China Covernment Accounting System Design

With China transforming from a planned economy to a market economy, China’s fiscal management also experiences great changes. Since1990’s, as an integrated part of establishing of public finance management, a series of reforms were initiated, such as departmental budget reform, Treasury Single Account reform, budget classification reform, government procurement reform, etc. Now China’s socialist market economy is deepening. In the face of complicated difficulties, fiscal reform is regarded as the breakthrough to the whole reform.Internationally, government accounting is a great driving force to improve public finance management, increase government efficiency and enhance fiscal transparency. The practice of UK, US, Australia, New Zealand, etc, are great examples. China’s government accounting reform has been put on government agenda. The12th Five-Year Plan explicitly states that China should carry out government accounting reform and set out government financial reporting system.Theoretically, government accounting is accounting in nature, which is a kind of information production system to meet the information users’needs. China’s government accounting reform should also identify the users’needs and satisfy users’needs. Referring to advanced international experience, budget management reform is a great driving force behind government accounting reform and directly set the tone of government accounting reform. Government accounting reform provides great information support to budget reform. Budget reform in advanced countries aims to enhance budget constrain, increase budget fund efficiency and effectiveness, promote long-term fiscal sustainability and enhance fiscal transparency. To meet budget management needs, government accounting is conducted simultaneously mainly through introducing accrual accounting and preparing consolidated government financial statements to accurately measure government operation cost and government assets and liabilities. At the same time cash based budget accounting is kept to completely tract budget execution. In summary, there is no practice of government accounting going alone.China’s budget management is deepening with the establishment of public finance framework. In the era of building up a transparent government, efficient government and accountable government, China’s budget reform will moving towards the following directions:1) to enhance budget constrain, which means all the government revenue and expenditure should be approved by the parliament and all the budget execution should fully comply with the approved budget;2) to strengthen budget performance, which means cost-benefit analysis should apply to all budget fund. Public goods and service usually are non-competitive and government doesn’t have a good awareness on cost. Thus a good mechanism should be set up to measure government cost and benefit;3) to prevent fiscal risk, which means that government should not only care about current year revenue and expenditure, and should also pay attention to long term expenditure pressure and fiscal trend. Proper actions should be taken to prevent fiscal risks. Lessons in some countries have justified this;4) to enhance the public engagement in budget. Budget is a public document in nature, which should involve all the public in budget preparation and enable all the citizens to supervise budget information. Budget information doesn’t only include current year budget but also refer to all the assets and liabilities that result from previous government activities.However, China’s current government accounting is actually cash based budget accounting, which cannot meet the information need of budget reform in the following aspect. Budget accounting can only reflect current year budget revenue and expenditure and cannot accurately measure government operating cost and cannot meet the need of budget performance evaluation. Budget accounting cannot fully record government assets and liabilities and cannot reflect government financial situation and long-term fiscal risk. Thus we should explore what information does China’s budget reform need and what’s the requirement on government accounting reform? How to build up China’s government accounting system? And how to satisfy budget management information need? To explore government accounting from budget management information needs perspective has great meaning both in theory and in practice.This dissertation can be divided into five sections.Section one:this section includes chapter one, which deals with the background, motivation and meaning of writing this paper. This paper follows the concept that only put government accounting reform in the bigger background of budget management reform, can government accounting reform be meaning both in theory and in practice. Otherwise, government accounting reform will lose its purpose and results in pure technical disputes. Section two:this section includes chapter two, which explores the internal relation between government accounting and budget. After examining the nature of government accounting and the objective of budget management, this paper argues that budget and accounting are only different stages in government finance management circle, which support each other and enhance each other. Government accounting reform shares the same purpose and theory basis with budget reform.Section three:this section includes chapter three, which mainly discuss the international practice of budget and government accounting reform. International practice indicates that budget reform and government accounting reform are important aspect to enhance government management. Performance budgeting needs government cost accounting to do cost-benefit analysis. Media and long term budgeting needs government financial accounting to analysis government asset and liabilities. To enhance budget constrain need budget accounting to strengthen budget execution management. China’s government accounting reform should also have close links with budget management.Section four:this section includes chapter four, five, six, seven and eight. Chapter four analyzes China’s budget reform direction and the information need. After pointing out the insufficient of current budget accounting, this chapter points out that China should set up government accounting system with three components. These are government budget accounting, government financial accounting and government cost accounting. Chapter five deals with government budget accounting which records budget execution. Chapter six mainly explores government financial accounting, especially its difference with private accounting. Chapter seven discusses government cost accounting, which produces government operation cost information. Chapter eight deals with government accounting information reporting mechanism. Resulting from the above three sets of accounting system, government should report budget execution information, government assets and liabilities information, government revenue and expense information, government operation cost and government cash flow information.Session five, this section includes chapter nine which mainly explores the route of China government accounting reform under the background of budget reform. Currently, China is undertaking budget reform. Government accounting reform should closely support the budget reform. In building up of three sets of government accounting system, three aspects should be noticed. First, there must be a complete set of government accounting standards and regulations. Second, the information produced by the three sets of accounting system should be fully used which is the meaning of the reform. Third, government accounting reform should progress steadily. It’s a huge project and should coordinate other reforms.