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April 25, 2016

Saluting 40 Years of Accounting Reform in India

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By Suhas Joshi[1]

1976 marked a major step in the Indian accounting reform process with the creation of a new organization called the Controller General of Accounts (CGA). The CGA, as the head of the governmental accounting profession, is the principal advisor to the government on all accounting matters. He is also primarily responsible for establishing and administering a technically sound management accounting system across the government, and for the compilation of the government’s accounts and their submission to the Parliament. The CGA heads the Indian Civil Accounts Service (ICAS), which was carved out from the Indian Audit & Accounts Service in 1976, following the separation of the accounting and auditing functions in India.

The ICAS celebrated its 40th Anniversary on March 1, 2016 at an event in New Delhi presided over by the President of India. The Finance Minister, the Comptroller & Auditor General of India and a host of Secretaries to the government were in attendance. The IMF was represented by its Deputy Director (FAD), Mr. M. Keen, and by Mr. Tom Richardson, its Senior Resident Representative in India. Several former and in-service officers of the ICAS, who have worked for the IMF were also present. It is a  little known fact that PFM systems in most former Soviet Union (FSU) countries were set up by members of the ICAS - in Georgia, Azerbaijan, Turkmenistan, Tajikistan, Russia and Moldova, to name a few. ICAS has also contributed significantly to IMF expertise over the years by providing over two dozen of its officers, both at IMF Headquarters and in the field.

In the afternoon, a plenary session and two panel discussions were held. In the plenary, Mr. Arvind Panagariya, Vice Chairman of the National Institute for Transforming India (NITI Ayog), delivered a keynote address on economic transition and the strategy to combat poverty to promote development in India. The first panel discussion focused on the relationship between government and the financial sector, and involved the Reserve Bank of India and CEOs of two banks from both the public and private sectors. The subject of the second panel discussion was “Global Trends in Public Financial Management” chaired by the Finance Secretary, Mr. Ratan P. Watal. The panelists included Mr. M. J. Joseph, Controller General of Accounts, Mr. Keen, and Mr. Wencai Zhang, Vice President, Asian Development Bank.

Over the last 40 years the CGA has spear-headed many major accounting reforms in India. The management accounting function is now well entrenched in the executive. Line ministries and departments today take complete responsibility for their spending decisions, and the outputs that result from the budgetary allocations voted by Parliament. Prescribed timelines for closure of monthly and annual accounts are complied with. Most in-year expenditures and revenue receipts are recorded in real time thereby facilitating informed decision making. The CGA’s Public Financial Management System (PFMS) has ensured timely payments of social welfare benefits to 1.7 million poor and needy people, benefits that have totaled some Rs. 363 billion since 2013. An additional Rs. 195 billion have been channeled through the employment guarantee scheme using PFMS, a system that has led to significant efficiency gains. The government intends to further strengthen the functionalities and capacity of the PFMS and transform it into an Integrated Financial Management Information System, in due course.

Under the PFMS architecture, a new facility called the Non-Tax Receipts Portal (NTRP) has recently been launched for facilitating faster collections and remittances to the Government Account. The CGA has also has introduced a risk-based approach to internal audit which is being piloted in four ministries during 2015-16.

To provide an impetus to these reforms, capacity development has also been given priority through the CGA’s Institute of Government Accounts and Finance (INGAF) which provides training in accounting, financial management and PFM to officials of the Indian government as well as some neighboring countries. The Institute conducts various courses on contemporary issues in expenditure management, budgetary processes and reforms, risk-based audit and internal control, and other PFM topics. Capacity development is supplemented by the National Institute of Financial Management (NIFM) which conducts induction training programs for newly recruited ICAS officers and other Mid-Career Training Programs.

[1] IMF Regional PFM Advisor, South and SE Asia.

Comments

A good summary of 40th annual day of civil accounts organisation and highlights of the major achievements.

Points well made.With the Departmentalized Accounting System and ICAS came the following key features in PFM in India:
TSA with zero balance accounts
Internal Audit
Computer based accounting systems and FMIS
New banking system for government transactions and agent banks authorization to handle transactions and settlement of funds with the Central Bank
Efficient Annual and In-year financial information reporting
Improved debt management
online budget execution and accounting systems
Training and capacity building
Harmonization of budget and accounts formats
Chart of Accounts Revision (compliant to COFOG and later cash GFS based)...and several new initiatives that were built upon subsequently!


Perfect summary for explaining the contribution of ICAS, nicely covers the innovations made by ICAS and current activities specially PFMS and NTRP.

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