PAC report says both parties made mistakes which have now been resolved

After much controversy and allegations, the final and much awaited Public Accounts Committee (PAC) report, with the main item being the audit observations on the two political parties, was an anti-climax.
The essence of the report was the view of the Election Commission of Bhutan (ECB) which pointed out that after the 2008 Elections, both political parties were financially in default, and thus in breach of the Public Fund Election Act. Given that it was the first-ever democratic elections, both parties were given a four-year period to clear the liabilities and some extensions were given after that period as well.
The issue first cropped up in the first session of the second Parliament in 2013 when Royal Audit Authority (RAA) Annual report was presented. Among numerous observations covering several agencies the observation on the two parties was in one of the last pages.
The RAA report showed Nu 25.6 mn in violation of laws and rules by People’s Democratic Party (PDP) with Nu 21.7 mn in irregularities in outstanding loans and Nu 3.9 mn in accumulated current liabilities. There were also four other audit issues like membership application form used as money receipts, missing receipt booklets, un-reconciled recoveries and irregularities in financial statements.
Druk Phuensum Tshogpa (DPT) had Nu 628,000 under shortfall, lapses and deficiencies.
With a heated election race just getting over, this immediately became a major issue as the Opposition picked up primarily on the Nu 21.7 mn loan cleared with Bank of Bhutan (BOBL) by surrendering the land mortgaged in lieu of it. The mortgaged land surrendered was valued at 21,023,440.27. However, as the land belonged to the former PDP President, the criticism was that the amount now stood as borrowings from him which is not permissible by the Public Election Fund Act 2008.
In short, the DPT was asking why PDP was even allowed to contest the 2013 General Elections when it had violated the Act.
In response, the PDP defended itself by saying that it had already cleared the issue and the report which was slightly out of date was yet to reflect the final situation. PDP ministers and MPs also went on the attack asking loaded questions on how DPT exactly cleared all its debts.
In an interview to this paper, the Chief Election Commissioner, Dasho Kunzang Wangdi, said that both DPT and PDP had cleared all pending financial liabilities in 2012 only after which they had been held to be eligible for contesting the 2013 Polls.
The CEC also said that some confusion had arisen as the RAA Annual report which was discussed in Parliament covered the period prior to the two parties resolving all issues with the ECB.
The period under review with regard to the Audit Report and Operations of the two political parties was July 1, 2008 to June 30, 2012 for PDP and from July 1, 2010 to June 30, 2012 for DPT.
The RAA in turn complained that both parties had not responded even after repeated reminders and even when they had been issued draft copies of the RAA report with the findings.
Following a detailed study on the issue of the Nu 21.7 mn irregularity, the PAC report has now reported that the issue was resolved by the Follow-Up Committee Meeting held on December 30, 2013 in view of the fact that PDP had liquidated the loan amount of Nu. 21,023,440.27 through a mix of cash repayment and voluntary contributions which had been accepted by the ECB.
On the issue of PDP’s accumulated liabilities of Nu 3.9 mn, the PDP had already paid off Nu.2, 668,434.48 of current liabilities leaving a balance of Nu.1, 268,995.32. The PDP has assured that it will make a public notification of old unclaimed current liabilities other than the amount of statutory liabilities, and if no claims are lodged within the prescribed time frame, the same will be reflected accordingly in their accounts for 2014. The compliance of assurance is to be verified in the next audit.
The audit of DPT by the RAA has verified that of the Nu 628,000 the amount of Nu. 461,813.92 has been recovered leaving a balance of Nu. 165,899.50. This balance amount has been carried forward to the current financial year (2012-2013) accounts and a separate observation has been issued on it. As such, this issue has been treated as resolved for now.
The PAC report also took pains to get the view of the ECB on the main contentious issue of the Nu 21.7 mn loan being paid off.
The PAC said that in regard to the audit observation that it was tantamount to borrowing not permissible by the Public Election Fund Act 2008. The ECB took into consideration the fact that political parties were being formed for the first time, the familiarization tours, although unforeseen, was necessary, fixed assets form more than 10% of total audited expenditures of the political parties for the financial year, both parties were in a similar financial situation of having loans payable to financial institutions and both parties owed and had agreed to pay (albeit differing amounts) to respective former Party Presidents, other agencies and individuals which were in breach of the Public Election Fund Act.
The PAC said that the ECB directed the two parties, among others things, to clear all financial liabilities within the next four financial years, by June 30, 2012 and not incur any more dues to non permissible sources which were in contravention of the Public Election Fund Act. This was duly notified publically on January 31, 2009.
The PAC report says, “In other words, yes, there was a breach, but the two parties were given a chance to set things right by complying with the directives of the ECB as contained in the public notification.”
The PAC pointed out to the laxity of both the political parties in responding to the RAA’s request to give justifications or comments on the draft RAA report findings.
It also said that there was need for better coordination between the RAA and the ECB on the matter of political parties.
The Parliament resolved that these outstanding amounts should be cleared by the financial year 2013-2014. Further, the House resolved that such accounts should be annually audited rather than letting the accounts accumulate for six years as in the present case.
The PAC, in its report, had three main recommendations. The first was that political parties, henceforth, should exercise greater prudence with their finances and adhere strictly to the Electoral Laws.
The second was that such oversight and inconsistencies should not be repeated in the future. New parties should be adequately advised by ECB so that they avoid the same mistakes made by the first two registered parties.
The final recommendation was that ECB and RAA should consult each other more when it comes to the accounts of political parties.

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