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Municipal Accounting Reforms In India

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Title: Municipal Accounting Reforms In India


1
Municipal Accounting Reforms In India
  • History
  • Genesis
  • Pre-reform Systems
  • Post-reform Systems
  • Accomplishing Transition

2
Municipal Accounting Reforms In IndiaHistory
  • Municipal accounting reforms initiatives
  • MA reforms are only two decade old.
  • 81-90Mumbai, Kolkatta Chennai WB TA
  • 91-95-Six municipal bodies of Gujarat - WB
  • 97-02 All municipal bodies of Tamil Nadu
  • 99-02-Anand, Jaipur Tumkur - ADB TA
  • 99-02-Banglore accounting reforms BATF
  • 01-03-Five municipal bodies of Maharashtra
  • 01-03Delhi, Hyderabad, Indore Ludhiana

3
Municipal Accounting Reforms In India History
  • Technical guide on accounting and financial
    reporting by urban local bodies by ICAI
  • Supreme Court direction
  • 11th Finance Commission recommendation
  • Covered under Urban Reforms Incentive Fund set up
    by GOI for States
  • December 2002 CAG Task Force Report
  • Emergence of City Managers Association
  • Emergence of Consulting firms and professionals
    with sector specific expertise

4
Municipal Accounting Reforms In India Genesis
  • Municipal accounting system reforms have become
    compelling necessity due to
  • Changing state-citizens relationship
  • Inadequacy of traditional accounting system
  • Paradigm change in financing urban development
  • New relationship based on three foundations
    accountability, transparency and efficiency

5
Municipal Accounting Reforms In India Pre-reform
municipal accounting system
  • Cash based single entry accounting system
  • Heterogeneity in every aspect
  • Consolidated fund accounting system.
  • Non updated municipal account codes
  • Accounts pending over the years
  • Non-capitalization and incompleteness.
  • Absence of system documentation.
  • Procedural inadequacy- no internal checks.
  • Imbalance staffing

6
Municipal Accounting Reforms In India
Post-reform municipal accounting system
  • Double entry
  • Modified accrual base
  • Fund based accounting
  • Computerised
  • Fully integrated with budget, uses matrix chart
    of account and budget heads
  • Maintenance Disclosure of Accounts as per
    accounting standards

7
Municipal Accounting Reforms In India
Accomplishing Transition Steps/Process
  • Perceived or Felt Need for Reforms
  • Willingness to Reform
  • Initiator or Change Agent
  • Champion of Reform or Transition
  • Level of Participation
  • Enabling Environment
  • Support of Higher Level Government
  • Technical and Financial Assistance

8
Municipal Accounting Reforms In India
Accomplishing Transition Steps/Process
  • Hiring of Professional Support
  • Resolving Accounting Policies
  • Designing System Accounting Manual
  • Implementation Strategy / Approach
  • Capacity Building
  • Parallel Run
  • Use of Computer Technology
  • Post Reform Blues

9
Municipal Accounting Reforms In India
Accomplishing Transition Steps/Process
  • Local Ownership - Felt Need for Reforms
  • Starting point for any transition / change
  • Internal higher success rate
  • External reforms seen as covenants
  • Willingness to Reform
  • Closely associated with the first factor
  • Higher Level ensures successful transition
  • If found low, municipal body should create it
    through opinion building exercises

10
Municipal Accounting Reforms In India
Accomplishing Transition Steps/Process
  • Initiator or Change Agent
  • Very crucial element for transition
  • Internal high probability of completion
  • External/Foreign act adversely
  • Local Champion of Reform or Transition
  • Desirable Element
  • Level of Participation
  • Higher the participation of all concerned
    higher willingness or acceptance of reforms

11
Municipal Accounting Reforms In India
Accomplishing Transition Steps/Process
  • Enabling Environment
  • Enabling provisions in law or account code,
    system of audit, transparency needs or culture of
    sharing of information
  • Support of Higher Level Government
  • Municipal bodies are state subject, highly
    dependent in all respect on the State
  • Technical Financial Assistance
  • Must for successful transition, most of the
    municipal bodies are weak in all respects

