The need to specify minimum conditions

Over the last few months, the functioning of the Funds and Assets Management Committee has come under fire. The members are accused of following a top-down approach, wanting to accumulate power, lacking efficiency, not delegating issues, refusing collaboration, showing no respect for others, providing insufficient basic communication, and being arbitrary in their decisions. Those who object to its functioning now propose that the constitution of the FAMC is changed. 

One of the most controversial issues is the Code of Conduct which was introduced in Auroville four years ago. Its opponents believe that it will, among other things, increase bureaucracy regarding the functioning of Auroville’s units.

Auroville Today spoke to Lyle, one of the Funds and Assets Committee (FAMC) members, to get clarification on the responsibilities of the FAMC and to get his views on the need to have basic guidelines concerning how our trusts and business units function, as well as on the proposal to change the constitution of the FAMC. 

Lyle: When the Government of India created the Auroville Foundation in 1990, it set up one legal entity which was responsible for everything in Auroville: safeguarding all immoveable assets (all lands and buildings), acquiring more lands, ensuring the completion and operation of the Matrimandir, and running educational institutions, commercial units, service units and the scientific research units. The first Secretary, seeing the enormity and unmanageability of all this, started a system of office orders whereby individuals and groups of individuals were given the responsibility to run a unit or a service on behalf of the Auroville Foundation. In later years, this was replaced by a structure of management trusts which are part of the Auroville Foundation. With the growth of Auroville, this structure has expanded enormously. Today there are 37 trusts, under which 303 units, 372 activities and 120 City Service activities operate. The total number of units and activities is 792; more than 1,500 people have been appointed as trustees or executive.

The FAMC mandate

The FAMC’s work and composition has been laid down in an extensive mandate, which was approved by the Residents’ Assembly in 2016. Apart from its overall mission – to encourage the development of an economy based on the Mother’s vision and instructions – it has as practical tasks to promote a vibrant and sustainable economy and protect and grow Auroville’s funds and assets. While doing so, it has to ensure that all financial rules and regulations, both internal and external, are followed; that there is financial transparency, clarity, and accountability; and that all funds and assets of Auroville are being managed in a responsible manner and are used to achieve the vision set out in the Charter of Auroville. 

This mandate gives an overwhelmingly large role to the FAMC. It has to approve land issues such as proposed land purchases, sales, and exchange; it appoints and removes stewards of land assets; it oversees the functioning of all trusts, units and activities of the Auroville Foundation and takes action as required; it appoints and removes trustees and executives; and it reviews applications for new building construction and infrastructure projects for financial integrity and sustainability. It constitutes and oversees the functioning of the Housing Board and that of the Budget Coordination Committee, and supervises the functioning of the Unity Fund. Last but not least, it is responsible for maintaining a register of all trustees and executives; a register of all land and building assets; and, jointly with the Secretary, Auroville Foundation, ensuring proper accounting procedures and overseeing the drafting of the Consolidated Balance Sheet of the Auroville Foundation, which has to be submitted to the Indian Parliament.

ACARAT, the unified accounting system, and the Code of Conduct

To do this work, over the years various systems have been developed. One is ACARAT, a computerized register which has the personal data of all trustees, executives and activity managers, when they were appointed, and when their term of office ends. It also has the data of all lands and buildings owned by the Auroville Foundation. 

Another work is to develop a unified and standardized accounting system where each trust and unit follows the same accounting model, booking incomes and expenses under the same headers. This would immensely facilitate the making of profit and loss accounts and balance sheets – one click of a button would be sufficient. It would also helps at consolidating the accounts of all the units into their trust accounts, and the consolidation of all trusts accounts in the consolidated account of the Auroville Foundation. This work is still in process, as it has met roadblocks because some units refuse to follow the prescribed systems.

Another work was to develop a Code of Conduct for all units of the Auroville Foundation. More than half of the Code consist of ‘normal traffic rules’: how do we create a trust, a unit or an activity; how does one become a trustee or an executive; what does it mean to be a trustees or executive; how do you close a unit; and when does one’s trusteeship ends.

Running a unit implies taking risks; but it is not sufficiently known in Auroville that those risks accrue to the Auroville Foundation – or rather, to the community itself. So it is necessary to explain what a unit can and cannot do. You have to specify minimal conditions, a kind of floor level, because we saw people going below this. People were booking personal expenses as expenses of the unit and one unit did not maintain accounts at all. This makes it necessary to put some minimal guidelines in place. If a unit executive acts below that level, then the FAMC, on behalf of the community, should be able to take action. 

