Very Interesting Letter to the president of ICAI

1

Each year, every regional Council chairman holds a meeting at which the Chairman and Managing Committee Members of the Branches of that region are invited for discussion on a one-to-one basis with the Chairman of the Region. The agenda of the meeting is to discuss matters of importance to the branches and to the region concerned. These meetings are invariably held at the regional headquarters. Instead of this practice, this year such a meeting was collectively held at Baba Ramdev Ashram, Haridwar. I understand that hardly very few Central Council members attended and the focus was more on other extra curricular activities. Notwithstanding the above, I understand that a huge amount of approximately Rs.55 lakhs (35 lakhs direct by ICAI + 25 lakhs of Regional Councils) was spent on this exercise and a donation of Rs.5  Lacs was also given from the funds of the Institute. The above may or may not include the cost of travelling of chairman and managing committee members of various branches whose expenses have been debited at the respective branch and regional headquarters level.

A view may be expressed that the programme was sanctioned by the executive committee and that such kind of meetings are necessary for bonding amongst elected members (who serve the ICAI free of cost) in an atmosphere that encourages a relaxed interaction. However, the wisdom of incurring such kind of huge expenditure needs to be considered for the next 6 months and also in future.

2

The above is especially important since even after the yoga camp, a separate meeting was called of regional chairman  of WIRC branches, which was held at Mumbai. This resulted in duplication of costs and efforts and on the other hand,  effective meetings where other such issues could be discussed were not permitted for the other regions.

3

Further, as a part of celebration of Diamond Jubilee a 20 – 20 Cricket match was organized with Income Tax Department.  I understand that a huge amount of Rs. 25 lakhs have been incurred by the Institute, where attendance was less than 500.  No prior approval of Council was obtained and Council was only informed.  On inquiry I found that earlier when some branches have requested to play cricket match (in 2006 and 2007), they were specifically refused by office, on the ground that such activity does not fall within the objectives /  powers under the C.A. Act.    In spite of the above stand such match has been held by ICAI at huge cost and also a new trend of cricket match by branches was permitted involving heavy expenses by Institute.

4

It is also noted that a letter has been issued ( which has been brought to your notice) instructing branch chairmen and regional Council chairmen to put up the framed photograph of the President and indicating that non-compliance would be viewed seriously. The letter made reference to some protocol which to the best of my knowledge never existed and this has never been done in the past.  You will appreciate that although the President  is the leader of the profession, he is first amongst equals and therefore, " directions" issued for putting up photographs and printing the same in newsletters etc do not send a very positive message to our membership. Once again issues of governance and good practices come to the fore. For Eg. Instructions had also been issued to have your photograph printed on every newsletter of every branch and regional Council.  This has thankfully been withdrawn - but not before an unseemly debate  in the Council which could ideally have been avoided. In a similar manner, it is seen that all 12 issues of the students newsletter carried your photograph last year  (as Vice President). Although one may claim that it is a decision of the Chairman of the Board of Studies, the inconsistency of such a decision would be apparent when one notices that the photograph of the present Vice President is not printed on the newsletters in the current year. Instead your photograph continues even after you become President. This gives a clear message of the photograph printed being associated with the individual rather than with the position one holds. You will appreciate that as a matter of good governance, decisions should not be person –based but should be based on position. When decisions are person oriented - they tend to send the wrong message about management and governance.

I am repeating the above views knowing the fact that the decision of printing of  President’s photographs on the newsletter has been withdrawn but felt it that I must support the view expressed by our Government nominee Council colleague  Mr. R. Sekar, who has also written letter on this issue and also on the issue of Satyam.

5

The Vice President of the Institute has always been entrusted with the significant responsibility with the of handling the funds and finance of the Institute and also of Branch matters so as to leave the President free to attend to important policy matters.  This year however, I understand from my council colleagues and others that the Hon Vice President has been divested of these responsibilities and that you are personally looking into matters such as issuance of cheques to branches for building etc.  The infrastructure development of branches which was looked after by President is also transferred to New Committee. While appreciating your personal involvement, I may once again mention that the message and consequences are not really desirable.

