2 weeks ago, I wrote a post on how people with questionable values lead  to collapse of propriety in a housing society. How it affects the citizen mindset in the whole country.

I had 2 options to deal with this ugly situation :

1. Crib at the errant and ugly behavior of office holders. // Easy and practiced by many.

2. Do some concrete action to restore propriety and my own faith in the system. // Its was as difficult or as instinctive to me as confronting a drunk molester in a running bus. The  story of confronting molester is here

The majority in my society exercised option 1.

The option 2, I exercised put me up fighting against a group of people ensconced and fortified on a hill ( Just like Kargil intruders ). They have a war chest of society resources (  Maintenance money worth lakhs, legal advisors, security, accountants etc)  to harass me.

As always, its unnerving for most individual crusaders to fight the alligators in pond.  A rational man is advised by friends to give up under provocations.

Look at one suggestion from a well wisher on facebook :

Image

I accepted the suggestion to be an Aam aadmi , An aam aadami , today is frustrated with the corruption and willing to take to streets.  Many of the aam aadamis may fail, bleed during the trsyst  but their is light at the end of tunnel.  There are some glorious instances where a single guy brought down an entire army of crooks by following the right path of truth example  J . B Patel of Panchwati society,  Andheri Bombay :http://articles.economictimes.indiatimes.com/2012-10-15/news/34473028_1_society-office-bearers-jayant-patel

Even without knowing his inspiring story, I  had gone ahead on the confrontational path.  The following is what I did.

  1.  Filed a complaint with Dy Registrar of society, Pune. Explained how there is a possibility of serious SCAM and immediate inquiry should begin . The inquiry should begin with sacking of office holders.
  2.  Sent a copy to Joint Registrar of Society. He manages Dy Registrar.
  3. Sent an email to CM office of Maharashtra . He forwarded the case to Secretary of state ( Co operatives)
  4. Demanded from office holders full life cycle documents of questionable transactions and a detailed list of bank transactions.
  5. Engaged a top ranking CA to investigate all documents.

Why I did this ?

Sometimes, its easy for accused to bribe/influence/threaten a small officer. Its however, beyond their capacity to buy 3 levels of high officials in the system. I tightened accountability at three levels to prevent this. Further, demanding and getting full lifecycle documents upto the current date leaves very little to accused to manipulate the documents at later stage.

Fraud

What were the results ?

The Ad Hoc committee went vengeful. It complained not against me but against my little startup.

  • Electricity Deptt : Inspectors came, searched my startup, searched my entire home and said, I just need to readjust the tarriff to commercial rate.
  • Corporation license Deptt : Inspector came and told me to get a license to operate business in municipal area. He asked me the intent of why society secretary did a written complaint. I showed him the cases they are embroiled and how even the CM office has acknowledged the complaint. He understood and said, we wont harass you at all.  Apply for a license, it just costs Rs 1000/= he said and we will fully co-operate with you. I smiled and said, I will do it.
  • Police Deptt : Local chowki summoned me to police station. I went with my wife to the police station. I was asked about illegality of my startup in residential area. I showed them Maharashtra IT act of 2010 which allows IT companies to work from residential areas. They didnt ask me any further. Read the blog on how IT companies can legally operate from residential complexes : http://www.wicfy.com/blog/working-from-apartment-is-legal-for-it-companies-startups/
  • Society Security    The Secretary  told the security to harass the employees of startup by. Not letting them park their bikes in authorized parking area.Sometimes they even prevented their bikes from entering the society. They made them to sign register everytime they came in an out of society. 

Thus, the accused were exhausted of their arsenal. The amount of harassment was coming to an end. My business just emerged stronger from all these harassment. The employees rallied around me in these tough situation because I kept everything transparent.  The values I hold, the fight I take and the possible consequences.

Now comes the funniest part.  When, the accused had little to defend themselves, they resorted to dirtiest tricks which crooks in  Govt or Corporate world resort to i.e Splitting of expenses.

Please see the image of response given to me by the Society secretary.

Image

Also, the accused, thinking the residents to be Dumb and weird, appointed their sympathizers to do an investigation and award them a clean chit. Recall how Gadkari had got himself a clean chit by  a person he appointed to investigate his own crimes ?

This also reminded me of my days in central govt.  Procurement in such large organization happens either centrally or locally. There is huge amount of money made by some people at central level but its more interesting at local level

At local levels for any transaction above Rs 5000/= needs a CLPC approval ( Central logistics purchase committee ). This CLPC comprises 3 independent officers and give approvals for any purchase above limit. Also they examine all the quotations.

Now if everything  goes through CLPC How do people at local levels misappropriate public money ?

Ans: Splitting of expenses. Any thing which is to be bought for 9900/= is split in two purchases of 4950/= each and can be bought with or without quotations.  At one stage I saw that there were 350 transactions, all between 4900 and 4999/=. This is how  people with corrupt intent try to loot public money.

I realized that people do not bring in good things of their experience in large systems to the society but ugly , dirty and corrupt practices are rapidly brought in . Even  in such small theater as housing society, this disease of splitting of expenses is brought in. Though the annual budget is as low as 40 lakhs.

Whats the way to rein in such ugly practice?

I consulted the Registrar and he suggested requesting a govt audit of all books of accounts and processes under section 89 of Mah CHS act. This independent inquiry by a govt auditor may reveal a lot more irregularity and doesnt cost much.  For a society its Rs 37/member/year of audit requested.  So for my society of 200 members, it would cost me Rs 7400/= approx.

We had seen creative accounting done by Ramalingam Raju ( Satyam Fame ) and how the reputed CA Pricewater house Coopers was party to crime of splitting salary expenses of ghost employees .  Well that was a 1000 crore + scam and this is worth a few lakhs.  The efforts to expose and prove the crime is more challenging till the accused are thrown out of office.

What will you do if you see such financial misconduct in your society ?

Are you aware that corruption is not just in govt, its a cancer which eats housing societies as well ?

How can you establish a clean system in your society ?

Please do share your experiences of taking the accused head on.

One thought on “Splitting the expenses and fraud accounting

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