Online edition of India's National NewspaperSaturday, Dec 06, 2008

Opinion - News Analysis

From accounts to accountability

Jean Drèze and Reetika Khera

Bank payments alone are not an adequate protection against corruption in NREGA.

The ghost of corruption has haunted many public interventions in India, and the National Rural Employment Guarantee Act (NREGA) is no exceptionintroduced on a mass scale, and projected as a foolproof remedy against corruption. Recent evidence, however, suggests that the banking system itself is not above corruption needed.

Rush to bank payments

The main technique of embezzlement in public employment programmes, including NREGA, is to fudge the “muster rolls” (attendance sheets): fake names or inflated attendance figures are entered in the muster rolls, and middlemen pocket the difference. This used to be possible, indeed very simple, because of the cloud of secrecy that surrounded the muster rolls. The NREGA sought to change that based on a range of safeguards, starting with the transparency of muster rolls. For instance,muster rolls are supposed to be available at the worksite and filled there every day in the presence of the workers, giving them an opportunity to check the details at any time. Similarly, payment details from the muster rolls are supposed to be entthese payments.

Another factor that facilitated corrupt practices in the past was that the same person or agency was in charge of maintaining muster rolls and paying the wages. Since both functionsfudging muster rolls was both easy and profitable. The separation of these two functions is a powerful safeguard against embezzlement. Even before NREGA, this was the norm on drought relief programmes in Rajasthan. There, muster rolls were prepared by Gram Panchayat functionaries with the help of the “mate” (worksite supervisor), whereas wages were paid by the patwari (a Panchayat level employee of the revenue department). This makes it harder to siphon off funds by fudging muster rdifferent actors collude with each other.

The need to separate payment agencies from implementation agencies was an important argument for the recent introduction of bank (or post office) payments of NREGA wages. There are other good reasofor introducing bank payments. For instance, paying wages directly into the workers’ accounts reduces the risk of harassment by payments officials. Further, it encourages saving habits and the use of bank facilities.

However, there are also significantoffices in rural India is still patchy, which means that labourers have to travel some distance to collect their wages (as opposed to getting cash in hand in their own village). In some states apayments have been associated with delays in the disbursement of wages, as the relevant transactions work their way through the system. There is also a danger of women being excluded, if bank accounts are opened in the names of men only, as h

From a long-term perspective, the payment of wages through banks is probably a move in the right direction. However, the transition to bank payments has been made in a very rushed and haphazard manner. And the results have often been sobering.

Online edition of India's National Newspaper

From accounts to accountability

Bank payments alone are not an adequate protection against corruption in NREGA.

The ghost of corruption has haunted many public interventions in India, and the National Rural Employment Guarantee Act (NREGA) is no exception. Bank payments of NREGA wages were recently introduced on a mass scale, and projected as a foolproof remedy against corruption. Recent evidence, however, suggests that the banking system itself is not above corruption — corrective steps are urgently

The main technique of embezzlement in public employment programmes, including NREGA, is to fudge the “muster rolls” (attendance sheets): fake names or inflated attendance figures are entered in the

et the difference. This used to be possible, indeed very simple, because of the cloud of secrecy that surrounded the muster rolls. The NREGA sought to change that based on a range of safeguards, starting with the transparency of muster rolls. For instance,muster rolls are supposed to be available at the worksite and filled there every day in the presence of the workers, giving them an opportunity to check the details at any time. Similarly, payment details from the muster rolls are supposed to be entered in the workers’ “job cards”, enabling them to monitor

Another factor that facilitated corrupt practices in the past was that the same person or agency was in charge of maintaining muster rolls and paying the wages. Since both functions were in the same hands, fudging muster rolls was both easy and profitable. The separation of these two functions is a powerful safeguard against embezzlement. Even before NREGA, this was the norm on drought relief programmes

lls were prepared by Gram Panchayat functionaries with the help of the “mate” (worksite supervisor), whereas wages were paid by the patwari (a Panchayat level employee of the revenue department). This makes it harder to siphon off funds by fudging muster rolls, unless the different actors collude with each other.

The need to separate payment agencies from implementation agencies was an important argument for the recent introduction of bank (or post office) payments of NREGA wages. There are other good reasofor introducing bank payments. For instance, paying wages directly into the workers’ accounts reduces the risk of harassment by payments officials. Further, it encourages saving habits and the use of bank

drawbacks with bank payments. The coverage of banks and post offices in rural India is still patchy, which means that labourers have to travel some distance to collect their wages (as opposed to getting cash in hand in their own village). In some states apayments have been associated with delays in the disbursement of wages, as the relevant transactions work their way through the system. There is also a danger of women being excluded, if bank accounts are opened in the names of men only, as has happened in some districts.

term perspective, the payment of wages through banks is probably a move in the right direction. However, the transition to bank payments has been made in a very rushed and haphazard

ften been sobering.

The ghost of corruption has haunted many public interventions in India, and the National Rural . Bank payments of NREGA wages were recently

introduced on a mass scale, and projected as a foolproof remedy against corruption. Recent evidence, corrective steps are urgently

The main technique of embezzlement in public employment programmes, including NREGA, is to fudge the “muster rolls” (attendance sheets): fake names or inflated attendance figures are entered in the

et the difference. This used to be possible, indeed very simple, because of the cloud of secrecy that surrounded the muster rolls. The NREGA sought to change that based on a range of safeguards, starting with the transparency of muster rolls. For instance, NREGA muster rolls are supposed to be available at the worksite and filled there every day in the presence of the workers, giving them an opportunity to check the details at any time. Similarly, payment details

ered in the workers’ “job cards”, enabling them to monitor

Another factor that facilitated corrupt practices in the past was that the same person or agency was in were in the same hands,

fudging muster rolls was both easy and profitable. The separation of these two functions is a powerful safeguard against embezzlement. Even before NREGA, this was the norm on drought relief programmes

lls were prepared by Gram Panchayat functionaries with the help of the “mate” (worksite supervisor), whereas wages were paid by the patwari (a Panchayat level employee of the revenue department). This makes it harder to siphon off funds by fudging muster rolls, unless the

