To understand why civil society participation in the social audit of the National Rural Employment Guarantee Scheme (NREGS) in Rajasthan raised the hackles of a swath of people, among them gram panchayat staff, politicians and bureaucrats, it is necessary to rewind to the October 2009 Bhilwara social audit which was conducted jointly by civil society and the Rajasthan government.

The induction of civil society members into the official NREGS social audit brought experience to the audit teams but, more importantly, it made the oversight process transparent and accountable.

The effect of this was dramatically visible post-Bhilwara. When the audit teams compiled the results of the 10-day-long exercise, they were stunned by the extent of corruption that came to the fore, especially in the purchase of material for civil works under NREGS. Bhilwara had been audited before along with other Rajasthan districts. But these were paper exercises that revealed few lapses, and did not in anyway threaten the tranquil world of the sarpanchs, engineers and Block Development Officers. Bhilwara-2009, on the other hand, invited a swift and strong backlash, and the government backed off realising it had stepped into a quagmire of stealth and corruption.

The Bhilwara audit teams, which examined bills and vouchers relating to material purchases in 11 of Rajasthan’s over 9,000 gram panchayats, conservatively estimated diversion of NREGS funds in the inspected village panchayats at Rs. 1.5 crore (about Rs. 12 lakh per gram panchayat). The sample size may have been too small to allow extrapolation for the more than 9,000 gram panchayats, but it nonetheless gave a fair picture of the overall volume of potential corruption under NREGS — anything between Rs. 800 crore and Rs. 1,000 crore a year. The allocation of NREGS funds for Rajasthan for the year 2009-2010 was Rs. 9,525 crore, up from Rs. 6,175 crore the previous year. This was to be split in the ratio 60-40 between labour wages and material costs.

The plain meaning of this was that roughly a third of the funds allocated for material purchases was being used to line the pockets of a long chain of people — from the sarpanchs, gram sevaks and sachivs (secretaries) at the lowest rung through civil engineers, accountants, contractors, dealers and suppliers to BDOs, going right up to the District Collector in a few cases.

Naturally, a fuller audit held out the threat of bringing down this cosy nexus. The Bhilwara exercise unearthed two sets of irregularities. The padayatris reported back fudged muster rolls, missing job cards, delayed and partial payment of wages as well as the use of machines to displace labour. The auditors in the 11 gram panchayats found a recurring pattern of fake and hand-written bills, exaggerated claims, use of substandard material, and payment by cash or bearer cheque.

The fund diversion was intriguing in the context of a series of Government Orders issued to panchayats and District Collectors advising strict compliance of norms for the purchase of material for projects under Rural Development and NREGS — among them sourcing of supplies only through registered firms, inviting open tender for purchases, ensuring that the dealer possessed a tax compliance certificate from the commercial tax department, and ensuring further that only bills bearing sales tax registration details were accepted for payment.

A GO dated February 16, 2007 reiterated the norms and regretted the heavy loss to the exchequer due to the flouting of norms by the gram panchayats and panchayat samitis. A second GO, dated June 18, 2007, brought the discomfiting results of previous social audits (done again by Aruna Roy and her team) to the attention of District Collectors, noting that these had revealed continued submission of kaccha (unofficial) bills by gram panchayats. The GO instructed the Collectors to keep a strict watch on the quantity and quality of material supplies going into NREGS works. It also asked them to ensure that payments were made only to registered, bonafide firms.

GOs unheeded

A whole two years later, the Bhilwara social audit would discover that the GOs went unheeded. In the event, Bhilwara-2009 threw up a curious situation. The coming into record of phony bills brought the commercial tax authorities into the picture. Queries went out to suppliers who had received payment for material sold to the gram panchayats. One the one hand, the fake bill trail led to sarpanchs, engineers, BDOs and politicians. On the other, firms were asked to produce Value Added Tax-paid bills, which opened a can of worms. VAT evasion being easy to detect, the entire supply chain stood to be exposed, setting off panic among sarpanchs, politicians, bureaucrats and manufacturers, who collectively decided to challenge the government on its move to extend the Bhilwara model of civil society-government social audit to the whole of Rajasthan.

