At Present governmental policy making emphasizes what departments produce rather than what they have available to spend. The study helps in developing a theoretical framework for accrual-based governmental accounting systems in Bangladesh. It also helps to conceptualize accounting information used by politicians (users of information) and public financial managers/civil servants (producers of information). As the people of the country are the owners of public money, the government and the civil servants have some responsibility to ensure welfare to the citizenry at all levels by effectively utilizing of the money. For developing the theory exploratory research has been conducted. To reach the result descriptive statistical techniques were applied to analyze thirty respondents who are directly/indirectly practitioner/service receivers of governmental accounting information systems operating in Bangladesh. In conducting this research twenty structured ‘Yes”/No” simple dichotomous questionnaires were used to measure peoples philosophy about taxation and accounting in Bangladesh to develop a strategic theory of the subject. This is done because all of the laws and regulations in the parliament of Bangladesh have been passed through a “yes”/”no” oral votes basis. The outcomes of the research will help the citizenry, the government, and other stakeholders in setting their services providing and revenues generation agenda, policy formulation, financial decision analysis, implementation, and performance evaluation of the government functions by department, ministries, local self-government, and many other components units.
All organizations which are not privately owned or operated can be defined as government organization. Governments financial activity done by the civil servants is called civil service accounting. ‘Govern-mental sector organization can be classified into the departments of central government, nationalized industries/‘state owned enterprises , public corporat-ions, local authorities, bodies set up for a specific purpose: universities, the mint, etc (Woods Frank, 2008). These are the government enterprise not government. Hence, they dont have any power of taxation and using fund without the prior permission by the government raised from their services and other charges (Amirthalingam, 2013). The study helps to give answer to the questions set by the people of Bangladesh for long time regarding Revenues expenditures and government accounting procedures currently practicing (Adenugba et al., 2013). Main intellectual basis for governmental financial sector analysis and policy advice over the last five decades is the work of World Bank Group and International Monetary Fund (IMF, 2015) reform strategy on public financial management. In Bangladesh, govt. usages “Stop-go-Approach” for budgeting and accounting which means a way of controlling the economy by restricting government spending for a period of time and then not restricting it so severely for a time (Uchenna et al., 2005).
Taxation is necessary by the government for public services and to manage whole economy. For collecting taxes government of Bangladesh has been announced ‘Kor Bahadur Designation for higher tax payers from the fiscal budget 2017-2018. For enhancing the realization of unpaid tax the government has taken initiatives titled ‘Rajawsha Halkhata from the same fiscal year budget. The ministry of commerce has been announced another motivational designation ‘Com-mercially Important Person (CIP) to drive more taxation from the business giants and affluent persons (Saunders, 2007). For grooming more taxes and attaching more people on taxpayers net government also observe 30th November as ‘Income tax day and December 10-15 as ‘VAT Day and ‘VAT Week in every year. In Bangladesh government is providing services to the people with profit and without profit. But taxes are collected from the people who have taxable income. People who are not able to pay taxes get also government services. Taxation is less risky for government financing than taking loan from private sector by the government. Here exist ‘Supranational taxation between central government and local self government for balanced economic development (Apriyanti, 2020). But uniformity of accounting system is absence for reporting revenues and expenditure (Islam, 2020). Harmonization of accounting and reporting practices in all levels of government needs to adopt International Public Sector Accounting Standards (IPSAS).
Aims of government accounting is preventing waste in the government and establishing a balance between optimal expenditure and services by managing governmental assets and resources in the most efficient ways. This balance can be established only by obtaining complete and accurate information from government accounting systems. Government accounting used to monitor revenues and expenses, which were available only in the budget and excluded the payables, receivable and assets of the government as there was a limited area of operation for the government previously (Arslan Coskun Mihriban, 2017). In modern concept of government accounting goes far beyond being budget and considers the changes in assets and includes cash flow into the accounting systems. Government accounting is a process of recording, decision making, analyzing, classifying, summarizing, notifying, and interpreting the government financial knowledge and reflecting all transactions which includes purchasing, transferring and allocation of governments property in general. In private organization, business ownership holds by the people. Ownership governments business like enterprises also holds by the people of the respective country. So it is important duty of the government to ensure transparency and ‘accountability for the people benevolence. Government accounting is an instrument of financial management, which enables in creating a basis for productivity analyses by suggesting the costs of government services (Kumshe, 2013). This instrument determines whether the activities of government are rational or not.