6

The initiative of opening centres for excellence in cities such as Hyderabad, Jaipur and Bangalore by the of continuation of the thrust initiated earlier is to be appreciated.  However, despite significant time having passed, no specific plans for utilisation of the centres in a concrete manner has been presented to the Council. It is imperative that the centres which have been put up by incurring huge costs running into a crores of rupees should be properly utilised.  Even at the Board Of Studies and other Technical Committees we are facing an acute shortage of experienced and competent technical personnel. So one fails to understand how it is proposed to ensure that the objective of the Centre of excellence is to be achieved and the huge expenditure already incurred justified. Considering the huge amount of expenditure incurred on putting up the centres of excellence, I think a far greater level of transparency and accountability is needed. I suggest that for each of the centres of excellence, a full detail of the costs incurred till date, (showing separately the capital and revenue expenditures) and the projected outflows and how we plan to make them should be circulated to the Council members. Particulars of the capital expenditures incurred in each of the last three years should also be separately circulated.

7

You have also taken initiative of "Green India Project". The social objective and the positive publicity in this regard is worth appreciating.  However, as responsible citizens we must practice what we preach. I had initiated the project of reducing paper by extensive use of electronic data. Unfortunately, the trend seems to have now been reversed/largely abandoned as we see huge amount of printed copies being circulated. I believed a conscious effort needs to be made to make the "Green India Project" more meaningful rather than an empty slogan. At this stage it is also necessary that Council be informed that total cost (direct and Indirect) in the short film which you desire to show across the country in Theatres and Cinema Multiplexes.

8

Another area of great concern is the increasing number of committees of the Council. Over the last two years this number has also doubled.  I am pained to note that the increase in the number of committees and its members has not increased the positive output flowing from such committees. Rather the attendance and participation at these committee meetings has declined alarmingly, resulting in issues of quorum becoming a common feature. No doubt this has allowed you to appoint more nominee members in the Committees- but such a scenario never arose in the past and sends a very bad signal to the outside world about the way the committees of the ICAI function.  This requires immediate attention of the President and some concrete corrective measures to be taken.

9

I do notice that the revenues of the ICAI are showing a consistent increase. However,  good governance practice would require that the funds are utilised with a greater sense of responsibility. In accordance with our fundamental objectives we should spend / invest more on Research and Development.  Instead we see huge increase in certain expenditures referred to in this letter and on the other side  we see little progress in creating awareness and education about convergence with IFRS which needs urgent attention on part of ICAI. This is not to find fault with any individual decision but more on an issue of good governance practices.  You will recall that in 2000-01, when the then president Shri. N.D. Gupta wished to replace the old Ambassador car, he had placed the proposal before the Council. The specific permission was sought as a matter of good governance since he would be the user of the car as the President. You will also see that despite the Council having authorised purchase of a Lancer,  eventually purchased the cheaper Ambassador car. And the stand that in the last three years a Honda City and an Optra Chevrolet were purchased for the President and Vice President.  Despite these cars being in excellent operating condition,  a new Honda CRV has been purchased for the President in February 2009. Considering the expenditure of Rs. 20 lakhs involved, I am sure you will appreciate the governance issues involved.

10

In a similar manner, we need to closely watch and control the expenditure on programmes such as convocations.  I understand that even in Delhi such kind of programme involved huge cost whereas participants are few as against the total strength of students qualifying as C.A.s every year.  I feel that such programmes should not be done for any personal publicity and the programme should be conducted in a manner that will uphold and maintain the image of the Council and the Institute.   A mail for such a Convocation giving lots of discomfort and inconvenience is already in circulation.

