This presentation delivered to Accounts and Finance Officers of ULBs in Bangladesh at Dhaka discusses various Myths and Realities associated with Municipal Accounting Reforms

1. Myths and Realities of
Municipal Accounting Reforms
Myths that underplayed need for reforms
Myths that discouraged attempts
Myths that have misled those who tried
Myths that have disappointed achievers
Dr. Ravikant Joshi
Workshop on Accrual Accounting for City
Corporations /Urban Local Bodies
CIRDAP Auditorium – Dhaka – 13th Feb 2013

2. Municipal Accounting Reforms
Myths that underplayed need for reforms
 Over the years, the
present single
system has served
me well
 Municipal Bodies
are government &
non-profit
organisation, Why
they should adopt
accounting reforms
 A sound accounting
system is enabler. Its lack
has resulted in lack of
transparency and
credibility.
 Efficiency, transparency &
accountability – three
objectives for every
organisation. Sound
accounting system serves
these objectives.
Myths Reality

3. Municipal Accounting Reforms
Myths that underplayed need for reforms
 Accounting reforms
will only help higher
government, financial
institutions and
accounting firms
 Accounting reforms help
primarily the Municipal
Body, its employees in
the form of easy and
systemic work, also its
decision makers in terms
of better, timely &
reliable information.
Accounting Reforms are not a luxury. They are essential to fulfil
the municipal body’s mandate. The help municipal bodies to catch
up with lost opportunities and benefit everyone
Reality
Myths

4. Municipal Accounting Reforms
Myths that discouraged attempts
 Too much pending
accounting work is
there, unless it is set
right reforms cannot
be introduced
 No information about
assets and liabilities,
so opening balance
sheet cannot be
formulated
 Accounting reforms can be
implemented from any day
they have little to do with
pending accounting work
 A perfect opening B/S is
desirable but not essential
pre-condition for reforms.
To start one needs
information on current
assets and liabilities.
Myths Reality

5. Municipal Accounting Reforms
Myths that discouraged attempts
 Staff is not qualified
and cannot handle a
double entry accrual
accounting system
 My local body does
not have funds to
buy computer
system and
accounting software
 Double entry accrual based
accounting is nothing but
common sense. Once the
logic is explained clearly a
common man can use it.
Availability of software has
solved this issue further.
 Do not require high end
computer systems
Myths Reality

6. Municipal Accounting Reforms
Myths that discouraged attempts
 Reforms will cause
Staff redundancies
 A double entry
accounting means
double workload
 In most of the case the
accounts section is
understaffed. Even if staff
turns excess due to reforms
will get accommodated in MB
 In existing system a second
set of records is maintained
but it is disjointed. Also there
are unnecessary procedures.
Streamlining leads reduction
Myths Reality

7. Municipal Accounting Reforms
Myths that have misled those who tried
 One needs to clear
past accounts and
draw up an opening
balance sheet
 Accounting reforms
are a one shot
exercise
 All successful accounting
reforms have concentrated
on introducing reforms
rather than clearing pending
accounts.
 It is a continuous process
and will have to be taken
continuously in future.
Today's sorry state is due to
lack of continuity.
Myths Reality

8. Municipal Accounting Reforms
Myths that have misled those who tried
 Accounting Reforms
are a stand alone
exercise
 Accounting reforms need to
be backed by budgeting
auditing and other reforms.
Accounting reforms is not an
end in itself but beginning of
reform process
Myths Reality
Focus on streamlining the future and not on correcting the
past, update continuously and simultaneously carry out
other financial management reforms as well.

9. Municipal Accounting Reforms
Myths that have disappointed achievers
 If MB undertakes
accounting reforms, it
can borrow from
market
 Borrowing from market
depends on overall
financial health of MB and
project’s bankability; not
on accounting reforms. But
it can help MB to translate
its financial results into a
language with which
market is comfortable. AR
lend reliability/credibility.
Myths Reality

10. Municipal Accounting Reforms
Myths that have disappointed achievers
 If MB undertakes
accounting reforms,
its financial position
improves.
 Accounting reforms are not a
magic, whose mere adoption
will improve a MB’s financial
position. The reforms will
pave way for it by making
available appropriate data for
judicious decisions by a MB.
Myths Reality
Accounting Reforms are the starting point in that they facilitate
decision-making and financial analysis. But they cannot guarantee
a sound financial position.

11. Municipal Accounting Reforms
Learning / Summing Up
 Accounting Reforms
 Are not expensive
 Existing staff can do it
 Can provide free time to the staff to focus on
other accounting activities
 More importantly, irrespective of its current
status, any municipal body can start
accounting reforms
 The real benefit is it takes care of
unintentional mistakes provide update, timely
data for decision making.

12. Municipal Accounting Reforms
Learning / Summing Up
 It not enough to know what accounting
reforms can achieve, it is equally
important to know what they cannot.
 Breaking the myths may lead municipal
bodies to presume that they can pursue
reforms casually. But this is not so. The
reforms are feasible only if they are
pursued in a well planned and professional
manner supported by enthusiasm and
hard work

13. Myths and Realities of
Municipal Accounting Reforms
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