from this fund suggested that transactions were vulnerable to fraud, the report pointed out. The inherent defect in design for fund release from National Fund for Calamity Relief (NFCR) in case of calamities of rare severity led to delays in release of fund, in some cases, up to 80 months after the onslaught of the calamity, it said.

The CRF and NFCR have not met the intended objectives satisfactorily due to emphasis on expenditure from CRF bystates rather than on calamity relief per se. Despite total expenditure of Rs 6,411 crore during 1990-98, many states did not set up separate CRF to enable them to provide prompt relief and prevent misuse or diversion through its merger with general revenues as recommended by the Finance Commission.

Due to this and the failure to follow the prescribed investment pattern, the fund in many states suffered loss of interest of at least Rs 139 crore, the CAG said.

The institutional arrangement, particularly for CRF management did not function in desired manner in most states. The State Level Committees under the chairmanship of chief secretary were not formed in a few states, and in others, it did not oversee the calamity relief as per the design. In most cases, the committee met rather sparingly, the CAG report pointed out. The role of the Finance Ministry was limited to automatic disbursement of grants without overseeing the quality of expenditure.

Similarly, the assigned role for monitoring theutilisation of expenditure by the Ministry of Agriculture sans financial control had contributed to inefficiency in expenditure and lack of accountability among states, the report said.

referring to weak institutional arrangement and absence of accountability.Financial administration of CRF was mismanaged and it suffered from control weaknesses. In this context, instead of achieving cohesive and efficient coordination in relief activities, the all-embracing role of the SLC as a single window for all activities relating to calamity relief was ineffective in ensuring financial accountability.

The SLC was powerless to prevent several irregularities and fix responsibility, it said. The CAG pointed out that diversion of fund from CRF was endemic. Sample checks disclosed that the state governments diverted Rs 519.54 crore to activities not connected with relief measures.

Stating that the Agriculture Ministry was responsible for monitoring of regulation and operation of CRF and NFCR, the report said theministry had observed in 1998 that the progress reports from the State Governments were not on expected lines.

Many states were not sending the reports and those submitted by some of them were tardy and there was total absence of information. The state governments had been according very low priority and importance to the submission of information to the ministry as release of central share of CRF was automatic and was not linked to submission of periodical utilisation reports by the states.

Stating that experience had shown that the submission of progress reports was not of binding nature for the State Governments, the Agriculture Ministry intended to bring the whole matter of monitoring mechanism with regard to CRF and NFCR before the eleventh Finance Commission, the CAG report said.

Damning evidence
The CAG's `performance appraisal' report, 1998, points out how states use the money meant for disaster relief. A glimpse: