preface

The reform of governmental accounting, whose basic function is to provide comprehensive information on the government's economic activities, is always pushed forward by financial risks or financial crisis. At present, China's government debt has caused widespread concern and worries both domestically and abroad. Therefore, Ministry of Finance of the People's Republic of China has continuously issued various regulations and measures to control and resolve the risks of local governments'debt, among which one important and fundamental measure is to make the reform of governmental accounting and governmental consolidated financial statements as an important information resource of the credit rating of local debt. Meanwhile, the Third Plenary Session of the 19thCentral Committee has proposed to establish modern financial system, and governmental financial accounting based on accrual-basis principle is an important element of the system. It is obvious that the reform of governmental financial accounting is imminent. Then what's the most important problem to be resolved in the reform? The writer thinks it is to establish the governmental accounting entity. Reviewing the current financial system of China, the local government and its divisions cannot be considered as economically and legally independent entity which is the basic premise of being an accounting entity. How to define the rights and liabilities so as to establish the governmental accounting entity? The practice proposes urgent demand for theoretical study. Reviewing the exist ing various researches on governmental accounting entity, the writer found that those research lies only in a technical level. Professional academics have not yet been aware of the importance of this issue or fail to realize that this issue needs more research. That's the basis of the research of this paper.

The paper consists of four parts and nine chapters in total. The first part (Chapter 1)is introduction. In this part, the writer analyzes the motivation of the reform of governmental accounting, points that the most important problem ahead of the reform is about the system rather than technology, and proposes that the primary issue to resolve in the reform is to establish the independent status and rights and liabilities of the governmental accounting entity in the system. This chapter summarizes the existing research results, points out that the professional field has not paid enough attention to this issue, and determines the starting point of the study of this paper.

The second part(Chapter 2)is the theory foundation of this paper. At first, it explains the definition of accounting entity, accrual-basis, as well as their relations, and points out that the two concepts cannot be separated just like the form and content of a thing. Then it summarizes the development process of the accounting entity concept including its germination, generation, formation and development with the market economy. From the process, it can be found that accounting entity exists on basis of independence in economy and in legal level. If the governmental department of China can not be independent economically and legally, it is impossible to be qualified accounting entity and its accounting information is still incomplete, which in turn will compromise the value of decision.

The third part, consisting of Chapter 3 and Chapter 4, introduces the reform process of American governmental accounting, theory of American govern mental accounting entity, fiscal decentralization theory and assigned rights and liabilities among American government body, as well as the ultimate resolution of local government debt, i.e. the implementation of Bankruptcy Lam, so as to learn its experiences in defining the rights and liabilities of the local governmental accounting entity under the fiscal decentralization system.

The fourth part includes Chapter 5 to Chapter 9, tracing to the source of the problem about the rights and liabilities of the governmental entity under the fiscal system of China, analyzing the status quo and problems as well as the causes, and attempting to seek reform thinking.

There are historical reasons for the chaos about the current rights and liabilities of governmental departments. Chapter 5 to Chapter 7 analyzes the reform process of the fiscal system of China during the past several decades. Under the planned economic system, individuals, enterprises, and governments lost their identity of economic entity, and have gradually got back the identity after the reform and opening-up policy. However, there is a lot of turns and twists in the way of the return of the governmental entity. Due to the decentralization of economic authority and one-sided emphasis on economic growth in the performance evaluation of government officers, the fiscal revenue of local government mainly comes from extra-budgetary land-transferring fees of free control which results in the uncontrolled debt financing. At present, the local government is more like an economic entity which pursuing business profit, rather than a public body to provide public service. Chapter 8 makes an analysis of the lagged reform of budget accounting as well as its boundedness.

Chapter 9 points out that the current chaos of government's rights and liabilities results from the emerging economic characteristics of local government whose characteristics of a public body have been seriously weakened. The past reform has only broken the‘big pot'of interests sharing but hasn't broken that of risk sharing. As a result, when the allocation of rights and liabilities is not clear, the financial risks of local government is continuously pushed up and accumulated and transferred to the central government. Without reform of government accounting, the fiscal risks may develop into fiscal crisis.

This paper places it as the priority to establish the accounting entity identity of the government and to define its rights and liabilities. At the macro level, an institutional framework of‘level regime, level powers, level rights of property, level tax base, and level budget'should be established, giving proper autonomous right to the local government; at the micro level, it should be made clear that each organization, government of each level, each department and unit, has its transparent and distinct risk responsibility, so as to form an risk sharing mechanism with legal force.