When political power had only a few duties in national economy in the past, there was not much need for information for economic administration. Now the whole world is directed by the economy rather than political power. Hence it is inevitable to create an accounting system that can respond to changes arising because of lack of information relationship among the nations. Budget and business accounting both are related with future, so no future decision will be taken effectively without originating proper government accounting systems. Government accounting is the safeguard of government assets, instrument of governmental financial decision analysis and better method of forecasting and generating revenues, recording and reporting expenses and measurement of performances.
Literature Review
The object of government is the well-being of the people (Roosevelt, 1910). To ensure welfare all economic policies are made for the people not for the nation. A nation may fall into decay through taxation in two ways: Firstly, when the amount of the taxes exceeds the power of the nation and is not proportioned to the general wealth. Secondly, when the amount of taxation, proportioned on the power of the nation, is viciously distributed (Verri Pietro, 1728-1797). A wise collector-general shall conduct the work of revenues-collection, increasing the income and decreasing the expenditure (Kautilyas, 1915).
The superintendent shall submit the accounts related with works in hand, works accomplished, parts of works in hand, receipts of expenditure, net balance, and tasks to be undertaken in each of the several departments. There are four main purpose of taxation viz.; Revenue (collect a sum of money for government), redistribution (transfer from rich to poor, reprising (levied on harmful things e.g.; tobacco, carbon), representation (accountability to general public by the government). American revolutionary slogan "no taxation without representation" ensures that, rulers tax citizens, and citizens demand accountability from their rulers. Bongabondhu Sheikh Mujibur Rahman (1966) proclaimed in a movement that, the power of taxation and revenue collection should be vested in the federating units and the federal centre would have no such power. He also demanded the federation would be entitled to a share in the state taxes to meet its expenditures. Taxation is considered much of a political issue not as an economic issue. Political leaders have used tax policy to promote their agendas by initiating tax reforms; decreasing or increasing tax rates, changing the definition of taxable income, creating new taxes on specific products etc. Essentially, an efficient national revenue collection system is the hub of every public administration system and the cornerstone of sound fiscal management (Gideon Zhou, 2013).
Government accounting is essential to all economic thinking conducted from a factual basis, because it gives a factual record in a systematic manner (Bray, 1955). There are three types of accounting system e.g. national accounting, government budgeting and government accounting and they have different sets of policy makers, nationally and internationally, they have different conceptual frameworks, they have different accounting policies and they are implanted by different institutions of government in different ways (Jones, 2000). The role of government account-ing and financial reporting are key factor that determines many decisions that are taken on a daily or short term basis. The quality of government financial reporting is also reflected in the correctness of the decision of the managers (Zdravkoski Ignor, 2018).
Most of the government plans for the future development of the public entity and not-for profit unit are prepared based on the data and information in the financial statement. For making these financial statements there are three basis of government accounting e.g.; the cash basis that record revenues only when cash is received, and expenditures recorded only when cash is paid, irrespective of the accounting period(s) in which the services were rendered or the benefit received, the accrual basis and under this method revenues are recorded when earned and expenditure are recorded as the result in liabilities are known or when benefits are received notwithstanding the fact that the receipt or payment of cash could take place or partly in another period, and the commitment basis that records an anticipated expenditure evidence by contract or by a purchase order or determined by administration. Practicing accrual basis accounting system is almost absent in Bangladesh due to lack of knowledge. This study will minimize the gap of using accrual basis accounting in the government sector.
