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CvSU MANUAL OF OPERATIONS
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f. Financial Management and Control System

A typical issue regarding the financial aspect of IGPs is whether to
continue with the existing government accounting method or to adopt
the commercial accounting in this Manual.

To be sure, it will help if we refer back to the twin objectives of
IGPs, which consists of profit and instruction. It is assumed that the
sustainable profitability of IGPs will help bolster the instruction
aspect as it gives indisputable proof that the theories being advanced
in the classroom have sound basis in the market place. Accordingly,
the Manual proposes recognition of full costs as the only method that
would give accurate profitability indicators. Depreciation, bad debts,
amortization of capital expenditure is items that should be found in
the financial statements of the IGPs.

Without full costing, the profitability indicators assure IGP
Managers, Directors, and personnel of remuneration without being
certain that this is reflective of their contribution toward the
attainment of IGP objectives. Thus, under existing pay scheme, the
government ends up subsidizing operations that are not financially
feasible. The bureaucratic layer thickens and additional benefits are
given with little or no benefit to the government.

It is also observed that the existing government accounting system
encourages the proliferation of very small IGPs for welding operation,
material testing etc. This is tolerated partly because of the desire to
accommodate as many IGP managers as possible and partly because
the existing accounting system does not adequately reveal the hidden
cost and cost allocation problems associated with this set up.
Another perceived incompatibility of government accounting
with IGP operations is the need for strict adherence to establish the
guidelines and procedures in purchasing supplies and materials. The
manual has put in place enough mechanism to guarantee the
propriety of IGP expenditures. Tedious documentation and other
requirements will therefore serve no other purpose than to stifle the
IGP or render it ineffective against its competitors; hence, the Manual
proposes the use of commercial accounting for IGP operations.

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