With protests mounting, the State government altered the norms it had itself held sacred in letter after letter. It instructed District Collectors to sanction payments even on kaccha bills provided the material supplied was fully utilised and was of assured quality. More startlingly, the GO dated November 10, 2009 announced VAT deduction at source for sanctioned payments. This was an incredible case of a government accepting the legal validity of kaccha bills.

The government had no justification for letting the offenders off the hook given the extent of fraud uncovered in Bhilwara. Moreover, feedback from the now abandoned November-December, 2009 audit programmes, and an inspection done by the government itself would strongly corroborate the Bhilwara findings.

The Rajasthan government undertook to carry out an inspection of NREGS works in the Soniana gram panchyat in Chittorgarh district essentially to appease the social activists who were upset by the suspension of the November-December audits. Filed as recently as December 6, 2009, the inspection report established pervasive irregularities in inviting tenders as well as the absence of technical sanction for most civil works. But this was nothing compared to the fact that over the years the gram panchayat had gradually edged out the labour component from NREGS, seriously undermining the very premise of the job guarantee programme.

The Soniana panchayat’s fund utilisation for 2009-2010 showed that a mere 10 per cent of the allocated Rs. 3.81 crore had gone towards labour wages as against the mandated 60 per cent. The funds drawn by the panchayat increased every year, from Rs. 22.70 lakh in 2007-2008 to Rs. 3.81 crore in 2009-2010. And progressively the proportion spent on labour wages decreased, from 67 per cent in 2007-2008 to a shocking 10 per cent in the current year. This led to one of two obvious conclusions: Either poor people needing employment were being defrauded or money was flowing to a panchayat that did not seem to need employment.

The government also had feedback from a few gram panchayats where the audit work had made some progress despite the protest. In the Sapotra gram panchayat in Karauli district, auditors established work measurement irregularities amounting to a total of Rs. 17.52 lakh.

These revelations coupled with the Bhilwara findings made a persuasive case for civil society participation in NREGS social audit. However, instead of standing firm, the government bought into the argument of the protestors that Aruna Roy and others were busybodies who had appropriated the rights and duties of the gram sabha. In support of their claim, the protestors cited a set of amendments introduced to NREGA in December 2008. Clause 13(B) (iii) of the amendments states that social audit will be done by the gram sabha which will elect from itself a Social Audit Committee of workers experienced in NREGA work. On the basis of this they also obtained two court stays against the inclusion of social activists in social audit.

And yet the same amendments also establish the public’s rights in NREGS social audit in the following respects: to inspect all relevant documents, including complete files; to submit any information; and to attend, observe and participate in the audit without intervening in its proceedings. Ms Roy is at pains to point that the activists at no point took the audit into their own hands, but that they were officially inducted by the government and went into the panchayats as part of a government team.

Basic principle

There is also the basic principle of audit which is that it must be done by a people external to the works being audited. To invest this right exclusively in the gram sabhas is to make them at once jury, judge and executioner. Forget the NGOs, the Rajasthan government said as much in a note it addressed to District Collectors. Dated April 2, 2009, the note points out that in a large number of cases social audit forums are constituted, not by the gram sabha but by the sarpanch, who packs it with his/her spouse and other relatives. The note goes on to say, “it is a fact that wherever NGOs have conducted audit in open hearings, a large number of irregularities were found. As compared to that, the irregularities detected in social audit by forums are negligible and put a question mark on their credibility.”

The government had enough and more evidence to make a strong case before the courts for civil society participation in social audit. Instead it suspended the audits — without being asked to do so.

It is now widely accepted that in many parts of the country, NREGS has emerged as a lifeline for the rural poor. It has had a cascading effect, raising wage levels even in the private sector. The biggest threat to the job guarantee programme was always control of the funds by a corrupt elite. Statutory social audit was a radical and innovative feature of the Act; it introduced the concept of vigilance to opaque and non-accountable systems.

The battle being fought in the panchayats, streets, offices, and courts of Rajasthan is therefore not just about social audit. It is about who will have control over the funds and priorities of the world’s largest guaranteed programme to fight poverty and generate employment — one that has the power to change the complexion of rural India.

Bhilwara-2009 invited a swift and strong backlash — the government backed off realising it had stepped into a quagmire of corruption

The battle being fought in the panchayats, streets, offices, and courts of Rajasthan is not just about social audit

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