Higher education institutes in the country will soon have to report their financial information in a standard and uniform format set by the Institute of Chartered Accountants of India.
As per the format,the institutes will now have to disclose their balance sheet and the income and expenditure account. The new system is a shift from the present cash basis of accounting to accrual-based system.
While the balance sheet will include sources and applications of funds along with liabilities and assets,the income and expenditure statement would reflect the academic receipts,grants and donations. With education being a not for profit activity,the ministry of human resource development (MHRD) wants to enforce these standards in order to check how much profit the educational institutes are making.
We want the institutes to keep their accounts and want to know if they actually are not-for-profit which they should be. The new accounting standards will be mandatory for all and we hope to implement it this year. Going ahead,we might introduce the accounting format for schools also, said an MHRD official.
The move assumes significance as in the recent years,government aid to educational institutions particularly in the form of concessions and incentives has risen besides increased fees charged from the students and increased donations by certain donor agencies.
We already disclose our finances,which are audited by the Comptroller and Auditor General of India. The new accounting standards are very recent and we are still studying the new paradigm as depreciation will have to be included, said IIT Kanpur director SG.
The present system of accounting and financial reporting followed by educational institutions does not meet the accountability concerns of the donors,including government and other stakeholders such as members,governing board,management staff,volunteers and general public as educational institutions in India follow not only diverse accounting practices but also different basis of accounting.
As per the new system,funds received by educational institutions may be divided into restricted funds,unrestricted funds which includes corpus fund,designated funds and general fund.
The new accounting standards will make it easier to understand and follow the balance sheets and make the entire system more transparent. Also,we are following the old system of accounting which need to be improved, said Shekhar Chaudhuri,director,IIM Calcutta.
However,institutes feel that the new accounting norms would only add to their administrative load.
It would be better to reduce the involvement of human element and use some modern technological solution for accounting to do financial accounting accurately, said an IIT professor.