Rationale of the study
In government accounting, spending money does not generate more revenue, but business does. So, a strong accounting system is necessary. Government accounting is necessary for international comparison and making sustainable strong market economy. As the government takes loan from other government for running its activities, hence it is very much necessary to set up accounting standards, laws and regulation for recording and reporting of governmental financial activities.
Table 1: Government assets, liabilities, revenues, expenses and their basis of reporting.
All government sector organizations must maintain systematic records so that (i) financial requirements can be estimated and (ii) the measurement of the use of these financial resources can be established and the relative efficiency and effectiveness of the organi-zation in using them can be assessed. Value for money is the utmost importance, especially when taxation or charging levels are high or increasing rapidly. Accounting procedures must be directed towards ensuring that the maximum benefit is obtained from the limited resources (Woods Frank, 2008).
The owner of the state is its citizens, whether they are poor or rich, elite or lower class. So the managers of the public money should inform the governmental financial and non-financial performance to its citizenry regularly on ward, union, upozila, district as well as secretariat zone in a manner as the people feels convenient. The necessity of applying accrual basis accounting in government/public sector enterprise is to prepare financial statements, reuse of assets and waste minimization at all levels of government using the equation of –
Assets = Liabilities + Fund balance/“Government Equity” .
Where, Assets represents current assets, Liabilities represent current liabilities and Fund balance represents reserve and unreserved fund and govern-ment equity means the capital provided by the government for running the enterprise. Accrual basis accounting helps in recording and reporting the states financial activities and measuring (see Table 1) the resources, liabilities and capitals properly:
Budget Review Calendar (Revenue generation point of view): Budget calendar is the future plan of generating revenues and approving expenditures to the purposes for the government at different levels and many other institutions. This calendar has been prepared by considering the ‘Smith, Adam (1776) principles of taxation as applicable for the citizens of Bangladesh.
Table 2: Budget Calendar of the study.
District Commissioner (DC).
All appropriation and approvals of fund, policy and necessary actions related with budget will be passed, taken and enforced by the decision of the cabinet and ECNEC meeting proceedings adjusting the calendar date/s.
To ensure transparency in government sector Government Accounting Standard Board (GASB) Statement No 34., has recommended the following requirement for the general purpose external financial statements.
Financial statements and measurement practices used in general governmental and fund accounting is given above Table 3.
Theoretical model of the study
The below model has been developed after critically review the literature of government accounting, laws and regulation, international public/government sector accounting and education standards, public financial management reports and reform strategy published by the different national and international authority for taxation and governmental accounting for meeting current demand and for future knowledge generation (Fig 1). In the model government activities have been differentiated in two categories. viz.; governmental services activities that fix the variable for raising public money and ensuring operational and fiscal accountability. As per this assumption government assets are not transferable. Hence, it has been suggested to use cash customized government accounting method for reporting and measuring services activities. The governmental business type assets can be transferable to private ownership in the form of Public Private Partnership (PPP) at a certain percentage. In that case applying accrual basis/modified accrual basis accounting systems is strongly suggested. If the total systems are applied duly, then with the help of the different financial statements, clearly presented Management Discussion and Analysis section, Required Supplementary Information and Notes to the Financial Statements, Balance Sheet and Cash Flow Statements will ensure transparency in governmental financial management. This system will help to compare between intra-governmental operations and accounting with the international donor groups and lending agency. Ultimately general welfare to the citizenry of the country will be ensured and balanced development could be expedited systematically.
• PROACTIVE stands for: Professionalism, Reliability, Objectivity, Accountability, Credibility, Transparency, Integrity, Viability, Ethics (Adapted from core values of CAG, http://www.cagbd.org/)
Fig 1: Theoretical model for government accounting and peoples Benefit- adopted from researchers experience.
Concept of different elements regarding governmental accounting:
Objectives of the Study
The general objective of the research is to determine the strategic way forward for collecting taxes and evaluating government accounting procedure as a tool for ensuring operational and financial accountability of the government and effective policy making for corruption free balanced development in Bangladesh. To achieve the general objective some others specific objectives are as follows:
1) To establish suitable effectiveness criteria for recording and reporting of revenues, expenditure and government accounting system.