The Code also specifies how much a unit should contribute to the community – commercial units 33% of their profits; guesthouses 20% and eateries 5% of their turnover – and the unit can self-determine what it does with the remaining surplus, as long as it is used to benefit Auroville as a whole. There have been discussions proposing changes to the contributions schedule, making it more equitable, introducing a progressive contribution system where smaller units pay a smaller percentage and large units a large one. This is normal in the rest of the world and is fairer as it helps smaller units to get off the ground. But we have never been able to get that considered by the commercial unit executives, despite numerous attempts to discuss it. There is another discussion going on concerning if a service unit and a research unit that make a profit should contribute to City Services. The FAMC believe they should; the Board of Services object.

Another topic which we are trying to address is the topic of large bank holdings which some units have. We are proposing that those units that are holding large reserves inform the FAMC what their plans are; and that those reserves are parked in the collective Auroville Maintenance account, with the stipulation that the unit would continue to get the interest which the bank otherwise would pay. This too has been refused to date. 

The FAMC is also required to resolve the problems with defaulting units. This too makes a minimum of regulations necessary. Otherwise, what right does the FAMC have to dissolve the unit and find the money to pay off the creditors? 

Government rules and regulations

If there is an increase in bureaucracy, this is also due to the fact that Auroville has to follow the rules of the Government of India. There are quite a few, and these rules are increasingly becoming stringent: the government is moving towards a tighter oversight system using all computerised information systems available. This makes full compliance mandatory. No longer is it possible to go and meet an official and convince him of your point of view: the system now returns a notice based on a number of criteria, independent of the judgement by a particular official. Those in Auroville who feel that “Auroville is different” and that for that reason the rules should not apply, are out of touch with reality.

We encountered this problem with the newly introduced Goods and Services Tax (GST). At the time the GST started, the rules were very unclear and many rules were still being formulated. The problem was that if you do not fully adhere to GST, you would be liable to pay a penalty per day, and those penalties accumulate. And of course, the GST was extremely difficult to apply to Auroville with its unique structure. Nobody knew exactly how to resolve the issues. A delegation from Auroville visited the Ministry of Finance in New Delhi to see if Auroville could enjoy a special exemption from GST. The response was largely negative: the government agreed to exempt Auroville maintenances from GST, but did not give any other exemptions. Meanwhile, a large number of trusts and units proceeded to get their own GST numbers. But our Chartered Accountants finally advised us to minimize the number of registrations, and so minimize the risks, which would have the additional advantage that Auroville would pay less GST. The FAMC organised a community meeting in the presence of three of Auroville’s Chartered Accountants and the Secretary of the Auroville Foundation, where we explained the necessity for bringing down the number of GST registrations. But ABC members objected that they had not been sufficiently consulted and blamed the FAMC for the unclarity. Today, many GST registrations have been cancelled, but the mistrust continues. 

Mistrust and the change of FAMC mandate

This became evident once again when we tried to constitute a feedback committee on the changes we would like to make in the present Code of Conduct. We want to introduce details for eligibility of being trustee and executive, specify their duties and responsibilities, introduce succession planning, and make tighter conditions for what to do in cases where mismanagement is suspected. The proposed amendments also include stipulations on the use of external bank accounts for fixed deposits; and conditions to ensure that units are maintaining adequate reserves for employees upon termination of their contracts in accordance with government rules, such as the Employees Provident Fund. 

We asked the trustees of the 37 trusts to nominate the feedback committee, but they refused. The Auroville Board of Commerce proposed that they would nominate such a committee, which was not what the FAMC had asked for. The Auroville Board of Services refused to participate altogether. So we decided to postpone the review process. 

Now attempts are made at changing the FAMC mandate and going back to a system which existed in the past when the FAMC was controlled by various interest groups. I do not think this would be good for Auroville. The present mandate specifies that the FAMC’s nine members are appointed by the community. This came into being in 2016, when there was dissatisfaction with the system of working group representation. It was found that the representatives of working groups were inclined to defend the interest of their working group rather than those of the community. Also, it was noted that the representative would have little time to actually do the work of the FAMC, next to his or her other work obligations. Is this what the community wants to go back to? Moreover, this will disempower the Residents Assembly to select people it feels are suitable because under the new proposal the RA would be able to select only three members, whereas they can select all nine at present. There is also an agitation against the present Code of Conduct and a move to come up with an alternative document. I am not arguing that the Code is perfect. But it is a first honest attempt to ensure a collective sharing of resources that are generated within Auroville and to protect Auroville from units assuming liabilities that could endanger Auroville’s financial viability.