Firms backed by Kudumbashree indulge in round-tripping, swindle public money

Round-tripping is a term that recently found a mention in the Hindenburg Report that had accused the Adani Group of massive tax evasion. Kudumbashree, Kerala's famed poverty eradication mission, too could soon be associated with this fraudulent practice.

It has now been found that round-tripping, though of a much smaller scale, was one of the means employed to siphon off government funds by firms selected by Kudumbashree to provide jobs to poor youth.

This rural round-tripping was revealed in the latest Comptroller and Auditor General Report on Local Self-Government Institutions that was placed in the Assembly on Thursday. Kudumbashree's failure to spot the round-tripping and other fraudulent methods of firms it had handpicked could mean either of two things. One, it is inefficient. Or, its staff colluded with the fraudsters.

The fraud had taken place as part of a youth employment scheme, Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY), that was introduced by the Union Ministry of Rural Development (MoRD) in September 2014. Its objective is to impart skills to rural youth aged 15 to 35 from poor families and provide them with jobs earning regular monthly wages. The funds are to be shared by the Centre and states in the 60:40 ratio.

Kudumbashree was the implementing agency in Kerala. It selected the firms that provided skill training and then released funds to these firms based on placements. Full payment was to be made if the success rate of placement was 70 per cent and proportional payment was to be made if the success rate was between 50 per cent and 70 per cent.

The CAG, after scrutinising the records of 26 firms chosen for the purpose by Kudumbashree in five districts (Thiruvananthapuram, Thrissur, Palakkad, Malappuram and Kannur), found that these firms forged documents to fraudulently claim second and third installments and Kudumbashree just let them.

Fake bank statements
One of the ploys used to swindle public money was to forge bank statements to show salary flow to the accounts of candidates for whom these firms have supposedly found jobs.

The CAG audit collected and cross-verified 248 bank statements of candidates claimed to be trained and placed by 10 such firms and observed that 172 of these bank transaction statements (69 per cent) did not match with the original bank statements the audit secured from the banks.

In the case of one Palakkad and two Kannur-based firms - Focus Skillpro Private Limited, Synchroserve Global Solutions Private Limited, and Hira Charitable Trust - all the salary statements submitted for verification turned out to be fake. The most number of statements scrutinised were of the Malappuram-based firm Jan Shikshan Sansthan. Of the 37 statements showing that salaries were regularly paid to candidates it had found jobs for, 27 were fake.

In this manner, six of these local firms mobilised nearly Rs 5 crore. According to the standard operating procedure (SOP) issued for the scheme, Kudumbashree has to conduct physical verification of the claims made by firms.

Salary round-tripping
Round-tripping is another way of illegally pocketing public funds.
The audit detected this in the records submitted by Hira Charitable Trust, the same records it had used to convince Kudumbashree and secure the second and third installments of funds. The audit picked the bank statements of 13 of the 25 students that Kudumbashree claimed it had checked and approved before releasing the installments.

The bank transaction statements that Hira submitted to back its claim that salaries were being paid were cross-checked with the original bank statements. None matched. And the audit noticed a peculiar circular movement of a single packet of Rs 8,000.

This Rs 8,000 first left the bank account of the Training Centre in-charge (TC i/c) of Hira Charitable Trust and landed in the account of the first candidate. The same amount then got transferred to the account of a second candidate. From there to the third and so on 13 times. And then from the 13th bank account, the same Rs 8000 got back home to the bank account of Heera's TC i/c.

Though it seemed as if 13 youths were paid Rs 8000, none of them were paid anything. Yet, it used these fake bank statements, representing just an illusory money transfer, to claim more instalments.

At times the fraud can resemble a back-and-forth frog jump. Take Frostees Exports India Private Limited, that claimed to have trained 600 candidates and found jobs for 375. Audit verified placement documents of 100. In 43 cases, it was found that monthly salaries were credited to candidates’ bank accounts through UPI transactions. The surprise was that the same amount or a part of it was returned to the same or another UPI ID on the same date or on the following date.

Double role strategy
The Audit stumbled upon yet another theft strategy. Pass off already existing employees as staff newly recruited after skill enhancement.

Take Dentcare Dental Lab Private Limited, one of the firms Kudumbashree picked to train poor youth and place them in jobs. Dentacare claimed to have trained 812 and placed 750 candidates in jobs. Audit cross-checked the details of 51 (14%) of 355 candidates whose training commenced in 2017 with the details of employees who worked at Dentcare Dental Lab Private Limited (collected from Employees’ State Insurance Corporation - ESIC).

It was observed that 31 candidates were employed in the same organisation well before the date of commencement of training under the DDU-GKY. This way Dentacare managed to secure nearly Rs 3 crore as the second installment. What goes without saying is that Kudumbashree did not carry out the physical verification it was supposed to.