Fake Aadhaar & Jan Dhan Accounts: CAG Must Conduct a Special Audit of Direct Fund Transfers under Centrally Sponsored Schemes: Sarma
Moneylife Digital Team 16 May 2023
Calling the proliferation of fake Aadhaar cards and false Jan Dhan bank accounts a serious threat, EAS Sarma, former secretary to the government of India, has urged the comptroller and auditor general (CAG) to conduct a special audit of these fund transfers under the Centrally-sponsored schemes (CSSs). 
Mr Sarma, in a letter to GC Murmu, CAG, says, "With special reference to funds transfers under the CSSs, this needs to be viewed against the background that, since 2014, there has been a tendency on the part of the political leadership to diminish the share of fund transfers to the states as per the rule-based allocation formula prescribed by the finance commission and, instead, unduly enlarge the share of fund transfers under Article 282, which permit the Union government to impose schemes on the states in a somewhat subjective manner, irrespective of their relevance to the requirements of each state." 
"In the Budget of 2023-24, more than 83% of the funds transferred by the Union government to the states are through CSSs and other central schemes that bypass the finance commission allocation formula. In monetary terms, this amount is nearly Rs8.24 lakh crores," the former secretary says.
According to a Lok Sabha reply on 26 July 2017 (Parliament question no1761), there are 314 CSSs in 51 Central ministries linked to Aadhaar. "In most cases, under these CSSs, the Union government transfers funds directly to beneficiaries' bank accounts, without going through the concerned states and the local panchayats, thereby precluding any independent verification."
Referring to the problem of 'duplicate' Aadhaar cards, the CAG exhorted the UIDAI (Unique Identification Authority of India) to "tighten the service level agreement (SLA) parameters of biometric service providers (BSPs), devise fool proof mechanisms for capturing unique biometric data and improve upon their monitoring systems to proactively identify and take action to minimise, multiple or duplicate Aadhaar numbers generated. UIDAI may also review a regular update of technology. UIDAI also needs to strengthen the automated biometric identification system so that generation of multiple and duplicate Aadhaars can be curbed at the initial stage itself."
Apparently, Mr Sarma says, UIDAI has not been able to implement this recommendation fully.
He also refers to articles written by senior journalist RN Bhaskar and Moneylife. "Mr Bhaskar's article, based on the government's replies in the Parliament and other authentic information, shows that there are at least nine states today in which the number of Aadhaar numbers exceeds the projected population of the states. This number was seven in February 2020. States where the number of Aadhaar exceeds the population may further increase in the coming days on the eve of the 2024 elections. These facts are fully known to the government but no action has yet been taken, raising questions about its intent," he says.
In the article, Mr Bhaskar showed that between 31 December 2021 and 28 February 2023, in almost all the states, excluding Andaman and Nicobar (A&N), Sikkim and Arunachal Pradesh, there has been a suspicious surge in the number of Aadhaar. "The average surge at the all-India level is 2.7%, with nine states showing surge rates in excess of that. In Meghalaya, the surge in Aadhaar has been as high as 24.5% and 9.3% in Assam."
"Twenty states had registered a swell in Aadhaar registrations within a 15-month period from 31 December 2022 and 28 February 2023. What is worrisome is that many of these states are alongside international land borders. The highest surges have taken place in North Eastern states, Uttar Pradesh and Bihar. That does call for a major investigation," Mr Bhaskar wrote in his article.
Mr Sarma, the former secretary, also quotes two articles from Moneylife, "Fraud Alert: Aadhaar Menace Also Hitting Banks, Lenders" and Fake Aadhaar, PAN Cards a Click Away: Report.
He says, "Compounding this is a parallel misuse of Jan Dhan bank accounts to which the Union government has been transferring funds to millions of CSS beneficiaries without any independent verification by the local panchayats. This has resulted in the proliferation of false Jan Dhan bank accounts as also their misuse for laundering money."
Mr Sarma further refers to articles from Economic Times- ET, Times of India, Moneylife and IndiaToday.  
Raising concerns that Jan Dhan accounts can be misused by 'money mules', the Reserve Bank of India (RBI) also warned they are 'very vulnerable' to frauds and asked banks to be on guard against such activities, the former secretary says, quoting from another article by ET.
According to a report from the Morning Context, in many remote areas where broadband connectivity does not exist, genuine beneficiaries under different schemes find it difficult to get their Aadhaar identification done, resulting in their not being able to receive the benefits.
"This shows that many unauthorised persons are benefitting from the funds released by the Union government under the CSSs, whereas several genuine beneficiaries, who ought to have benefitted under those schemes, stand deprived of the same," Mr Sarma says.
"Considering that 314 CSSs involve direct bank transfers by the Union government to the beneficiaries' accounts through linkage to their Aadhaar identity, covering fund transfers amounting to around Rs8,23,857 crore, bypassing the states and the local panchayats, implying a lack of adequate public accountability, with clear evidence of the proliferation of fake Aadhaar cards on the one side, coupled with the existence of false Jan Dhan bank accounts on the other side, there is a clear possibility of large scale misuse of funds transferred by the Union government under Article 282, bypassing the rule-based transfers prescribed by the finance commission," the former secretary added.
He says, "I request the CAG to conduct a special audit of the CSS fund transfers so that the extent of misuse and misapplication of the budgeted allocations may be reported to the Parliament and the public at large."
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