2) To determine the factors associated with the effectiveness criteria for budgeting and government accounting system.
3) To develop an explanatory theory that associates certain factors with the effectiveness of revenues, expenditure and government account-ing systems.
4) To evaluate the government accounting procedure as a tool for policy formulation and effective taxation for the all levels of govern-ment in Bangladesh.
This is an exploratory study. In carrying out the present study, both quantitative and qualitative method is being followed. Social Constructionism research philosophy is used in conducting this research. Inductive research approach is applied to develop theory. Total sample has been 30. Of which some are business graduate (receiver of services) and some are employees (Practitioners of government accounting in different levels) working at the chief accounting officer of ministry of Science and Technology situated at Segunbagicha, Dhaka, Bangladesh.
Telephone interview was conducted with the four professional accountants for taking their opinion. An Upazila accounts officer and some academicians practical and research experience is placed to fill the gaps and short fall. Both primary and secondary data were used to carry out the research. For collecting Primary data a structured mailed questionnaire was sent to the aforementioned office. For collecting secondary data Primary sources that is, reports, thesis e-mails, conference reports, company reports, some governmental publications, Budget speech, unpub-lished manuscript sources, some secondary sources i.e.; newspapers, books, journals, internet, some tertiary sources i.e.; indexes, abstracts, colleagues encyclopedias, dictionaries, bibliographies and citation indexes are studied and analysis.
Questionnaire was designed based on the previous studies adopted for developing public sector accounting framework by , Financial Management Academy (FIMA), Institute of Public Finance, Bangladesh (IPF), Consortium of International Government Accounting Research (CIGAR) Network, International Consortium for Governmental Financial Management (ICGFM), Government Accounting Standard Board (GASB), International Monetary Fund (IMF) and World Bank group.
From the below analysis (Table 4) it is seen that most of the people of the country having idea about reporting and recording of revenues through taxation and financial transaction. But when they asked to write down the ideas they didnt do that. The general citizens of the country have emphasized on the employment and taxpayers census for grooming tax revenues. For utilizing money from the people of the country they have been directed to the government to take loan from the cooperative society for meeting deficit budget. Majority respondents opine that pre-budget discussion should hold between government and public. 100% people are thinking that the profit by the government enterprises should maximize to reduce the tax burden of the people.
Below analysis showing (Table 5) that most of the people of Bangladesh suggested forming revenue advisory team across the country to generate more revenues on time. For measuring government performance Central Accounting Information Systems (CAIS), some taxpayers benevolent laws must be introduced by the government. They also suggest that, as the collected revenues are the public money; hence, it should be displayed digitally regular basis at the convenient place of the collector. Majority number of respondents thinks that Accounting Information Systems (AIS) should play central role in making governmental decision about resource management and expenditure control.
With the expanding scope of the economy of Bangladesh the functions of the government financial managers has also been expanded. In line with expansion the government is placing 7th five year development plan, Delta Plan-2100, producing some medium term development budget before the citizenry.
Table 4: Variable relating to revenues.
Table 5: Ensuring accountability and establishing just society.
Table 6: Reforms and standard setting in public sector.
Table 7: Way of adopting GASB statement no. 34 and IPSAS.
Hundred percent people think that, government should adopt International Public Sector Accounting Standards for international comparison and to recognize receivable and payable and for meeting the government guarantee. In that regard professional skill building needed for public financial managers through maintaining International Education Standards. Com-ptroller General of Accounts (CGA) office should replaced by the professional accountant over civil servants. Double entry accounting system is needed for communicating economic events by the government. Newly appointed civil servants must undergo training pertaining by FIMA/IPF.
