From Accounts to Accountability: ICAI's Role in Public Financial Management

A well-functioning Public Financial Management (PFM) system is what makes government genuinely effective and trustworthy. It governs how public money is raised, allocated, spent and accounted for — and ultimately determines whether fiscal discipline, transparency and public trust can be sustained.

As governments shift toward real-time reporting and begin adopting tools such as Artificial Intelligence, the demand for accurate and well-organised financial data keeps growing. That reliability hinges on sound financial reporting. Lasting PFM reform, therefore, isn't just about new technology — it depends on strengthening the underlying systems and processes that protect the integrity of financial data.

PFM in India: Progress and Gaps

India's PFM landscape shows real progress alongside ongoing challenges. A solid institutional and legal foundation — reinforced by audit oversight from the Comptroller and Auditor General (C&AG), fiscal discipline under the Fiscal Responsibility and Budget Management Act, and digital platforms like PFMS and Direct Benefit Transfer (DBT) — has helped improve transparency and cut down on leakages.

Even so, weak financial reporting and limited capacity at the local level remain persistent obstacles. Recent reform efforts have leaned into transparency, fiscal discipline and outcome-based governance, but lasting impact will require deeper work on financial reporting, accountability and institutional capacity. The 16th Finance Commission is now working to improve how public resources are allocated and used across every tier of government.

ICAI's Role in Strengthening PFM

As a partner in nation-building, the Institute of Chartered Accountants of India (ICAI) — through its Public & Government Financial Management Committee (PGFMC) — supports government bodies at every level by improving financial reporting and management practices, building official capacity through training and e-learning, aiding accounting reform implementation, and offering technical guidance.

Setting Accounting Standards for Government

India's government structure operates at three levels — Central, State, and Local Self-Government — and standardisation efforts differ across each.

Central and State Governments

• Most accounting still follows a cash or modified-cash basis, though reforms are underway, most notably the Ministry of Railways' move toward accrual accounting.
• Under Article 150 of the Constitution, government accounts are kept in forms prescribed by the President on the advice of the C&AG, India's Supreme Audit Institution.
• The Government Accounting Standards Advisory Board (GASAB), set up by the C&AG's office, develops cash-based Indian Government Accounting Standards (IGAS) and accrual-based Indian Government Financial Reporting Standards (IGFRS).
• ICAI sits on GASAB and regularly contributes technical input on draft standards and related documents.

Local Self-Government

• Rural Local Bodies/Panchayats: follow a cash-based system under the Model Accounting System (MAS), implemented through the e-GramSwaraj platform.
• Urban Local Bodies: required to use accrual-based accounting under the National Municipal Accounts Manual (NMAM), developed by the Ministry of Housing and Urban Affairs based on an earlier C&AG Task Force report.
• To bring consistency across local bodies, ICAI has issued 31 Accounting Standards for Local Bodies (ASLBs), modelled on international benchmarks such as the International Public Sector Accounting Standards (IPSAS). These are recommendatory until individual states choose to make them mandatory — Uttarakhand became the first state to revise its Municipal Accounts Manual in line with the ASLBs.
• ICAI is also part of a newly formed Steering Committee revising NMAM 2.0 under the C&AG's office.

Building Government Capacity

ICAI invests heavily in capacity building through structured training programmes, workshops, vernacular-language webinars, and e-learning content. So far, roughly 3,500 government officials have been trained, including staff from the C&AG's office, the Indian Cost Accounts Service, Tamil Nadu's treasury and accounts department, and urban/rural local bodies across states such as Gujarat, Tamil Nadu, Maharashtra, Uttarakhand, Nagaland, Tripura, Bihar and Punjab.

ICAI also runs a recurring webinar series on "Public Financial Management: Key for Growth & Governance," held every alternate Thursday to keep members and stakeholders up to date on PFM developments.

Certificate Courses for Local-Body Accountants

Working with the C&AG's office, ICAI launched a certificate course in 2023 aimed at placing trained accountants in Panchayats and Municipal Bodies, even in remote areas. Several state Urban Development and Panchayati Raj departments now require this course for local-body accounts staff, a meaningful step toward stronger discipline and accountability at the grassroots level.

Stakeholder Engagement and Partnerships

ICAI maintains an active dialogue with the Ministry of Housing and Urban Affairs, the Ministry of Panchayati Raj, the Ministry of Rural Development, the C&AG's office, and various state government departments, offering technical and advisory support on financial reporting. It also engages with bodies like the National Institute of Public Finance and Policy, the International Public Sector Accounting Standards Board, and the South Asian Federation of Accountants.

Recognising Reform: ICAI Awards

To encourage progress, ICAI presents Awards for Promotion of Accounting Reforms in Local Bodies, recognising local bodies that improve transparency, accountability and the overall quality of their financial reporting.

Publications and Research

ICAI regularly publishes material on public finance and government accounting, including a joint study with NITI Aayog on transitioning Urban Local Bodies to accrual accounting, which lays out implementation roadmaps, policy insights and reform strategies.

Professional Opportunities for Members

ICAI also runs a Certificate Course on Public Finance and Government Accounting, covering government economic policy, budgeting, fiscal tools, public funds, grants, and the accounting systems used across Central, State and Local Bodies. Open to both CA members and government officials, the course is recognised in tenders issued by local bodies and government departments in Maharashtra, Madhya Pradesh and Jammu & Kashmir, and the C&AG's office counts it toward empanelment criteria for CA firms.

Conclusion

Transparency, accountability and fiscal discipline remain the foundation of effective governance, and strong PFM systems are central to India's progress toward becoming a developed economy. Through capacity building, standards development, institutional partnerships and policy support, ICAI has helped move the conversation from basic accounting toward genuine accountability in public finance — strengthening government officials' financial management capabilities along the way.

As India advances its Viksit Bharat vision, ICAI's continued focus on reform aims to support a transparent, resilient and future-ready public financial system.