Private higher educational institutions have to disclose their income and expenditure

Private higher educational institutions will have to disclose their income and expenditure in a standard format and make them public in line with corporate-style accounting and auditing  norms being readied by the human resource development (HRD) ministry and the Institute of Chartered Accountants of India (ICAI).

The guidelines are aimed at promoting openness and accountability in educational institutions, officials say.

“The effort is to have transparency in the income and expenditure of higher educational institutes. Things like from which heads they are earning and under which head they are spending,” said a senior ministry official who did not want to be named.

“Parents, students and society should know clearly about all these things,” the official added.

Though all educational institutions need to have their accounts audited, there is scope for manipulation of numbers because of the absence of a standard format, officials say. The numbers are also not required to be made public.

The ministry official said the new guidelines would make it mandatory for private sector institutions to make their accounts public.

“Like private sector publicly listed companies, they have to put their statements in the public domain,” the official said.

Ministry officials say there are concerns that many private institutions engage in malpractices to fleece students.

“They may declare the course fee openly, yet several other expenditures like hostel, library (fees) become hidden ways to charge more,” said a second ministry official. “As higher education in private sector flourishes, hidden charges becomes a headache for millions of students.”

Prashant Bhalla, vice-president of the private sector Manav Rachna International University in Faridabad, Haryana, said a broad accounting parameter could be ideal. “We can put the accounts in public through newspapers, but we (the private sector) should not be painted as a group only indulging in wrong practices.”

All state-funded higher educational institutes send their accounts to the government and are audited by the Comptroller and Auditor General of India (CAG) before being tabled in Parliament.

Non-government educational institutes will have the liberty to name their own auditor. “Since they don’t get grants, their accounts will not go to Parliament,” added the second official.

According to official statistics, India has 504 universities, 22,000 colleges and several thousand technical education institutions.

Of the total number of higher educational institutes, at least 60% are controlled by the private sector.

At least 13 million students are pursuing higher education across India.

The move to enforce a uniform accounting system for private sector institutions is positive, said Shobha Mishra, head of the education wing at industry lobby Federation of Indian Chambers of Commerce and Industry, or Ficci.

“With increasing private participation in the higher education sector, attempts to bring transparency is not a bad idea,” Mishra said. “I believe there should not be any distinction between public and private sector in education on this subject.”

To boost education, the government is increasing its budgetary allocation. In the 2010-11 Budget, India earmarked `42,036 crore for education, an increase of around 15% from the previous fiscal. Higher education was allocated `11,000 crore, around 7% more than in 2009-10.

The HRD officials also said the 14 proposed innovation universities, which will have private sector participation and enjoy greater autonomy, will also need to adopt the new accounting standards and make public their income and expenditure through newspaper advertisements and website postings.

The chartered accountants’ forum has agreed to prepare the common accounting format on a no-profit, no-loss basis.

Amarjit Chopra, president of Icai, confirmed that the institute was working on auditing standards for higher educational institutions.

“By the end of October, the institute will come up with such standards. A committee is being formed for it within the institute,” Chopra said.