ACCOUNTING AND BUDGETING FOR SEMI-AUTONOMOUS GOVERNMENT ORGANISATIONS IN THE JAPANESE
CENTRAL GOVERNMENT
The Center for National University Finance
JAPAN
2-1-2 Hitotsu-Bashi Chiyoda-Ku
Tokyo, 101-0003, JAPAN
Tel: 81-3-4212-6202
Fax: 81-3-4212-6250
Email: kiyoshi@zam.go.jp
ABSTRACT
Separation of execution functions from policy making
in Japanese central government will start in 2001. The separation is called as
agencification, which endows execution bodies with a greater autonomy through
strengthening accountability for their performance. It naturally leads to shift
the management focus from input to output, therefore, financial management
system would transfer from cash to accrual basis: accrual based system focuses
on measurement of resources consumed to product outputs.
However, there exist several variations in
relationships between budgeting and accounting even though adopting an accrual
system. Agencification in Japan also shows a distinct system for harmonising
autonomy and accountability, while the semi-autonomous organizations shall
adopt accrual based accounting and prepare the financial statements. The distinct
point is that finance for the bodies is divided into two types of fund in
accordance with their activities: the grant for operating costs and the capital
expenditures from the central government. Also the funding is related to
accounting regulations. The operating costs are recorded in the profit and loss
statement, while the depreciations of fixed assets financed by the capital
expenditures do not appear in the profit and loss statement, but directly be
deducted from capital reserves in the balance sheet. The regulations are based
on the concepts that semi-autonomous bodies have full discretion to use the grant
for operating activities though the minister in charge retains to make a
decision on investment for fixed assets. The accounting principle presumes that
it is necessary for the bodies to maintain net operating balance at a positive
level, not keeping net worth.
The
regulations therefore contradict with GAAP. In addition every fixed asset is
recorded in the balance sheet, although the bodies are unable to make a
decision on replacement or construction of fixed assets, that is, could not
fully control the assets. Consequently, the regulations shall significantly
restrict the autonomy for capital assets. In this regard, two alternatives,
i.e. integrating two funds into a grant for current costs or renting the fixed
assets from the central government will be indicated and compared in terms of
greater autonomy and improving public accountability.