CAG pushes for prosecution to enforce timely PSU financial disclosure

THIRUVANANTHAPURAM: There are mixed views on whether the Comptroller and Auditor General of India (CAG) being a bit ruthless while dealing with issues of Kerala’s PSUs.

It’s a fact that Kerala’s PSUs are bleeding the exchequer, further straining the state as it battles to regain its financial health, which has been shattered by a burgeoning debt pile.

A company secretary based in Mumbai told businessbenchmark.news that a majority of Kerala’s PSUs are sitting on fault lines, and bringing them back on track could prove to be a Herculean task.

In a recent report, CAG has recommended prosecution of Responsible Officers of Kerala’s public sector undertakings (PSUs), who have failed to implement Corporate Governance in their respective institutions.

Several shortcomings

CAG has picked numerous holes in the running of PSUs in Kerala. Even if the financial non-viability of many of these entities is ignored, CAG has pointed out serious lapses on the corporate governance front.

Moreover, in many cases, it has highlighted inconsistencies between the numbers held in government records and those maintained by these PSUs.

Issues galore

CAG has found that most PSUs are going too easy on timely submission of financial statements, holding board meetings, appointing required number of independent directors, setting up audit committees etc.

However, failure to make timely presentation of annual financial statements has been viewed with utmost seriousness by CAG.

Strong action sought

CAG in its recommendations noted, “Government should contemplate the application of Section 129 (7) of the Companies Act, which requires fines and/or imprisonment for non-preparation of accounts within the prescribed timeframe.”

Section 129(7) implies that PSUs that fail to prepare and disclose their financial statements within the stipulated time frame should face legal consequences, including fines and imprisonment for responsible officers.

Corporate Governance

Out of the 131 working PSUs, only 72 companies and one statutory corporation had furnished (till 30 October 2022) the details regarding corporate governance, which were considered for analysis.

CAG stated that only five PSUs (including one statutory corporation) have submitted their accounts for the financial year 2021-22 for audit within the stipulated period whereas sixty PSUs submitted only their ‘arrear accounts’ (2014-15 to 2020-21) for audit by CAG

Another observation is that out of the 72 PSU companies, 40 companies did not comply with the mandatory requirement of conducting four meetings of the Board of Directors during 2021-22 (FY22).

Averse to woman directors?

Out of the 72 companies came for review, six companies appointed independent directors on their Board and only 26 companies appointed at least one woman director.

Out of the 72 companies, in 11 companies, the posts of Key Managerial Personnel were not filled up within the time prescribed

Audit Committee was not constituted in 52 out of the 73 PSUs, and majority of the members of the Audit Committees in 15 PSUs were not Independent directors.