Municipal service delivery: new accounting software improves transparency in Kerala, India

Published on: 28/10/2009

The ADB technical assistance (TA) project "Capacity Building for Municipal Service Delivery in Kerala" (2006-2008) assisted municipal corporations and selected municipalities to (i) improve their capacity to organize, record, update, and manage financial and other information on a routine basis; (ii) increase the efficiency and integrity of the data being collected; and (iii) promote good governance in relation to financial management. The TA project aimed to help ensure the sustainability of the investments under the Kerala Sustainable Urban Development Project (Loan 2226-IND), a $221.2 million loan approved by ADB on 20 December 2005 and which became effective on 19 March 2007.

The TA project successfully installed and implemented municipal accounting software in five municipal corporations and two municipalities. As a result of continuous recording, updating and managing financial information on a routine basis using accrual-based double-entry accounting, they managed to publish their financial statement regularly.

Some of the major lessons are:

• Accounting system alone does not do anything – it is just software. It became meaningful when the necessary financial information is entered in accordance with the new accounting policy, which had to developed. The necessary financial information includes the past income and expenditure, assets and liability, and cash flow statement for the last five years. In ULBs, there are backlogs in accounts for four to five years. Recovery of the backlogs and data entry tasks absorbed enormous amount of ULB staff’s and consultants’ time.

• Feeding income and expenditure information can be computerized by connecting the accounting system with the Payroll module and the demand collection balance (DCB) module. Staff salary is the largest expenditure item in the ULB and computerization by the payroll module will bring efficiency in accounts work. The DCB module compares (a) demand: how much to be collected, (b) collection: how much actually collected, (c) balance: how much is still due. This will help ULB in capturing the amount of the uncollected in tax and charges for urban service delivery, which is a good start for ‘management accounting.’ However, the amount of data entry is the same as the number of households in one ULB—again, this requires enormous amount of time and labour.

Read the full Technical Assistance Completion Report