The document discusses municipal accounting reforms in India, including: - It provides an introduction to municipal accounting reforms, which involve converting cash-based single-entry accounting systems to accrual-based double-entry systems and adopting international public sector accounting standards. - Reforms are needed due to changing state-citizen relationships and demands for greater accountability, transparency and efficiency from citizens. They also help address changing models of financing urban development. - India has pursued municipal accounting reforms over several decades, but implementation has been uneven, with only about 300 of over 4,000 municipalities fully adopting reformed systems. Barriers include lack of capacity and ownership at the local level.

1. MUNICIPAL ACCOUNTING REFORMS
- A CASE STUDY OF INDIA
PRESENTATION TO MOF – GOVERNMENT OF INDONESIA
RAVIKANT JOSHI
ADVISER
CIRISIL INFRASTRUCTURE ADVISORY – MUMBAI, INDIA

2. MUNICIPAL ACCOUNTING REFORMS IN INDIA
• INTRODUCTION – WHAT IS MUNICIPAL ACCOUNTING REFORMS?
• MUNICIPAL ACCOUNTING REFORMS (MAR) – WHY?
• MUNICIPAL ACCOUNTING REFORMS IN INDIA – HISTORY MILESTONES
• MUNICIPAL ACCOUNTING REFORMS IN INDIA – CURRENT STATUS
• MUNICIPAL ACCOUNTING REFORMS IN INDIA – LEARNINGS
• WHAT IS NEEDED TO IMPLEMENT MUNICIPAL ACCOUNTING REFORMS
• IMPLEMENTING MUNICIPAL ACCOUNTING REFORMS

3. MUNICIPAL ACCOUNTING REFORMS
- INTRODUCTION
• MUNICIPAL ACCOUNTING REFORMS A WORLD WIDE PHENOMENON
• NEW ZEALAND, AUSTRALIA PIONEERS IN THIS FIELD
• MUNICIPAL ACCOUNTING REFORMS (MAR) INCLUDE
• CONVERSION OF EXISTING CASH BASED SINGLE ENTRY ACCOUNTING SYSTEM
TO ACCRUAL BASED DOUBLE ENTRY ACCOUNTING SYSTEM
• ADOPTING INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS
(IPSAS) FOR MAINTENANCE AND REPORTING OF ACCOUNTS
• USE OF INFORMATION TECHNOLOGY – COMPUTERIZED ACCOUNTING
SYSTEM
• MAR FOR ACHIEVING – EFFICIENCY, TRANSPARENCY, ACCOUNTABILITY

4. MUNICIPAL ACCOUNTING REFORMS
- GOALS, OBJECTIVES
Accountability
Transparency
Efficiency
Standardized and comprehensive
reports
Timely dissemination
Quality financial information
Management Information System
Information to State Govt
Budgeting
Improved financial reporting
Audits
Improvement in credit worthiness

5. MUNICIPAL ACCOUNTING REFORMS –
WHY?
• MAR HAVE BECOME COMPELLING
NECESSITY DUE TO –.
• CHANGING ‘STATE-CITIZENS’ RELATIONSHIP
• PECULIAR PLACE OF ULBS IN MODERN HUMAN
LIFE.
• PARADIGM CHANGE IN FINANCING URBAN
DEVELOPMENT.

6. MUNICIPAL ACCOUNTING REFORMS –
WHY?
• CHANGING ‘STATE-CITIZENS’ RELATIONSHIP
• CHANGE IN THE PEOPLE’S PERCEPTION ABOUT THE
ROLE OF GOVERNMENT.
• GOVERNANCE IS SEEN AS A PARTICIPATORY AND
CONTRACTUAL PROCESS.
• CITIZENS THINKING THEMSELVES AS CONSUMERS
OF GOVERNMENT.
• THIS NEW RELATIONSHIP IS GETTING BUILT ON
THREE FOUNDATIONS – ACCOUNTABILITY,
TRANSPARENCY AND EFFICIENCY.
• CITIZENS DEMAND FAIR ACCOUNTS OF HOW
THEIR GOVERNMENT IS DOING FINANCIALLY.

