India’s municipal accounting reform is one of the basic reforms required in the decentralization process of urban local bodies. Central and state governments and specific urban bodies have made efforts for the roll out of accounting reforms. It can be seen that the accounting reform activities are being undertaken in different directions, resulting in varying efficiencies and results. Although the reforms undertaken are an improvement from the earlier version of manually maintained single entry–based accounts, there is need for greater guidance and better direction.
Municipal accounting reform is a necessary tool for improving urban finances and governance. However, urban bodies lack the internal capacity, knowledge, and experience to undertake this reform process. Hence the urban bodies are bound to depend on external expertise for initiating the process, implementing the project, and sustaining and improving the process. The success of the reform depends on the planning ability and the inclusion of a comprehensive computer software module that is capable of meeting all the data requirements, satisfying analytical needs, and providing adequate reports and information to enable the municipal management to make informed decisions. This emphasizes the need for standardized modules capable of providing for narrow as well as wide networked systems and meeting the demands of various local conditions. The implementation needs to be done in a phased manner establishing a robust double entry accrual-based accounting system initially, improving this in the second phase through a financial management improvement program, and then attaining an e-governance system in the final phase.
This working paper provides guidance for implementing municipal accounting reforms based on Indian experience and can be used in other developing countries with necessary adaptation. The objectives of this paper are to highlight the importance of implementing accounting reforms in the urban local bodies, to inform the processes involved in the implementation, and thus to provide the way forward to improve urban local bodies’ financial status and overall management.
Mountains in Plains 