Educational institutions to follow ICAI accounting norms, publish balance sheets
The Ministry of Human Resource Development (MHRD) has accepted the recommendations of a committee of the Institute of Chartered Accountants of India (ICAI) clearing the way for uniform accounting system in educational institutions. As a result, all educational institutes under the central government and those that get grants or approvals from central education regulators will be directed by the government to publish a balance sheet every year, starting 2013, to bring in more transparency to the sector.
It is expected that other state governments might also implement the recommendations thereby bringing more institutes under the ambit of the new accounting norms.
The educational institutes will follow a uniform accounting norm and disclose income and expenditure in a standard format similar to that of companies, according to an initiative unveiled on Wednesday.
“The aim is to bring transparency and openness in our educational institutes,” said Kapil Sibal, minister for human resource development.
All Union government institutes, including central universities, Indian Institutes of Technology, Indian Institutes of Management and National Institutes of Technology will have to adhere to the accounting standards. Besides, all universities and colleges under the University Grant Commission, the All India Council for Technical Education and the National Council of Teachers Education will have to follow the norms. Even schools affiliated to the Union government-controlled Central Board of Secondary Education (CBSE) will have to incorporate the accounting norms.
The Institute of Chartered Accountants of India, led by President G Ramaswamy, has recommended that “… accounting standards issued by the ICAI should be made mandatory to educational institutions…”
In addition, “all educational institutions should be mandated to apply an accrual basis of accounting… fund-based accounting may be introduced for earmarked/designated funds,” ICAI said.
“All educational institutions should follow a common format for presentation of its general purpose financial statements to ensure proper accountability, financial discipline, end-use of funds and to meet the needs of stakeholders. The accounting standards should enable the society, the student and the citizen,” the ICAI said in a statement.
India has 572 universities and more than 31,000 colleges, where around 15 million students pursue higher education. In addition, there are at least 10,000 CBSE schools.
Sibal said his ministry had accepted the report in principle and “it will come into force from the 2013 academic session”. Sibal will discuss the report in the Central Advisory Board of Education, a panel comprising experts, academicians and state education ministers.
“I would like to see this adopted by all educational institutes in the country but states need to come on board too,” he said.
Though central government institutes submit their accounts to the government and the Comptroller and Auditor General of India audits them, private institutes are not obliged to do so. At least 60% of colleges are under private control.
The standards will provide clarity on the deployment of funds, Ramaswamy said. “It will lead to decommercialisation and orderly growth of education,” he said.
The Icai president said that some colleges might be talking about sustainable revenue model but that needs to be spelt out.
“Once the accounting is done, you will put it online in a centralized server,” he said. “If you are earning revenue then you have to deploy 85% in education every year. This accounting norm will help analyse and come to a conclusion on who is doing what.”
A private university administrator in the National Capital Region attacked the move and said it would discourage investment.