More than seventy five percent people of the country think that governmental accounting systems has yet updated as the economic sectors expanding rapidly due the reluctant of members of parliament (Ouda, 2019). An important portion of the respondents argued that governmental business type activities should oversight by the Institute of Chartered Accountants of Bangladesh (ICAB). Hundred percent respondents gave their opinion to establish governmental financial managers council for developing their professional skills. Most important things is here that the parliamentary committee regarding Public Accounts of The Republic should take intensive care on allocating fund, ensuring accountability and stopping the extravagant expenditure. After carefully analysis of the data and documents following are the major findings have been discovered:
• Financial Reporting Council (FRC) is in sleeping mood after its conception. As a result it has no contribution for developing any standards/systems for governmental financial reporting practices.
• Building, libraries, museum, highways, parks should be classified as public sector assets. These service facilities do not produce probable future cash flow for the government. Charging depreciation is not appropriate for service facilities. It is better expensed rather than capitalized.
• Only a budget management act 2009 is operating total government economy of Bangladesh. There is no governmental accounting standard for recording and reporting transactions (Ives, 2009). International Education Standards (IES) are not followed to enhancing the skills of public financial managers.
• Financial managers are of two types, (a) Government financial managers and (b) Public financial managers. Government finical managers are the executive body (civil servant) and appointed by the elected members of the Republic. Public financial managers are non executive body (public servant) appointed by the executive body and work under the direct supervision of the executive body.
• In Bangladesh various reform strategies regarding public sector expenditure control/ management have been implemented but no strategic project regarding government financial recording and reporting strategy yet to be done.
• A theoretical model has been recommended for future application of accrual and customized cash basis accounting in the governmental sector.
• A budget preparation calendar has been suggested to booming more revenue for strong policy.
• Using accrual based government accounting information systems will enhance the decision making skill of the government over the cash basis accounting.
Government sources of revenues are changing, peoples perceptions and concepts about the definition of the government is changing, government budgeting systems changing, total GDP increasing, social safety net and other activities of the government also changing. So it is very important issue of developing a uniform governmental accounting system (Bogui, 2009). Establishing strong accounting system in government sector is necessary because the current time emphasizes on what departments produce rather than on what they have available to spend. It is strongly recommended that the whole systems of government accounting should be digitalized by the 2025. With the dimensions of Industry 4.0, the “on demand” economy is being emerging across the world. In this economics system, corporate giant like ‘face book and ‘Amazon those do not have any content but are the richest company of the world. Revenue generation and taxation of the Peoples Republic of the Bangladesh will undergo through block chain method by 2020 as stated in budget speech 2019-2020. World largest GDP countrys budget management systems have changed. So redesigning of recording and reporting of Bangladeshi governmental/civil service accounting activities is necessary for ensuring account-ability. Redesigning of skills is necessary for nursing public money. Proper nursing of public money may bring the sweetest fruit for the people of Bangladesh. In the pathway of development of Bangladesh accrual basis accounting is the next step to start finessing the intellectual infrastructure, making public services easier. Moreover, to reduce the tax burden from people government should give deep attention on profit making planning in the state owned enterprises which need accrual basis accounting.
The research conducted by the researcher without any external funding. All sort of activities like data collection, data analysis, composing is done by the researcher. So there is no necessary to mention any name for giving any special compliments.
Author declares no conflicts of interest of the article.
ENDNOTES
The term Government sector and public sector sometimes used as interchangeably. Government sector includes central government, state government as well as local government bodies. But public sectors means beyond the limit of government at different level. The public sector includes public companies, public interest entities (PIE), public enterprises and services. The public sector is usually composed of organizations that are owned and operated by the government. This includes federal, provincial, state, or municipal governments, depending on where you live (https://www.toppr.com).
A state-owned enterprise (SOE) is a legal entity that is created by a government in order to partake in commercial activities on the governments behalf. It can be either wholly or partially owned by a government and is typically earmarked to participate in specific commercial activities (World Bank Group, Corporate governance of SOEs: A toolkit, 2014, p. 25). Currently there are 49 state owned enterprises (non financial) in Bangladesh. See Bangladesh economic review 2019, Chapter 9, p. 1
The government of Bangladesh has taken several reforms strategy regarding public financial management and expenditure control for strengthening the public financial management process. These are (a) Public financial management action plan 2018-2023. (b) Public financial management reform strategy 2016-2021, (c) GoB Financial management Reform Program September 2003, (d) Reforms in budgeting and expenditure control (RIBEC) 1992, (e) Report of the committee on reforms of the budget and expenditure control (CORBEC), 1971/1980, Ministry of Finance Bangladesh.
