A government move to convert its fiscal accounting to "accrual" system fails to sail through in eight years and, under the circumstances, the country does not get a realistic picture of transactions and financial strengths.
A project was undertaken with the funding of the World Bank Group in 2010 to introduce an effective and modern accounting basis. But until the end of its tenure in June 2014, there had been no effective measure to this end, excepting a study.
The project's objective was to reform the core governance systems in areas such as public procurement, financial management, fiscal reporting, and watchdog institutions.
Another programme, funded by the Ministry of Finance (MoF), which began in November 2014, also has been engaged in working out most efficient and transparent accounting system of this kind. But there is also no significant development for going into the accrual basis.
The programme will come to an end on June 30 next, and it is unlikely to be extended as government rules do not permit extension of such recipe.
Accrual-basis accounting is much more transparent than the existing cash-basis calculations, and most of the advanced economies maintain it. This mode of reckoning considers both assets and liabilities.
An example is best suited to describe it: airline tickets paid for before the flight represent unearned revenues for the airline until the flight is delivered. Upon ticket purchase, airline accountants credit unearned revenue. That account is debited when the flight occurs.
The term "cash basis accounting" is not meant literally -- it also covers payments by cheque, credit card, barter etc. However, risks are involved in such instruments as they may bounce.
For lack of such system, the government does not know its status in respect of assets. After completion of the Padma Bridge, the existing cash-basis accounting system will not show it as an asset in the balance sheet.
The accrual basis ensures fair maintenance cost as it considers annual depreciations and others pertaining to it.
"It reduces random maintenance cost and ghost expenditure of the government machinery and ensures accountability and transparency in the accounting practices," said Sabbir Ahmed Khan, a consultant at the Public Expenditure Management Strengthening Programme (PEMSP), the MoF-run programme that will be wrapped up by June 30.
However, he said they had completed 'classification system' under the programme and billed it as also another achievement towards espousing the accrual basis.
He told the FE that this system deserves to be introduced. "Of course, this is 100 per cent possible to implement…"
Mr Khan is rather upbeat about introduction of the system. "If the ongoing programme expires without accomplishment, I believe government will take another move to do it… in its interest…"
On the other hand, another key official under the programme said the most important thing to start the accounting is to create "asset registry but we are much behind on it".
He said there is need for huge government budget for such registration.
Asset registry is such that a government building ought to be assessed in terms of its valuation. It is hard to compute as there is need to deduct annual depreciation.
However, there are some institutions which have been maintaining their assets, including PWD, and such institutions may be helpful in facilitating the system. The institutions usually have maintained their assets since the British era.
Another Bretton Woods institution - the International Monetary Fund (IMF)-has been advocating for this system across the world.
The IMF has many guidelines on how to begin this system and maintain standards.
People involved with the programme told the FE that they had been following the guidelines and made progress about the accrual basis.
But an economist, who had worked for a long time with the IMF, thinks Bangladesh needs a mindset about it first of all to introduce this type of international standards.
"First of all we need a strong mindset whether we will introduce it or not," said Dr Ahsan H Mansur
He told the FE that this type of accounting helps analyse the fiscal expenditure in more right ways.
Financial reports prepared on an accrual basis allow users to assess the accountability for all resources the entity controls and the deployment of those resources, assess the performance, financial position and cash flows of the entity, and make decisions about providing resources to, or doing business with, the entity.
At a more detailed level, reporting on an accrual basis shows (a) how a government financed its activities and met its cash requirements (b) allows users to evaluate a government's ongoing ability to finance its activities and to meet its liabilities and commitments (c) shows the financial position of a government and changes in financial position (d) provides a government with the opportunity to demonstrate successful management of its resources (e) and it is useful in evaluating a government's performance in terms of its service costs, efficiency and accomplishments.
Australia, Canada, Colombia, the United States and France, Indonesia and Malaysia are some of the countries that have adopted the accounting system on the accrual basis.
People at the programme told the FE that India was set to incorporate it last year but it delayed.
