Better accounting paying off

A sea-change has taken place in the Bangalore Mahanagara Palike's accounting process, thanks to the implementation of the Fund Based Accounting System (FBAS). The main advantage of FBAS is that it allows objective oriented accounting that can be tailor-made for an organisation. A municipality's finances can be organized around three categories of funds which directly corresponding to its three areas of activity. Governmental & social (obligatory), fiduciary (activities performed as an agency of other bodies like state governments) and commercial (proprietary/capital maintenance). The BMP has switched to a system that has these categories organized as separate funds. This brings in many advantages.

FBAS allows information based control of a municipality's various activities. It provides an information trail enabling better auditing and a base for computing costs of goods and services. Accurate and real time information on accounts and finance becomes available. This enables efficient application of scarce financial resources. Item-wise receipts and payments as well as implementation of works can be monitored on a daily basis. Zone-wise and ward-wise information will be available too. A FBAS system also provides better information for external funding and donor agencies in assessing the performance and credit-worthiness of a municipality. It provides flexibility in accounting by enabling accrual and modified accrual methods of accounting. Finally, FBAS systems are in line with Generally Accepted Accounting Principles (GAAP) - the global standard for accounting.

Implementing FBAS in the BMP has been no cakewalk. It has required a thorough understanding of the way the BMP works and working together in association with all its departments. What has happened is a process flow reorganisation. Systems and formats have been redesigned to meet modern demands. “We have been successful in our endeavour because we came in with the belief that we will build on what exists. Working in partnership with the BMP and using appropriate technology has been the key,” says Prasad.

Working in partnership with the BMP, the FBAS team has put in place a robust system that will make much difference to the municipal body’s functioning. The onerous task has been undertaken by a dedicated team, now headed by T S Prasad, which has worked round-the-clock putting in about 3,25,000 man-hours since March 2000 to ensure a smooth transition. An initiative of the Bangalore Agenda Task Force, (BATF) the implementation has been entrusted to Chennai based NCR Consultants Ltd.

While the transition to FBAS is complete, the changeover to the accrual system of accounting from the cash system, which the BMP has been following all these years, is in the final stages and will be completed by 2004. A series of workshops and sensitisation programmes for people at the top level upto the fourth level at the BMP, has smoothened the way. Reflecting on the whole process, the team concurs that it has been gruelling but are satisfied that the BMP is indeed using FBAS for its day-to-day requirements, making the whole endeavour worthwhile. As of today, the BMP is the only city corporation in the country to have switched to funds based accounting.

The Namma Budget team’s progress

PROOF core group members with the BMP commissioner

One of the PROOF's sub-groups is the Namma Budget team. The objective of Namma Budget is to make the BMP’s budget more citizen friendly. For the last few months the team has been busy with understanding the nitty gritty of the BMP’s budget. Funds have to be provided for various expenditures incurred in carrying out the various activities – garbage clearance, road repairs, maintenance of side drains and storm water drains, etc. There are also certain fixed expenses like salaries to employees, pensions, street lighting, etc. Unless all expenses are prioritised and offset against accepted receipts of revenue, chaos would be created if expenditure is taken up on an ad hoc basis. The budget is a bible of sorts by which the BMP plans its financial activities for the year.

The Namma Budget team has met with some BMP engineers to understand the aspects involved in the preparation of the budget. Subsequently, they met the Commissioner Mr Srinivas Murthy with more questions on the BMP budgetary process. After a bit more groundwork they hope to prepare a preliminary report on the study done so far and present it to the PROOF partners for their evaluation and comments. The Namma Budget endeavour is important as it will create greater awareness of the significance and importance the budget plays in the day to day activities of the BMP and thereby the city.