It is a necessary requirement for transparency and accountability in an accounting system that presents a true and correct picture of the state of affairs of an educational institution and enables less intrusive but more effective regulation of the education sector besides assisting in prevention of malpractices that presently plague the sector. Getting into consideration that presently, the accounting and financial reporting practices of educational institutions in India are oriented towards meeting the needs of the governing bodies running them and educational institutions follow not only diverse accounting practices but also different basis of accounting, that the group has recommended.
Here are some of the the accounting standards that should enable the society, the student and the citizen:
- To define transparently the revenue earned through various sources such as tuition fees and other charges, income from consultancy or from intellectual property owned by the institution (for higher educational institutions etc).
- To recognize segment reporting of accounts (each school under the same institution being considered as a separate segment for accounting purposes).
- To recognize costs and revenue separately for UG and PG programmes and for research and teaching activities.
- To define relevant financial ratios derived from accounts for inter comparison on research to total expenditure, income from fees to total income, salary expenditure to total expenditure etc. These ratios could enable greater understanding of funding needs especially in respect of government funding.
- To identify if surpluses are being generated and the manner in which the surpluses are utilized or invested. and
- To disclose related party transactions.
The recommendations would also be placed before the State Education Ministers in the next meeting. The Ministry in co-ordination with ICAI shall organize capacity building programme to train the staff of educational institutions.