Sunday, October 28, 2012

Culpability for Wastage of Funds by the Army Commanders

Reference: Army chief, top generals wasted crores, shows defence ministry audit
Culpability for Wastage of Funds by the Army Commanders by Major General Mrinal Suman
Elements inimical to the services are at it once again. Senior army commanders are being accused of wasting crores of rupees through improper purchases made under Special Financial Powers of the Army Commanders. As per the press reports, a post-audit has been carried out of 55 transactions pertaining to financial years 2009-10 and 2010-11 by the Controller of Defence Accounts. The audit report has estimated the total loss to be to the tune of Rupees 103.11 crores. It is a serious indictment and deserves elaboration.
With a view to impart enhanced autonomy in administrative and operational functioning, various financial powers have been delegated to the Army Commanders. As per the recommendations of the Committee on Defence Expenditure, the Ministry of Defence decided in November 1991 that exercise of such delegated financial powers should be with the concurrence of local financial advisors. It implies that such delegated financial powers are neither absolute nor discretionary, and can be exercised by the Army Commanders only with the prior consent of their Integrated Financial Advisor (IFA).
The system of IFA aims to reduce delays and provide pre-contract expert advice to the executives for ensuring financial prudence and prevent irregularities.
Role of Financial Advisors
Commanders have to obtain prior financial concurrence of their IFA before incurring any expenditure as there is no provision for ex-post facto acquiescence.
IFAs are tasked to carry out a careful and intelligent scrutiny of all proposals involving expenditure from the public funds to ensure economy, efficiency and propriety in public finance. Before according financial concurrence, it is their duty to seek complete and comprehensive justification for the proposals. They are authorised to even challenge the necessity for incurring projected expenditure for a given purchase.
Unless IFA accords Acceptance of Necessity and approves the quantity to be procured, no proposal can be progressed. He questions the proposed mode of tendering and checks the list of prospective vendors. All tender documents are vetted by IFA prior to their issuance.
Most importantly, IFA is always a member of the Commercial Negotiation Committee and participates in the following functions:
  • Appraisal of bids as regards commercial terms, delivery schedule, performance warranty, guarantee terms and acceptance criteria.
  • Determination of fair and reasonable price of the product. Preparation of a ‘Comparative Statement of Tenders’ to determine lowest bidder. Undertaking negotiations with the lowest bidder to obtain best possible terms. Diligent drafting of contract to safeguard Government’s interests.
  • Post-contract management to monitor adherence to the terms of the deal and timely invocation of penalty provisions in case of default.
  • As is obvious, IFA exercises total and all-encompassing oversight over the complete procurement process. He can stall any procurement proposal if not convinced of its financial propriety.
    The Question of Culpability
    The said audit report faults the Army Commanders for disregarding guideline while buying foreign equipment, procuring equipment from Indian agents, accepting equipment rejected by another army entity and purchase of Chinese products which may have been embedded with malignant software.
    As seen above, IFAs guide commanders at every stage of the procurement process and keep a close oversight. If that be so, onus for rendering faulty financial advice or clearing faulty cases rests on them. They should be asked to explain alleged irregularities and infirmities. How can an Army Commander be blamed for adhering to the advice of his IFA? If that be so, why have IFAs at all?
    Most outrageously, the audit report states that the local financial advisors are intimidated by military officers in command. One has not come across a more preposterous and bizarre statement. No IFA ever gets intimidated. On the contrary, they are overbearing, domineering and suffer from an acute ‘rank-equivalence-complex’. They keep comparing their pay scales with those of the service officers to draw equations with different ranks. This complex manifests itself in their condescending attitude as they tend to assume the role of dispenser of favours while according financial concurrence. Therefore, the question of their getting intimidated is all baloney.
    Inadequacies of the Current Dispensation
    It is incongruous that a duly pre-audited procurement process is found to be flawed in post-audit. Interestingly, both pre-audit and post-audit are carried out by the officials of the Defence Finance and their roles are inter-changeable.
    Unfortunately, the prime reason for the current weakness of the system is the failure of the Defence Finance officials to deliver. They are expected to act as defence financial advisors but are ill-equipped for the task.
    They know nothing about the armed forces, their equipment and functioning. Worse, most are equally ignorant of financial management tools. During a survey of the educational qualifications of the top 50 Defence Finance officers, it was seen that most of them did not possess even elementary knowledge of finance/economics – only 8 percent had studied economics at the post-graduate level. Most were post-graduates in subjects like Political Science, English, Sociology and Sanskrit. Such officials cannot be expected to grasp minutiae of financial imperatives and perform defence economic advisory functions.
    Let us look at the unenviable position of the Army Commanders. They have been asked to follow the advice of their IFAs while exercising their delegated financial powers. They are justified in assuming that all procurement proposals vetted and cleared by IFAs are in consonance with the Government rules and regulations. Therefore, it is absurd that the Army Commanders be held responsible for any alleged irregularities or omissions.
    It should be for IFAs to justify the procedure followed. They and they alone should be held accountable for faulty advice and oversight. Quite appallingly, IFAs disown any responsibility under the plea that decision making is the prerogative of the executives and they cannot be held accountable for the same. It is a most ludicrous excuse.
    The fact of the matter is that the armed forces are a soft target. The said audit report is a part of the well-orchestrated campaign to denigrate them through planted selective leaks.
    Comment: No Army Commander will sign a purchase order unless the FA certifies that every thing is in order. The media has lost all perspective and is out to make headlines even at the cost of reputation of senior army generals. The nexus of IFA Officers and dealers/ spurious vendors need to be investigated.
    Of Matters Military - Probity and Formation Commanders
    Of the last dozen cases of corruption that we heard about, how many involved officers from the EME, ASC or Ord? It is common knowledge in formations today that the 'meat' lies in op wks, S&S Imprest, ACG/ATG, MI Fund and CHT Fund. Rations and spares are passe.
    Probity and Formation Commanders
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