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7
Accountability
Budgeting Auditing
Financial Reporting
Accounting
Transparency
Efficiency
The
objectives
Good Governance
The tools
The
Agenda
Introducing double entry accounting can serve as a
platform for wider improvements
The larger agenda goes beyond
municipal accounting reforms……

8. MUNICIPAL ACCOUNTING REFORMS
– WHY?
• PECULIAR PLACE OF ULBS IN MODERN HUMAN
LIFE.
• URBAN LOCAL BODY BEING THE THIRD TIRE OF
GOVERNMENT IS -
• CONCERNED WITH COMMUNITY WELFARE, SOCIAL
JUSTICE AND ECONOMIC PROSPERITY OF THE
PEOPLE.
• REQUIRED TO MANAGE FUNDS IN PUBLIC TRUST.
• RESPONSIBLE IN DECIDING QUALITY OF URBAN LIFE
AND THEREBY PRODUCTIVITY OF PEOPLE.
• SOCIETY IS BECOMING VERY COMPETITIVE.
• HUMAN PRODUCTIVITY BECOMING HIGHLY DEPENDENT
ON QUALITY OF GOVERNANCE.

9. MUNICIPAL ACCOUNTING REFORMS
– WHY?
• PARADIGM SHIFT IN THE FINANCING URBAN
DEVELOPMENT/INFRASTRUCTURE.
• MARKET ECONOMY BASED FINANCING.
• PLETHORA OF ALTERNATIVE SOURCE OPENING UP.
• EACH POSSESS MERITS AND DEMERITS.
• ESSENTIALLY IT REQUIRES DECISION-MAKING.
• ACCOUNTS OF ULBS NEED TO COMMUNICATE IN A
LANGUAGE WHICH MARKET UNDERSTANDS
• ULBS NEED MANAGE THEIR RESOURCES &
FINANCIAL PERFORMANCE IN A BETTER WAY

10. MUNICIPAL ACCOUNTING REFORMS IN INDIA - MILE
STONES
4/5/2022
10
1980’s Mumbai,Chennai
& Kolkatta WB TA
1990-94 Vadodara and other
Cities of Gujarat WB TA
1997-01 Tamil Nadu 105 ULBs
1999-01 ADB TA Anand, Jaipur, Tumkur
2001-03 Bangalore, Indore, Ludhiana &
Hyderabad on their own initiative
Initial
Efforts
Policy
Reforms
2003 onwards - Maharashtra, Karnataka,
Andhra Pradesh, Delhi, Raipur, Jabalpur etc.
2000 – 11th CFC Recommendations
2001-Supreme Court Directives
2000 - ICAI Technical Guide
2002–C&AG Task Force,
URI Fund By MOUD GOI
2004 onward – Nagpur, Vejalpur, Thane, Nashik
2004–Model
Accounting Manual
2006 – 14 – JNNURM
Made MAR & Public
Disclosure Mandatory
2005 -08 – Gujarat MAR – 159 ULB
2006 -14 – MAR undertaken in more than 500 ULB
and in almost all the States of India
Recent
Reforms
2005 – 12 – DFID funded Project in MP and WB

11. MUNICIPAL ACCOUNTING REFORMS IN INDIA
CURRENT STATUS
• MORE THAN THREE DECADES EXPERIMENTATION AND IMPLEMENTATION SAW
AMPLE ATTEMPTS
• RELEVANCE AND PRACTICALITY OF ACCOUNTING REFORMS WAS UNDERSCORED
– BY BOTH SUCCESSES AND FAILURES
• FEW MUNICIPAL BODIES HAVE CHANGED (IMPROVED EFFICIENCY) AFTER
SUCCESSFUL INTRODUCTION
• BUT AS A WHOLE VERY AVERAGE OR POOR ACHIEVEMENT
• OUT OF 4041 STATUTORY ULBS AROUND 700 ULBS HAVE TRIED WITH MAR
(TOTAL 7935 URBAN AREAS – CENSUS TOWNS)
• HARDLY 300 ULBS HAVE FUNCTIONAL REFORMED ACCOUNTING SYSTEM
• IN MANY CITIES MAR ARE NOT COMPLETE EVEN AFTER 10 YEARS OF
IMPLEMENTATION
• IN CASE OF MANY ULBS MAR HAVE DECAPITATED OR DETERIORATED