The need to separate payment agencies from implementation agencies was an important argument for the recent introduction of bank (or post office) payments of NREGA wages. There are other good reasons for introducing bank payments. For instance, paying wages directly into the workers’ accounts reduces the risk of harassment by payments officials. Further, it encourages saving habits and the use of bank

drawbacks with bank payments. The coverage of banks and post offices in rural India is still patchy, which means that labourers have to travel some distance to collect their wages (as opposed to getting cash in hand in their own village). In some states at least, bank payments have been associated with delays in the disbursement of wages, as the relevant transactions work their way through the system. There is also a danger of women being excluded, if bank accounts

term perspective, the payment of wages through banks is probably a move in the right direction. However, the transition to bank payments has been made in a very rushed and haphazard

The Deoghar social audit

A social audit of 17 NREGA works in five Gram Panchayats of Karon Block in Deoghar District (Jhardhan), conducted on 12-16 October 2008, unearthed some alarming facts related to bank payments. Briefly, the loot is far from over: funds are siphoned off through manipulated bank accounts of NREGA workers, in collusion with bank staff. In Deogarh, banks are rapidly being integrated in the system of corruption.

Consider the case of the construction of two NREGA wells in Ranidih Panchayat: one on Koka Baori’s land and the other on Paane Hembrahm’s. Both were approached by the Panchayat Sevak, who offered to get a well constructed on their land. Once the well was sanctioned, a contractor took charge (an infraction under the Act). When cheques arrived in the name of the beneficiaries, they were asked to collect it from the bank and hand it over to the contractor to pay for material costs.

As far as wage payments were concerned, it was a simple matter for the contractor. Two years earlier, he had kindly opened bank accounts for many NREGA labourers (often without their knowledge), with a little help from the rather cooperative staff of the Deoghar-Jamtara Central Cooperative Bank. The contractor and Panchayat Sevak manufactured muster rolls with wages adding up to the labour component sanctioned for the wells. Whenever money is transferred to the labourers’ accounts, the trio of bank officials, contractor and Panchayat Sevak step in: they coolly pocket the excess money after giving their due to the labourers who actually worked. Most of the labourers we spoke to said that they had never been to the bank, and that they were paid in cash at the worksite by the contractor.

While other banks in the area did not have the audacity to indulge in such open loot, their practices were not entirely above board either. In some cases, we heard that labourers had been made to sign withdrawal slips in bulk at the time of opening their bank accounts, to facilitate proxy withdrawals later on. In the case of Allahabad Bank and Vananchal Bank, bank officials said that labourers came in person to withdraw their wages, but usually accompanied by men who “do not look like labourers”. These men, believed to be the contractors’ cronies, stand outside the bank and force the labourers to hand over the excess money that has been claimed in their name. For us, this story was a nightmare come true: one year earlier, a master (or rather mistress) contractor in Orissa had told us that if bank payments of NREGA wage were introduced, “the contractors will become dacoits.”

Magic bullet or shot in the foot?

How typical Deogarh’s experience is we do not know. But this experience certainly shows that bank payments alone are not an adequate protection against corruption. In fact, in Jharkhand’s anarchic environment (not unique to Deogarh), they have even facilitated embezzlement in several ways. First, while all NREGA-related documents (e.g. muster rolls, job cards, measurement books) are supposed to be in the public domain, it is not clear whether banks are going to accept this principle for their own records, including the details of NREGA accounts. Meanwhile, the rush to bank payments has led to reduced transparency by withdrawing key documents from public scrutiny.

Second, payments through banks and post offices introduce new players into the corruption game — the staff of these institutions. It is not clear how these officials (who are often employees of the Central government, rather than of the State governments or Panchayati Raj Institutions) are to be held accountable for NREGA-related matters. They tend to be more difficult to “catch” than other functionaries such as the Panchayat Sevak or Gram Rozgar Sevak.

Third, embezzlement of wages paid though bank accounts typically requires the involvement or cooperation of the labourers themselves, in one way or another. Labourers generally have a stake in blowing the whistle against corruption, but when they become part of the nexus of corruption, this voice is effectively silenced.

Last but not least, bank payments have led to an alarming neglect of other transparency safeguards. For instance, muster rolls are no longer signed by workers at the time of wage payment, since wages are paid directly through banks. In fact, in Deogarh we found that muster rolls had been reduced to a naked attendance sheet, without any payment details. The only person who signs is the person who fills the muster roll in the first place, and his or her “supervisor”, often acting in collusion. Apparently, a similar setback is happening in Rajasthan. This is unfortunate since Rajasthan had largely stamped out the

embezzlement of NREGA wages based on more “conventional” safeguards such as the transparency of muster rolls.

This is not to say that the transition to bank payments should be reversed. But this transition certainly requires great caution (including strict monitoring of banks and post offices), and must be combined with strict enforcement of all the transparency norms. The Central government seems to regard bank payments as a “magic bullet” against corruption, but the bullet is in danger of ending up in its own foot.

(The authors are associated with the G.B. Pant Social Science Institute, Allahabad University.)

Corrections and Clarifications

The seventh paragraph of an article "From accounts to accountability" (Op-Ed, December 6, 2008) was "A social audit of 17 NREGA works in five Gram Panchayats of Karon Block in Deoghar District (Jhardhan), conducted on 12-16 October 2008, unearthed some alarming facts related to bank payments .." It should have been Deoghar District (Jharkhand).