11

Traditionally, various powers which are actually vested in the Council have been left to the President.  On the date of election substantial powers of the Council are given to the President enabling him to function smoothly in the best interest of profession and Institute.  Therefore, such powers are to be very carefully and consciously used keeping in mind the interest and dignity of Council as all such decisions of the President would tantamount the decision of Central Council.  Communicating to the public the views of the Council is one of them. Therefore, the statements made by the President always reflect (or are supposed to reflect) the views of the Council. For this reason a great degree of restraint is often called for. In fact, even a past president he is always under that restraint that any view expressed by him would be mentioned as a view expressed by a past president and would therefore be attached a special significance. It is all the more necessary for the President in office to be extremely cautious in the public statements made by him.  I learnt that you make public statement of many members not understanding existing Accounting Standards. Other statements have included your views about a Council colleague involved in Satyam episode, where you mentioned in a  statement given in the media immediately after visiting Jail and meeting the partner of PWC, that prima facie Mr. Gopalkrishnan is not guilty.  Again on 6th April there was a statement/report in the press that there is a clear case of gross negligence by the very same partner of PWC. Similarly, other statements about the Statutory Audit of nationalized banks not being up to the mark have caused grave concern and unease.  I understand that an apology has also been demanded. I can only suggest that a statement of President is ultimately supposed to be a statement of Council and one has to be more careful and has to observe restraint in giving public statements. We must also keep in mind that the Council of the ICAI functions under the supervision of the Ministry of corporate affairs which is ultimately a limb of the government. Therefore, public criticism of any other limb of government  or other regulators needs to be totally avoided. Any issues that one may have with other regulators can be taken up either with the regulators directly  or in extreme circumstances with the officials of the Ministry but in no case should be expressed in the media. I am aware that you gave a clarification in the Council when this issue was raised by our Council Colleague Mr. J. Venkateswarlu, along with Newspaper clippings.  

12

Another aspect of governance is the increasing level of agitation and hostility that is being seen among the issues that are arising.  I have received e-mails from Mr. Garg of Agra mentioning several irregularities.  This needs to be specifically dealt with legally.  I also understand that for international Conference from 1st to 3rd July, Regional Council members from CIRC (Except one) and large number of members of Agra branch  were not taken in to confidence.  This led some degree of lack of involvement/hostility. Some differences of opinion will always exist. However it is further leadership to ensure that these differences are tackled in a diplomatic manner without letting them result in outright hostility which can only harm the image of the profession. In any case lack of participation/involvement also has other effects and  I understand that this Conference also may result in to huge deficit of 30 to 50 lakhs.  Kindly let me have the complete details of this. The matter with regard to Chairman of CIRC Mr. Dhruv, the decision to take away his powers and initiation of Disciplinary proceedings on him etc. are other such examples.

13

I have referred to the very strong feelings of hostility in the preceding paragraph. The recent incident of a truly behaviour within the premises of the Institute is an example of this unwelcome trend.  It is unfortunate that the name of Central Council member is also being involved in instances which have led to the filing of FIRs resulting in the police coming to the Institute premises. Even though no individual may have control over such instances, numerous instances mentioned above are indicators of certain trends and I think it is appropriate that the President should clarify how such circumstances arose and what corrective actions are being taken to ensure that such episodes do not recur besides the outcome of one more high powered Committee appointed by you for this episode.  As a President instead of appreciating the immediate action and decision by Hon’ble Vice President of removing such lady employee, I was surprisingly shocked to learn that you have asked for a clarification from the Secretary of the Institute for her dismissal.

14

Lastly I would like to know the status of the case with regard to the leakage of CPT Exam, status of the report and findings by High Power Committee appointed for Satyam case and also your decision about FRRB, simultaneously doing investigation on Satyam’s published accounts.  Council may be briefed on these issues which are of significant importance to the profession and Institute.

15

I am aware and conscious that in last meeting you expressed your personal view that matter of general interest should preferably be first discussed with the President and should not be circulated to the Council members. However, as I said that matters traveling beyond reasonable level of tolerance I thought it fit to circulate this open letter to President to all my Council Colleagues with a request to each one of them to appreciate the honest intention, sincere desire and keen interest of mine for maintaining the highest standard of our Institute, our profession and above all the dignity of our Council.