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MUNICIPAL ACCOUNTING REFORMS IN INDIA
CURRENT STATUS
• MULTILATERAL AGENCIES WHICH INITIATED, CHAMPIONED, FUNDED MAR AS STILL
PUSHING THESE REFORMS
• GOVERNMENT OF INDIA IS ACTIVELY INVOLVED SINCE 2001 –
• PUTTING IN PLACE GUIDING FRAMEWORK
• DOING ADVOCACY OF REFORMS
• INCENTIVISING REFORMS - BUT FEDERAL STRUCTURE LIMITS GOI EFFORTS
• NATIONAL AUDIT AGENCY HAS NOT MATCHED GOVERNMENT INITIATIVES
• INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA HAS LIMITED ROLE WHICH IT NOT
PLAYED FULLY
• BARRING FEW, STATES HAVE NOT PLAYED ADEQUATE AND APPROPRIATE ROLE
• ULBS ARE CONFUSED– TO GO FOR BOTTOM UP REFORMS OR TO WAIT FOR GUIDED
TOP-DOWN REFORMS
• ULBS LACKED CAPACITY, WILLINGNESS AND REAL COMPULSION (ACCOUNTABILITY) TO
COMPLETE REFORMS

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MAR IN INDIA - LEARNINGS……..
• EXTERNAL SUPPORT, PUSHING IS NECESSARY BUT NOT SUFFICIENT
• NEED AND OWNERSHIP FOR MAR MUST COME FROM ULBS
• HIGHER LEVEL GOVERNMENT MUST BE COMMITTED AND MUST PLAY IT ROLE OF
• PUTTING IN PLACE POLICY, LEGAL, INSTITUTIONAL FRAMEWORK
• GUIDING REFORMS, OPINION BUILDING, CAPACITY BUILDING
• ENFORCING REFORMS WITH HARD BUDGETARY CONSTRAINTS AND PERMANENT
MECHANISM FOR MONITORING AND EVALUATION
• POSITIVE AND NEGATIVE INCENTIVE FRAMEWORK
• ACCOUNTABILITY FRAMEWORK MUST BE CLEAR, SIMPLE BUT STRICT
• AWARENESS BUILDING, OPINION BUILDING AND CAPACITY BUILDING OF ALL THE
STAKEHOLDERS TO ENSURE THEIR INVOLVEMENT
SOME QUESTIONS NEED TO BE ASKED……..
• …BUT HAS IT HELPED THE CITIZENS (CLIENT’S POWER)? OR
• …………THE POLICY MAKERS (COMPACTS) OR
• ……….. THE GOVERNMENT (MONITORING)???
• …..HAS IT IMPROVED ACCOUNTABILITY, TRANSPARENCY?

14. 4/5/2022 YASHADA- Workshop on Municipal Accounting Reforms 14
MUNICIPAL ACCOUNTING REFORMS AND
ACCOUNTABILITY
Case Study Client’s
Voice
Client’s
Power
Compacts Administrati
ve Effi
Transpar
ency
Gujarat X X X √ X
Tamil Nadu X To some
extent
To some extent √ To some
extent
Bangalore X To some
extent
To some extent √ √
Hyderabad X X To some extent √ √
Indore X X X To some extent X
Maharashtra X X X √ To some
extent

15. MUNICIPAL ACCOUNTING REFORMS
WHAT IS NEEDED TO IMPLEMENT MAR?

16. 4/5/2022 16
MECHANISM TO ADDRESS WIDER
ASPECTS OF MAR NEEDED
• ULBS ON THEIR OWN CANNOT ADDRESS INTERNAL / DIRECT
ASPECTS OF MAR – NEED TO BE ASSISTED IN ALL TERMS
• ULBS CANNOT ADDRESS WIDER ASPECTS OF MAR
• WILL HAVE TO BE ADDRESSED BY THE ‘STATE’ AND OTHER
‘STAKEHOLDER’ THROUGH STRONG POSITIVE INTERVENTION
• STAKEHOLDERS
• CENTRAL GOVERNMENT,
• STATE GOVERNMENT
• NATIONAL AUDIT AGENCY, STATE LEVEL AUDIT AGENCIES
• FINANCIAL INSTITUTIONS, DONOR AND RATING AGENCIES
• ACADEMIC INSTITUTIONS, PROFESSIONAL BODIES
• CIVIL SOCIETY,
• PEOPLE AT LARGE

