Patna: Beyond politics and charges and counter-charges, the over Rs 1000-crore Srijan fund transfer scam is a telling comment on the financial management of the state.

The Accountant General of Bihar submitted a report to the finance department in April. Titled "Irregularities in financial management involving Srijan", a perusal of the report (a copy of which is with The Telegraph) reveals some staggering numbers.

The AG checked 31 offices in Bhagalpur, Banka and Saharsa districts and analysed 603 bank accounts covering the period 2007-17. What it found was that Srijan Mahila Vikas Sahyog Samiti, the NGO at the centre of the scam, did not have any authority to carry out banking activities.

As the AG's checks found, connivance between banks, Srijan and the drawing and disbursement officers (DDOs) concerned led to fraudulent transfer of Rs 1260.67 crore to the NGO between 2007-17. Of this, Rs 860.43 was deposited in bank accounts, which too was unauthorised. As many as 364 new bank accounts were opened - 94 on government order and 270 new ones in violation of government finance rules.

The AG audit found that a huge corpus fund of over Rs 400 crore was not deposited back by Srijan. It should be a matter of concern for government to ensure recovery of the amount, the report says.

The AG has also sought to give an explanation as to how the scam unfolded. "The key to the fraud was the indiscriminate opening and operation of bank accounts by the DDOs, direct deposit of government funds to Srijan's bank account through direct issuance of payment cheques in its favour, third party endorsement of banker's cheque and withdrawal of money from treasury through bills, recouping of funds by Srijan as and when required by the DDOs to avoid dishonouring of various cheques issued by the DDOs," the report notes.

How officials flouted financial rules with impunity is detailed. Then chief secretary Anup Mukherjee had on October 13, 2008, written to the Araria district magistrate with a copy to all DMs ordering withdrawal of funds from Primary Agriculture Cooperative Societies and cooperative banks and transferring them to nationalised or regional rural banks. He specified that this must be done by October 20, 2008. Despite his order, government funds kept going to Srijan.

The AG report indicates that the district cooperative officer and assistant registrar-cooperative societies approved the amendments made by Srijan in its bylaws. But the working of Srijan had never been inspected by them, as required as per provisions of the Act. The amendments made by Srijan in 1997 allowed it to start the banking business.

Srijan is registered under the Bihar & Orissa Sahkari Samiti Act, 1935. From January 1997 to December 2013, the officials extended the working areas and activities of Srijan through amendment and included new clauses 13 times.

The report specifies that Srijan had no authority for banking business. The NGO showed itself as a banking unit under Bhagalpur Central Cooperative Bank Limited (BCCBL). However, the BCCBL MD told the audit team that Srijan was never given permission to carry out banking business and it was also not authorised to carry out banking business under the provisions of the Reserve Bank of India.

Most of the illegal bank operations were done through new accounts. In 98 per cent of the cases, the officials did not specify reasons for opening new bank accounts or the reason for transferring government funds from nationalised banks to either Srijan or another bank, which made it "conducive" for the scam to go on.

The report says the frequency of transfer of funds was high under certain DDOs and nil under others. It notes that a sharp rise of fund transfer was witnessed after 2010 and peaked during 2015-16. It says that Srijan, during 2007-17, held on to government funds for long periods of three to four years. "It was during the same period that the state government had taken a total of Rs 64,989 crore as market loan and paid a total interest of Rs 19138.72 crore," says the report.

In the final remark, the AG audit observes that "internal control mechanism had deficiencies and there were serious supervisory lapses". It asked the government to fix responsibilities for all financial irregularities after a detailed investigation of financial transaction of DDOs with Srijan since January 1996.

Incidentally, the rural development department has already asked the Bhagalpur DM to proceed against the officials concerned on the basis of the AG report as funds landing up in Srijan bank accounts were meant for Indira Awas Yojana houses for the poor.