The system of financial administration, including the accounting and auditing of Government transactions, followed in Bangladesh after the liberation of the country in 1971 was identical to the system prevailing in the composite India before 1947. In this system, the SAI was responsible for the compilation of accounts of Governments in addition to his auditorial functions. The Railway Accounts and Audit Departments which were separate were amalgamated for a short period but eventually were separated again. In August, 1974, the Bangladesh Administrative Services Reorganization Committee submitted a report dealing with the accounting and auditing system in the country and made specific recommendations. It believed that implementation of earlier decisions alone would not solve the complex audit and accounts problem. Further, the system of accounting and auditing would have to be developmental oriented and for that matter something more radical and fundamental would have to be done. It also observed that "it is a fact that when audit and accounts are merged into one single process, in actual practice both of them suffer and ultimately is likely to become ineffective".
The Administrative Services Reorganisation Committee were of the opinion that:-
In. October 1982, Martial Law Committee on organisational set up submitted a report recommending decentralization of the office of the Accountant General (Civil) dividing into 12 offices, 11 of which would be located at 11 Ministries and the office of Accountant General (Civil) would continue the compilation of Finance Accounts, Appropriation Accounts and prepare Audit Report. The Committee also believed that the proposed' decentralisation would be the first step towards separation of accounts from audit and lay the foundation for departmentalisation of accounts when the Ministries/Divisions themselves would be able to manage their own accounting functions.
The question of relieving the Audit department of accounting functions has been revived as part of the proposed reorganisation of the administration. On the analogy of UK, where accounting functions have been entrusted to the departments, several Committees/Commisions and certain other authorities had , recommended, from time to time, that similar arrangements-'should be introduced in Bangladesh. Earlier, separate departmental accounting offices had been formed in the Defence and the Railway Departments, but under the administrative control of the Ministry of Defence.
This precedent has also been quoted in support of the suggestion that the Audit Department should now be divested of its accounting responsibilities. Accounting responsibilities have been, recently, transferred to ministries as an experimental measure, and still under the obvious observation of the Government. The Chief Accounts offices have been placed under the control of the secretary of the Ministry concerned and their working has been differently organized from that of the Railway and the Defence Accounts Departments. It is too early to say whether any positive advantages have been gained or has contributed towards an increase in efficiency or more effective budgetary control as a result of this transfer, commensurate with the additional cost involved.
The separation of accounting from audit had been advocated on the consideration that it was somewhat in appropriate to combine both these functions in the same organization. This principle can be applied wherever accounts form an integral part of the departmental organization. There is an obvious need for external and independent agency to check that the internal accounting organization has not slurred over its responsibilities and has not been coerced by the administration into admitting questionable claims or into overlooking irregular practices. Where, however, the accounting organization itself is outside the control of the administration, as in government departments, this principle cannot have the same validity. The pre-check of claims before acceptance, the examination of contract documents, etc., in accordance with accepted financial principles and practices, undertaken by the accounting organization, are essentially audit processes. When these functions are discharged by an independent authority, there can be no apprehension of its being subverted by the administration. The principle on which an external audit is superimposed on internal accounting - and audit as in commercial or business enterprises is hardly applicable in government organizations. On the other hand, the earlier arrangements ensured economy in manpower, arrest dilution in competence already visible, and provide for specialization, leading to increased efficiency. These considerations should not be lightly dismissed.
The departmentalization of accounts is now being introduced on a different consideration the desirability of securing administrative competence and completeness. In a commercial concern, the chief executive is fully responsible for its efficient and economic administration and is therefore in overall control of its technical financial and accounting components. In Government, on the other hand, authority is diffused and financial control and accounting responsibility verted in organizations outside the administrative departments.
The transfer of accounting responsibilities along with delegation of financial authority to the ministries should, therefore, be viewed as necessary steps towards the evolution of an acceptable and logical pattern of administration. The purpose of transferring accounting functions to ministries should be to provide them with means for controlling the appropriations in accordance with the votes of Parliament and to introduce a greater flexibility in the utilization of the available resources by the process of permissible reappropriation. It should also enable them to keep a close watch on the progress of their plans and programmes. While these objectives could be fulfilled by necessary adjustments within the Audit Department and in the structure of the accounts, it would be more appropriate to rationalize the departmental organization to emphasize their undivided responsibility for the efficient and economic administration of their charges.