17. 4/5/2022 17
ACTIVE ROLE OF STATE &
STAKEHOLDERS
• BECAUSE
• ACCOUNTABILITY – BOTH UPWARD & DOWNWARD –
ACCOUNTING REFORMS NOT NECESSARILY ENSURE THIS, ALSO IT
SHOULD BE EQUAL TO ALL
• TRANSPARENCY – ACCOUNTING REFORMS AUTOMATICALLY DO
NOT ENSURE IT, ONE NEEDS TO CREATE STRUCTURE
• EFFICIENCY – MAY RESULT AT INDIVIDUAL LEVEL BUT NOT AT
STATE OR PEOPLE LEVEL IF NECESSARY CAPACITY BUILDING IS
NOT UNDERTAKEN FOR STATE AND CIVIL SOCIETIES

18. 4/5/2022 18
ROLE OF THE STATE
• COMPATIBILITY AND STANDARDISATION
• MAKING IMPROVED ACCOUNTS OF MBS COMPARABLE WITH EACH OTHER IN
THE STATE & WITH OTHER MB OF COUNTRY THROUGH STANDARDISATION
OF ACCOUNTING POLICIES, STRUCTURE AND OPERATIONS.
• SUSTAINABILITY
• UNLESS REFORMS TAKE PLACE IN ALL MBS OF STATE AND A SPECIALISED
ACCOUNTING CADRE GET CREATED SUSTAINABILITY OF REFORMS WILL NOT
BE POSSIBLE.
• OPINION BUILDING, CREATING ‘BUY IN’
• ANY REFORM/CHANGE REQUIRES LEADER/ CHANGE AGENT/CHAMPION – IT IS
UNLIKELY THAT THEY WILL BE AVAILABLE IN EACH AND EVERY MB.
• TRANSITIONAL COSTS
• IT CAN BE LOWERED TO MINIMUM BUT IT CAN’T BE WIPED OUT. HALF OF THE
MBS WILL NOT BE ABLE TO AFFORD EVEN MINIMAL TRANSITIONAL COST
• CAPACITY REQUIREMENTS AND BUILDING
• MOST OF THE MBS LACK TECHNICAL KNOW HOW AND HUMAN RESOURCES
FOR INTRODUCING AND LATER ON FOR USING ACCOUNTING REFORMS

19. 3-PHASE IMPLEMENTATION PROCESS
STABILISATION
PHASE
DESIGN
PHASE
• Comprehensiveness
• Participative
development
• Bottom-up
development
• Follow best
practices
• Local involvement
• Training, handholding
• Compatibility
Key
consider
ations
while
approac
hing
each
phase
IMPLEMENTATION
PHASE
• Sustaining through
independent run
• Leveraging reforms
Implementing Municipal Accounting Reforms

20. 4/5/2022 20
THE PREREQUISITES
• LOCAL OWNERSHIP - FELT NEED FOR REFORMS
• STARTING POINT FOR ANY TRANSITION / CHANGE
• INTERNAL – HIGHER SUCCESS RATE
• EXTERNAL – REFORMS SEEN AS COMPULSION
• WILLINGNESS TO REFORM
• CLOSELY ASSOCIATED WITH THE FIRST FACTOR
• HIGHER LEVEL ENSURES SUCCESSFUL TRANSITION
• IF FOUND LOW, MUNICIPAL BODY SHOULD CREATE IT
THROUGH OPINION BUILDING EXERCISES

21. 4/5/2022 21
• INITIATOR OR CHANGE AGENT
• VERY CRUCIAL ELEMENT FOR TRANSITION
• INTERNAL – HIGH PROBABILITY OF COMPLETION
• EXTERNAL/FOREIGN – ACT ADVERSELY
• LOCAL CHAMPION OF REFORM OR TRANSITION
• DESIRABLE ELEMENT
• LEVEL OF PARTICIPATION
• HIGHER THE PARTICIPATION OF ALL CONCERNED –
HIGHER WILLINGNESS OR ACCEPTANCE OF REFORMS
THE CATALYSTS…..

