The Central as well as State Governments are taking initiatives to move from governance to good governance, good governance to e-governa...
The Central
as well as State Governments are taking initiatives to move from governance to
good governance, good governance to e-governance for restricting mal-practices
in financial operations of public sector organizations. To bring a change
depends upon bureaucratic and political commitment and also upon the will-power
of administrative authorities. India, the second largest democratic country of
world is facing various difficulties in implementing accrual accounting in
public sector. The researches proved that the accounting reforms can support
good governance by ensuring transparency in the way financial transactions are
recorded in public sector accounting. Accrual Accounting reduces the losses
being suffered by ways of
financial irregularities, embezzlements and scams. It
increases the speed of transactions and prepares a ground for using Information
Technology in Accounting. It also equips management with valuable financial
information for taking effective decisions and ensuring maximum utilization of
economical resources. Accrual Accounting has been successfully implemented in
other countries like New Zealand, Australia, and United Kingdom while other
countries including India have been taking initiatives for its implementation.
In 2011, Malaysia mandated implementation of Accrual Accounting however the
change is still under process there.
The migration from cash accounting to
accrual accounting has been considered to provide a more prudent fiscal
management in public sector. Cash accounting system has a major drawback of not
providing full information about the resources known as assets. It also does
not disclose the accurate cost incurred in providing specific goods and
services. One question normally arises, when there are drawbacks in cash
accounting system, then why such system was being adopted in these countries.
As far as India is concerned, government has been keeping its financial records
on cash base single entry system (CBSES) from pre-independence era. Due to low
population, the work-load was not too much and the CBSES was considered
feasible and adopted. But as time passed, the increase in population size
increased the work-load and it is felt to migrate from CBSES to Accrual Based
Double Entry System (ABDES). At present, in public sector, the financial
transactions are recorded primarily in cash book and other accounts books are
also maintained like assets register, salary register, register of loans and
advances etc. In most of government offices, balance sheet is not prepared. The
decisions involving huge amount are being taken on the basis of acumen of
administrators and senior officers after taken into consideration incomplete
information provided by accounting books maintained with CBSES. If Government
decides to implement ABDES in public sector, first task will be to identify
assets and liabilities of each government office and prepare opening balances.
The chart of accounts will be prepared and various accounting books will be
maintained similarly as being maintained by the corporate sector. Indian
Government has been making efforts since year 2002 for reforming accounting
systems of public sector.
The Government of India constituted Government
Accounting Standards Advisory Board (GASAB) under Comptroller & Auditor
General (CAG) for improving transparency and accountability in public sector
accounting. Dr. Lalit Kumar working at Haryana Institute of Public
Administration, an administrative training institute of Haryana highlighted
various stages to adopt ABDES in public sector accounting. First stage includes
initiatives for capacity building of the officers entitled to bring this change
in public sector accounting i.e. Administrators and Bureaucrats. The message of
change should be conveyed from top bureaucrats with clarity on benefits of
accrual accounting. The milestones or deadlines should be fixed and widely
communicated by the Government. The training institutes including
Administrative Training Institutes (ATIs) should be directed to organize
workshops at bigger scale. Second stage includes implementation phase, in which
key departments with huge revenues and expenditures should be focused first for
adoption of ABDES. The material including books, handouts and notes should be
prepared with clear explanation of critical success factors in implementing
ABDES. The modules for effective implementation should be framed and conveyed
to the accounting personnel. The accounting personnel should also be trained on
how to migrate from CBSES to ABDES. Third stage includes passing orders with strict
guidelines for bringing this change in public sector accounting.
The Indian
Government Accounting Standards (IGAS) framed by GASAB should be ordered to
ensure uniformity in accounting principles of public sector accounting. The
accounting standards and policy framework as prepared by GASAB should be
strictly taken into account. The success of implementing ABDES depends upon the
capacity of key entities including Accountant General's Department, Auditor
General's Department, Finance Department, Treasuries Department and Officers
including Principal Accounts Officers (PAOs) and Drawing and Disbursing
Officers (DDOs). Fourth stage includes up-gradation in the qualifications of
accounting personnel being recruited in public sector.
The qualifications
should be upgraded to M.Com, MBA (Finance) or Chartered Accountant. Finally the
aim of Good Governance and corruption-free public sector can be achieved with
migrating to ABDES which ultimately depends upon will-power and commitment of
politicians, bureaucrats, administrators, and accounting personnel. In case,
key problems relating to implementing ABDES are addressed, it can prove a boon
for ensuring citizen-centric services a reality in public sector
About the author
Dr Lalit Kumar
Dr. Lalit Kumar is M.Com, M.Phil , Ph.D , University of Kurukshetra ,
has been working as Assistant Professor in Faculty of Financial
Management, Haryana Institute of Public Administration, Gurgaon
for more than 9 years. As present, he has been assigned with a research
project on “Implementing Accrual Accounting in Haryana” and Capacity
Building Programmes for Cutting Edge Employees of Haryana Govt,
by Government of India. :)
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