Prestigious designation to the families where all members are paying taxes for long period of time. Budget speech 2017-2018, p.81.
Ibid. P.81
In Bangladesh a CIP is an individual who is allowed to receive a number of benefits and facilities for the period of one year after recognition for their contribution to their respective sector. Such a CIP receives a special id card from the Ministry of Commerce and from the Government of the Peoples Republic of Bangladesh. Such CIPs are invited to the Citizens reception for various national ceremonies including entry to the Bangladesh Secretariat and the city corporation. CIPs have priority seating opportunities in most domestic public transport during business trips. To facilitate visas, the Ministry of Foreign Affairs offers a Letter of Introduction to the Embassy concerned. CIPs get access to the Very important person (VIP) lounges at airports and their family members receive priority when booking cabins at government hospitals. Generally, CIPs are either those who export products or those regarding businesses. CIPs primary list is prepared based on the amount of export, income tax and value-added tax (VAT), the type of business, employment, etc. Afterward, the people who qualify are selected for the honor (https://en.wikipedia.org/wiki/Commercially_Important_Person).
A supranational organization is an international group or union in which the power and influence of member states transcend national boundaries or interests to share in decision making and vote on issues concerning the collective body. The European Union and the World Trade Organization are both supranational entities. In the EU, each member votes on policy that will affect each member nation. The benefits of this construct are the synergies derived from social and economic policies and a stronger presence on the international stage.
Accountability requires government to answer to the citizenry-to justify the raising of public resources and the purposes for which they are used. Governmental accountability is based on the belief that citizenry has a “right to know”, a right to receive openly declared facts that may lead to public debate by the citizens and their elected representative. Financial reporting plays a major role in fulfilling governments duty to be publicly accountable in a democratic society, Government Accounting Standards Series, No.171-A. June 1999, p. 76.
Financial assets are not considered as it is used cash basis accounting for reporting.
Buildings except those are an ancillary part of a network of infrastructure assets, should not be considered infrastructure assets for purposes of this statement. These types of assets should not be depreciated
Government Equity Accounts and Guidelines (Up to December 31, 2017), Ministry of Finance, Bangladesh
In The Wealth of Nations (1776), Adam Smith argued that taxation should follow the four principles of fairness, certainty, convenience and efficiency. Fairness, in that taxation should be compatible with taxpayers conditions, including their ability to pay in line with personal and family needs.
July- August months are reserved for innovation and idea generation for upcoming year budget.
Applicable for all levels of Government.
Either a balance sheet or a net assets format may be used. For convenience, only the statement of net assets is referred to in this Statement.
Either fund net assets of fund equity may be used as the label for the difference between proprietary fund assets and liabilities; for convenience, only the term net assets is used in this statement.
Segment disclosure are not required for an activity whose only outstanding debt is conduit debt for which the government has no obligation beyond the resources provided by related leases or loans In addition, segment reporting is not required when an individual fund both is a segment and is reported s a major fund.
Academic Editor
Dr. Liiza Gie, Head of the Department, Human Resources Management, Cape Peninsula University of Technology, Cape Town, South Africa.
Department of Business Studies, North Bengal International University, Rajshahi, Bangladesh; 2MPhil Fellow, Institute of Bangladesh Studies, Rajshahi University, Rajshahi, Bangladesh.
Kuddus MA. (2020). Peoples conception about revenue-expenditures and governmental accounting procedure in Bangladesh: a strategic way forward and philosophical analysis, Int. J. Manag. Account. 2(3), 47-60. https://doi.org/10.34104/ijma.020.047060