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 Volume XXXV of the Compendium of Opinions

ICAI: Treat corp funding to political parties as expense
January, 27th 2011

Corporate funding to political parties should be treated as expenditure in order to increase transparency in financial statements and curb black money flow, Accounting regulator ICAI has said.

It also added that Companies Bill should incorporate this provision.

"We wish if a company makes contributions (funding) to any political party then it should be treated as an expenditure..It will lead to much more transparency in financial statements and it will also reduce black money," ICAI President Amarjit Chopra said yesterday.

"Let it be more transparent...From where political parties are getting funding (for carrying out their activities)," he observed.

Institute of Chartered Accountants of India is at present entrusted with the task of developing accounting format for political parties by Election Commission of India.

Chopra said the institute will be submitting a final report in this regard to the Election Commission in next ten days.

"We have already submitted our interim report in this regard to the Election Commission and we will submit our final report within next 10  days," he said.

Noting that companies were making financial contribution to election parties in a "clandestine" manner, he suggested certain minimal percentage of total turnover of a company could be allowed as an expense for the purpose of providing funds to political parties.

"Any minimal percentage of total turnover to be contributed (by a company) could be allowed as expenditure," he said.

Throwing light on current practice adopted by corporate for giving funds to political parties, ICAI President disclosed that several companies routed the funds meant for political parties by creating trusts.

"Various companies have created trusts..They make payment to these trusts and through these trusts they are routed (to parties)..Every top industrialist is doing that," he asserted.

"What kind of accounting should be there and what should be the disclosure practices (for political parties)..The purpose behind the task is if there is an election party then governance rules must apply to them more than anyone else," he said.

ICAI has also recommended rotation of auditors for political parties to the Election Commission.

"We have told them (Commission) that rotation of auditors are good for them," he said.

Chopra pointed out that political parties generally do not rotate their auditors, which results in direct conflict of interest.

"The same parliamentarians who sit on standing committee of parliament on finance, which recommends rotation of auditors for companies, are not willing to accept rotation of auditors for election parties--it is very strange," he said.

 
 
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