Accountancy today is highly complex

“I’m just back from a 400 kilometre cycle tour from Chennai to the Javadi Hills and back,” says Palani, by way of opening the talk. “I’m cycling more than 40 kilometres each day; I’m training to join the Paris-Brest-Paris event in August.” This quadrennial amateur cycling test, known for its endurance and sleep deprivation, will depart from Chateau Rambouillet outside Paris on a 1,219 kilometre long route with 14,188 ft of climbing. Palani has 84 hours to complete the feat. Is he up to it? “Not yet,” he says. “But I will be.” 

In his daily life Palani is doing another type of endurance work. He is the executive of Omega, one of the first accounting units of Auroville. Omega does the accounts of two trusts, the Freeflow Trust and the Kattidakalai Trust. The Freeflow Trust holds 14 units; the Kattidakalai Trust has 47 units and 77 activities. Omega also checks if each of them is up to date with all operational licenses required for their type of business. “It’s a lot of work,” says Palani. “I employ eight people and soon will need three more, also as the Auroville Foundation office wants to have the yearly accounts of all trusts finalized by the beginning of May, a month after the closure of the financial year. So you‘ll appreciate that our hands are more than full.” 

It was not always like that. Palani fondly remembers the ‘good old days’ when, mentored by Jean-Luc Rose, he did the accounts of four units and submitted them to Ezhumalai, the then Senior accounts officer of the Auroville Board of Commerce, for consolidation by late September, beginning of October. “Jean-Luc taught me accounting, at first manually, later we used the ‘Auroville accounting’ software, which had been developed by a group of Aurovilians. At the time it was a big thing. Now, of course, everybody uses the Tally accounting software.” 

How did he become an accountant?

He laughs. “I was born in the Health Center of Auroville at Kuilyapalayam, and joined the Auroville Kindergarten when I was 5. My education was all in Auroville. During my summer vacations I did all kinds of jobs in Auroville: mechanics with Nagappam, painting with Carlos, electronic board soldering with Matthias, soap making with Dara and acting as an assistant production manager at Auromodѐle Atelier. But I didn’t feel comfortable in those jobs. My talent was used, but I didn’t learn anything new. 

Then I met Jean-Luc & Milene. They were French, and as I had picked up French in Last School we went along well. From Jean-Luc I truly learned accounting. I had only been taught some basic accounting, but now it got real. I was constantly learning something. In 1988 we started the accounting unit Omega, but our aspiration for it to be an Auroville service unit was not accepted. We were told that there was no money to pay us and that Omega should instead be a commercial unit. I became an intern.

In 2002 we created the Kattidakalai (meaning “the art of construction”) Trust with 5 entities. Jean-Luc  was one of the trustees, next to Jean-Marc and Carlos, and I was the trust’s accountant. Jean-Luc at some point left Auroville. That put the responsibility for Omega on me, and I also replaced him as trustee of the Kattidakalai Trust. I was a trustee for about 18 years, in fact until April this year when I ceased to be a trustee, as some people felt that there might be a conflict of interests in being trustee and executive of the accounting unit that does the trust’s accounts. 

Standardisation of accounts and MoE instructions

In 2018 I was selected by the Residents’ Assembly to be a member of the FAMC, the Funds and Assets Management Committee. One of the FAMC’s main projects was the standardisation of accounts and developing a standard coding system – all units use the same code for the same types of income and expenses – as this makes the consolidation of all accounts so much simpler. We worked on it for a year, helped by some senior Auroville accountants. I was a member till 2022, when the Governing Board setup its own FAMC and appointed other people as members.

My FAMC managed to set up a 7-digit coding and standardisation system, and we tried to use it to centralise all the accounts of the Foundation using a centralised server. But last year we received an instruction from the Auroville Foundation Office that now Auroville’s accounts must correspond to the format used by the Ministry of Education (MoE) of the Government of India. [The MoE is the Ministry that holds charge of Auroville, eds.] We were told that the format that we had been using for so many years was wrong. Nobody was aware of this, not even our Chartered Accountants. We were instructed to redo the accounts over the financial year 2021-2022, which had already been submitted to the Comptroller and Auditor General of India. This meant redoing the balance sheets of all the trusts, units and activities and of the Foundation itself in the new format of the MoE. All our coding and standardisation work became ineffective.

The problem, as I see it, is that this new format doesn’t really fit Auroville and doesn’t give any advantage as compared to the old one. Our previous balance sheets gave a much better and far more detailed explanation of our activities. The format of the MoE has evidently been developed for schools, colleges and universities, whereas a place like Auroville has also many commercial and service activities. Only about 20% of all of Auroville’s activities are educational. It has proven to be difficult to merge our accounts in this new format. It needs modifications and we are working on that in order to finish the accounts of 2022-2023.

The system audit

Another issue we accountants faced was the system audit, ordered by the Governing Board of the Auroville Foundation, to randomly audit some Auroville units in order to find out if they were in compliance with the Indian Government rules. This audit was conducted by a private accounting firm from Chennai. After the audit was done, the concerned executives and accountants were called for a meeting to clarify the findings of their audit. Most of the unit executives were able to answer the questions asked. Only some units and individuals were found to have made mistakes in their accounting practices. As an outcome of this exercise a ‘list of compliance’ was sent to all units and activities of all the Trust under the Auroville Foundation for adherence.