22. 4/5/2022 22
• ENABLING ENVIRONMENT
• ENABLING PROVISIONS IN LAW OR ACCOUNT CODE,
SYSTEM OF AUDIT, TRANSPARENCY NEEDS OR
CULTURE OF SHARING OF INFORMATION
• SUPPORT OF HIGHER LEVEL GOVERNMENT
• MUNICIPAL BODIES ARE STATE SUBJECT, HIGHLY
DEPENDENT IN ALL RESPECT ON THE STATE
• TECHNICAL & FINANCIAL ASSISTANCE
• MUST FOR SUCCESSFUL TRANSITION, MOST OF THE
MUNICIPAL BODIES ARE WEAK IN ALL RESPECTS
THE IMPERATIVES…

23. 4/5/2022 23
• FORMAL POLICY DECISION ABOUT TRANSITION
• FIRST STEP, ESSENTIAL FROM CONSENSUS POINT & FROM
LEGAL POINT OF VIEW
• HIRING OF PROFESSIONAL SUPPORT
• ESSENTIAL AND DESIRABLE, NEED FOR CLEAR VISION
ABOUT ROLE OF CONSULTANT, UNAMBIGUOUS TOR
• RESOLVING ACCOUNTING POLICIES
• BY INVOLVING MAXIMUM STAKEHOLDERS
• BRINGS CLARITY, INVOLVEMENT & COMMITMENT
DECISIONS……..

24. 4/5/2022 24
• DESIGNING SYSTEM & ACCOUNTING MANUAL
• BLENDING OF FIELD EXPERIENCE AND PROFESSIONAL
KNOWLEDGE YIELDS BETTER ACCOMPLISHMENT
• IMPLEMENTATION STRATEGY / APPROACH
• CAN FOLLOW ANY APPROACH BUT HARD WORK
CONTINUOUS SUPERVISION, HANDHOLDING,
PARTICIPATION, SYMPATHETIC BEHAVIOUR ARE
MUST
• CAPACITY BUILDING
• ABSOLUTELY NECESSARY, ACTIVE INVOLVEMENT IN
TRANSITION AND ON-JOB TRAINING ENSURE
SUCCESS
TASKS….

25. 4/5/2022 25
• PARALLEL RUN
• SHOULD NOT BE TOO SHORT OR TOO LONG. SHORT
RUN KEEPS COST DOWN BUT ROBS ON-JOB-TRAINING,
LONG RUN LEADS TO GOOD CAPACITY BUILDING TURNS
COSTLY
• USE OF COMPUTER TECHNOLOGY
• CAN COMPLICATE TRANSITION BUT HAS USUALLY
HELPED SWITCH OVER TO NEW SYSTEM
• POST REFORM BLUES
• HANDHOLDING OR LIVE WIRE SUPPORT FACILITY LEADS
TO SUSTAINABILITY OF REFORMS
PROCESS……..

26. MAR IMPLEMENTATION PROCESS-
SUMMARIZED
Map accounting transactions and
flows
Study accounting policies Best practices study
Draft modified accounting &
budget codes & chart of accounts
accounting & budgeting
Stakeholder consultations &
roadmap for implementation of
accounting reforms
Updation of accounts –
opening balances
Assistance in software
finalization
Finalized accounting &
systems manual

27. MAR IMPLEMENTATION PROCESS-
SUMMARIZED
Updation of accounts –
opening balances
Assistance in software
finalization
Finalized accounting &
systems manual
Staff Training
Assistance in parallel run
Assistance in independent run

28. MAR - MINIMUM IMPLEMENTATION
TIMEFRAME
Phase Month 1 2 3 4 5 6 7 8 9 10 11 12
Map current
process
Modify code of
accounts
Accounts
manual
Select software
Update accounts
Training
Parallel run
Feedback
Amend a/c code

29. THANK YOU