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K.R. Srivats

New Delhi , Sept. 17

THE Finance Ministry will soon commission feasibility studies for the introduction of accrual accounting in certain Central Government departments.

This initiative will be undertaken through selected pilot projects in two Union Ministries and formed as part of a World Bank-assisted project for modernising the Controller General of Accounts (CGA) organisation.

There are three main components in this project: development of a modern, multi-dimensional system of accounting classification; a feasibility study for introducing accrual-based accounting through selected pilot projects; and development of advanced internal controls and internal audit systems for Government departments.

A senior Finance Ministry official said that the pilot projects to test the feasibility of accrual accounting are likely to be undertaken in certain specified areas coming under the Health Ministry and the Urban Development Ministry. In the case of the Health Ministry, the pilot project is likely to be undertaken in Dr Ram Manohar Lohia hospital in the Capital. As for the Urban Development Ministry, the test of feasibility of accrual accounting is likely to be undertaken in the New Delhi Zone of the Central Public Works Division (CPWD) of the Ministry of Urban Development.

A senior Finance Ministry official said that the fund flows of the New Delhi Zone alone run into hundreds of crores. Indications are that a systemic cost-benefit analysis and technical aspects of transition from a cash system to an accrual-based system would be considered in the two pilot projects.

The Government has already accepted the 12th Finance Commission's recommendation for a gradual transition to the accrual basis of accounting.

The Finance Minister, Mr P. Chidambaram, said on Wednesday that the Union Government is determined to switch over to the accrual system of accounting.

He had also indicated that the Centre would not hesitate to recommend the accrual system of accounting to all urban local bodies (ULBs) in the country if those ULBs that had adopted the same found it as a rewarding exercise.

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Feasibility studies soon for introducing accrual accounting in Govt depts

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