I also learned that some people hold the Auroville accountants responsible for any suspected misdemeanor of a unit executive or activity manager. But accountants can ,only work with what the executives and managers provide them. We ask questions if we see from the submitted accounts that something is unclear, and we will inform our trustees if we think that something remains incorrect. But we do not have the power to check if a bill is correct or false. It is the responsibility of the executives and managers to do that.

Closing small activities

Recently, a few Auroville residents stated that small activities, with a turnover of three lakhs or less, should be closed for administrative reasons. This would marginally affect the Kattidakalai trust. The activities are all ‘micro’; most of them have a yearly turnover of less than 10 lakhs; some are below 5 lakhs and only a few below 3 lakhs.

But I think that the people who push this ‘closing’ idea have a too limited understanding of Auroville. For sure, to keep accounts of very small activities adds to our workload. But why have they started? For two simple reasons: one is that people need to live and that Auroville is not providing a sufficient income to the residents. The second reason is that people must be given the opportunity to express themselves – I consider this a fundamental right. Many of these small activities are run by artists who occasionally sell their art, or by people who make jams or cookies. The structure of the Auroville Foundation makes it necessary for them to start an activity – something they wouldn’t need to do if they were living outside Auroville.

Through these activities those Aurovilians sustain themselves and the people they employ; they do not depend on Auroville. Also, it should be kept in mind that no outsiders invested in any activity and so are not exposed to any financial risk. All equipment and all materials have been purchased with funds of the individuals who run the activity. So just closing them for administrative reasons doesn’t seem right.

Moreover, how is Auroville going to maintain those individuals if their business is closed? We already have a track record of not providing pensions to people who have dedicated their lives to Auroville and who have grown old here. The Silver Fund which the FAMC wanted to introduce never came from the ground for many reasons. Are we going to have Aurovilians around who have no work and need to be supported by Auroville? It would become a heavy burden to support these people. Indian Aurovilians could work outside of Auroville; but foreign Aurovilians cannot, as this would go against the Indian visa policy for Auroville.

Goods and Services Tax (GST) – seek exemption

The structure of the Auroville Foundation with its 37 trusts has also caused issues with the filing of Goods and Services Tax returns. Some people think that all trusts should be merged so that there won’t be any GST in the dealings between units and activities of different trusts. But the GST Commissioner of our area has stated that merging 37 trusts into one or two is impossible. He advised the present structure, a trust-wise GST filing. We could only merge trusts – and then only two or three – if we would have the administrative capabilities and sufficient and qualified manpower to handle the accounts. But we don’t have that.

I believe there is a better solution. Instead of closing small units, they should be officially exempted from having to file GST. India is moving in this direction. Currently, in India registration for GST is optional for firms with an annual turnover of less than Rs 40 lakhs for goods and Rs 20 lakhs for services. The Government found that firms with less than Rs 1.5 crore annual turnover account for 84 per cent of total registrations but contribute less than seven per cent of the tax collected.

Our problem is that each trust has to file GST returns as the total turnover of all its units and activities exceeds Rs 40 lakhs. But many units, and all activities, have a turnover that would exempt them from GST if they would be outside of Auroville. For that reason I propose that the Auroville Foundation make a request to the GST Council that Auroville units and activities that have a turnover of less than Rs 40 lakhs for goods and less than Rs 20 lakhs for services are exempted from GST filing. Accounts will need to be kept, that is in accordance with the Auroville Foundation Act. But for GST, we should seek this special exemption, if possible.

The Auroville maintenance: insufficient

There is a general tendency to pass judgement on unit executives who earn more than the Rs 16,000 monthly maintenance that Aurovilians working for Auroville services receive today. I believe that this thinking is too narrow. A maintenance of Rs 16,000 a month to live on is not realistic, certainly not for a family. So some executives book certain costs (telephone, motorbike repair and insurance, etc.) as expenses of the unit.

Of course, those who work in Auroville services do not have that opportunity. But they have other benefits. Instead of criticising unit executives, I think we should stimulate them to do better so that they can contribute more to Auroville, so that all Aurovilians can have sufficient maintenance.”

BOX:

The Auroville Foundation Act 1988 transferred everything related to Auroville to the Government of India, which later transferred it to the Auroville Foundation established by the Act. 

In order to properly manage these assets, the Foundation created management trusts, which in turn began to host units [having a yearly turnover of 10 lakhs or more] and activities [having a yearly turnover of less than 10 lakhs]. Today, the Auroville Foundation holds 37 management trusts. All trusts together have 296 units. Five of them are umbrella units holding a total of 304 activities. 

For each trust, each unit and each activity, separate accounts have to be kept. Each year all accounts are consolidated: the activities in their umbrella unit, the units in their trust, the trusts in the accounts of the Auroville Foundation. 

Each account is scrutinized by a Chartered Accountant. The consolidated accounts of the Auroville Foundation, in addition, are audited by the Comptroller and Auditor General of the Government of India. The accounts of the Foundation, as certified by the Comptroller and Auditor General of India together with the audit report, are forwarded to the Central Government which lays them before each House of Parliament.