ICAI Presents Report on Accounting Standards to HRD Minister;
Recommends Accounting Standards issued by ICAI be made Mandatory to Educational Institutions
A report on Implementation of Accounting Standards in Educational Institutions of Department of Higher Education, Ministry of Human Resource Development was presented to Shri Kapil Sibal, Union Minister for Human Resource Development here today by CA. G Ramaswamy, President, ICAI and CA. Jaydeep N Shah, Vice- President, ICAI. The report has been brought out by a working group consisting of members from ICAI and those nominated by the Ministry of HRD for the purpose, namely CA. G. Ramaswamy, President, ICAI, CA. Jaydeep N. Shah, Vice-President, ICAI, CA. Amarjit Chopra, Chairman, Professional Development Committee and representatives from the school and university sector besides experts in accounting.
An accounting system that presents a true and correct picture of the state of affairs of an educational institution is a necessary requirement for transparency and accountability and enables less intrusive but more effective regulation of the education sector besides assisting in prevention of malpractices that presently plague the sector. Considering that presently, the accounting and financial reporting practices of educational institutions in India are oriented towards meeting the needs of the governing bodies running them and educational institutions follow not only diverse accounting practices but also different basis of accounting, the Group has recommended that all educational institutions should be mandated to apply accrual basis of accounting; Accounting Standards issued by the ICAI should be made mandatory to educational institutions; Fund based accounting may be introduced for Earmarked / Designated Funds; 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 :-
(i) to define transparently the revenue earned through various sources – tuition fees and other charges, income from consultancy or from intellectual property owned by the institution (for higher educational institutions) etc;
(ii) to recognize segment reporting of accounts (each school under the same institution being considered as a separate segment for accounting purposes);
(iii) to recognize costs and revenue separately for UG and PG programmes and for research and teaching activities;
(iv) to define relevant financial ratios derived from accounts for inter se comparison on research to total expenditure, income from fees to total income, salary expenditure to total expenditure etc). These ratios could enable greater understanding of funding needs especially in respect of government funding.
(v) to identify if surpluses are being generated and the manner in which the surpluses are utilized or invested;
(vi) to disclose related party transactions;
The Ministry of Human Resource Development would be organizing consultations with higher educational institutions and schools on the recommendations of ICAI Committee. The accounting standards would be made applicable to all Central Educational Institutions, universities under the regulatory ambit of UGC or receiving grants from UGC, technical institutions under regulatory ambit of AICTE, teacher education institutions under the regulatory ambit of NCTE and schools affiliated to CBSE. The recommendations would also be placed before the State Education Ministers in the next meeting. The Ministry in coordination with ICAI shall organise capacity building programme to train the staff of educational institutions.