12
Municipal Accounting Reforms In
IndiaAccomplishing Transition Steps/Process
  • Formal Policy Decision about Transition
  • First step, essential from consensus point from
    legal point of view
  • Hiring of Professional Support
  • Essential and desirable, need for clear vision
    about role of consultant, unambiguous TOR
  • Resolving Accounting Policies
  • By involving maximum stakeholders
  • Brings clarity, involvement commitment

13
Municipal Accounting Reforms In
IndiaAccomplishing Transition Steps/Process
  • Designing System Accounting Manual
  • Blending of field experience and professional
    knowledge yields better accomplishment
  • Implementation Strategy / Approach
  • Can follow any approach but hard work continuous
    supervision, handholding, participation,
    sympathetic behaviour are must
  • Capacity Building
  • Absolutely necessary, active involvement in
    transition and on-job training ensure success

14
Municipal Accounting Reforms In India
Accomplishing Transition Steps/Process
  • Parallel Run
  • Should not be too short or too long. Short run
    keeps cost down but robs on-job-training, long
    run leads to good capacity building turns costly
  • Use of Computer Technology
  • Can complicate transition but has usually helped
    switch over to new system
  • Post Reform Blues
  • Handholding or live wire support facility leads
    to sustainability of reforms

15
Municipal Accounting Reforms In India
  • Thank You
  • Dr. Ravikant Joshi

16
Municipal Accounting Reforms In India Issues in
Nation/State-wide Implementation
  • Reform initiatives have confirmed that reforms
    are possible in municipal environment.
  • But reform initiatives have raised certain
    issues.
  • Individuality/Heterogeneity
  • Slow pace/Incomplete Attainment
  • Non-replicability of Reforms
  • No reforms in financial reporting, auditing
    budgeting systems, even in the bodies adopting
    accounting reforms

17
Municipal Accounting Reforms In India Issues in
Nation/State-wide Implementation
  • Contemplating a way forward is difficult.
  • More than 4500 local bodies having different
    size, degree of complexities, powers resources
    and stage of development.
  • Less than 5 per cent of local bodies (150) have
    carried out any sort of reforms.
  • Need an accounting system having blend of
    governmental commercial accounting system.
  • Commercial form of government accounting

18
Municipal Accounting Reforms In IndiaWay Forward
  • Objectives of Reforms
  • Improvement in accountability, transparency, and
    financial performance of municipal bodies
  • Comparability and uniformity of system and data
    while allowing micro level diversity
  • Simple, cost effective and scalable reforms
  • Multi-level multi-dimensional efforts

19
Municipal Accounting Reforms In IndiaWay Forward
  • Role of Central Government
  • putting in place model municipal accounting
    financial reporting system manual
  • Incentive grants to States and Municipal bodies
    suitable changes in URIF, CCF guidelines
  • Model budget code and matrix code.
  • Setting up of government or municipal accounting
    standard board.
  • Formation of Professional association of
    municipal accountants and auditors

20
Municipal Accounting Reforms In IndiaWay Forward
  • Role of State Governments
  • State governments to revise their municipal
    account, audit and budget codes.
  • Institutional strengthening (capacity building)
    efforts for municipalities.
  • opinion building efforts to change perception of
    all the related people
  • Suitable changes in legislation
  • Technical assistance, financial assistance for
    reforms
  • Elevation of status of account audit function,
    pay scales, recruitment rules

21
Municipal Accounting Reforms In IndiaWay Forward
  • Civic Education-equip NGOs/CBOs with technical
    knowledge so that they can participate in a
    meaningful way.
  • Role of Urban Local Body
  • Synergy between budget and account code
  • Change in perception towards accounting function
    giving due importance to it.
  • Induction of professionally qualified people
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