In a major lapse, the state government failed to close 76 personal deposit (PD) accounts with an unspent balance of Rs 4,421.56 crore at the end of the March 2020 fiscal in violation of its own financial code, the Comptroller and Auditor General (CAG) has found.
"Not transferring the unspent balance lying in PD accounts to the Consolidated Fund of the state before the closure of the financial year entails the risk of misuse of public funds, fraud and misappropriation," the CAG said in its report on finance accounts tabled in the ongoing Assembly session.
Of the total amount, Rs 2,741.52 crore meant for various schemes was lying unspent for a period of more than three years.
According to the Karnataka Financial Code, 1958, PD accounts are created in favour of drawing and disbursing officers to make payments for various works. Amounts are transferred to these accounts from the Consolidated Fund and are required to be closed at the end of the fiscal. However, CAG found many accounts violated the guidelines stipulated in the Code.
Out of the 76 PD accounts, 23 accounts were found to be inoperative and not closed as per regulations. Further, 53 PD accounts are operative — 32 were credit accounts, 11 debit accounts and 10 had nil balance, the report said.
While CAG has flagged the practice, warning that it would lead to misuse of funds and fraud, authorities said that the parking of funds in PD accounts was due to various factors.
"One of the main reasons is the release of funds at the fag end of the fiscal year. If a few crores are released during February or March, authorities will not have sufficient time to float tenders and start work. As a result, they keep the money in the account," a source from the Finance Department said.
Clear directions have been issued to not park any funds in PD accounts and all departments are forbidden from opening any accounts without prior approval.
While some central schemes might require such accounts, release of funds for state government projects is streamlined using the new Khajane-2 (treasury) software, which makes such accounts redundant, sources added.
Many of the accounts flagged by the CAG were likely opened a few years ago and could be associated with big-ticket projects of the government.
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