The Hindu Business Line : Call to evolve accounting standards for government

THE time has come for accounting standards (AS) to be evolved in the government sector in order to improve financial reporting and enhance the accountability mechanism, said Mr V. Ramachandran, Vice-Chairman, Kerala Sate Planning Board.

Delivering the keynote address at a seminar on `Financial management in Government of Kerala' organised here by the local chapter of the Institute of Public Auditors of India, Mr Ramachandran said that accounting and financial reporting standards are essential for public accountability and for an efficient and effective functioning of the democratic system of government.

Accounting standards and financial reporting play a major role in fulfilling the Government's duty to be publicly accountable and can be used to assess the government's accountability, efficiency and effectiveness.

Existing accounting practices in India are out of time and place. The model British laws, which laid great store by good faith in financial reporting, are not in sync with what Mr Ramachandran described as the 20th century's depiction of morality.

It is in the fitness of things that the State Government and its various departments introduce a system of performance reporting in their respective establishments.

During his tenure as the Finance Secretary and Chief Secretary, Mr Ramachandran said, he had put forward a proposal for subjecting the Appropriation Account and the Audit Report to the consideration of the State Cabinet before they were forwarded to the Governor for his concurrence.

This would have required enunciation of a policy decision without a precedent, but elicited no response from successive governments in the State. With the result that ministers and secretaries continue to be blissfully unaware of what the demands and allocations are.

An Accountant-General is in a position to demand that the Cabinet consider the documents before sending them to the Governor. Unless auditors make bold to do what is required of them, they forfeit their right to criticise, Mr Ramachandran said.

Overall, Indian auditors have been able to give a good account of themselves in these testing times when their counterparts in developed countries have caved in to the rigours of the profession. The problem in the Government accounting sector is that the principles of fiscal conservatism and budget discipline of the 80s have been given the go-by.

Analysing the causes of the poor finances of the State Government, Mr Ramachandran said mobilisation efforts have failed to keep pace with the scales of expenditure.

The already highly-evolved human development indices in Kerala needed additional money for sustenance. A mismatch in the demand and availability of funds was discernible right form the 80s.

This created a situation where the principle of deficit financing would gain countrywide currency. All accepted norms of budgeting have since been given up.

Politicians began to be increasingly involved in the exercise. In this context, Mr Ramachandran said India happens to be the only parliamentary democracy where legislators pass `Cut Motions' seeking to enhance allocations.

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