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A Review of the Regulatory & Legal

Framework of Public Sector Accounting In Nigeria

The research work examines the legal basis and the regulatory framework that form the basis of public sector accounting in Nigeria. The 1999 constitution, the Finance (Control and Management) Act of 1958, Audit Act of 1956 and the Financial Regulation 2000 forms the basic legal document that guide preparation and presentation of accounts in the public sector. In addition, the International Public Sector Accounting Standards (IPSASs) issued standards that guide the preparation and presentation of public accounts. Problems faced by the public sector in complying with these bases when carrying out the activities of the government. The study discovered that human factor, implementation problem as well as public awareness are the major challenges hampering financial regulations at the federal level.

2014

Bello A. Sulaimon JUNE, 2014.

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A Review of the Regulatory & Legal Framework of Public Sector Accounting In Nigeria

Bello A. Sulaimon sulbellven01@yahoo.com; +(234) 8160442283

Department of Accounting, Bayero University, Kano

Abstract

The research work examines the legal basis and the regulatory framework that form the basis of public sector accounting in Nigeria. The 1999 constitution, the Finance (Control and

Management) Act of 1958, Audit Act of 1956 and the Financial Regulation 2000 forms the basic legal documents that guide preparation and presentation of accounts in the public sector. In

addition, the International Public Sector Accounting Standards (IPSASs) issued standards that guide the preparation and presentation of public accounts. Problems faced by the public sector in complying with these bases when carrying out the activities of the government. The study

discovered that human factor, implementation problem as well as public awareness are the major challenges hampering financial regulations at the federal level.

Key words: Public sector accounting, Legal framework, Regulatory framework, Public policies.

1.0 INTRODUCTION

1.1 Background to the study

Public sector can be described as entities or

organizations that implement public policy through

the provision of services and the redistribution of

income and wealth, with both activities supported

mainly by compulsory tax or levies on other sectors.

That is, it comprises governments and all publicly

owned, controlled and or publicly funded agencies,

enterprises, and other entities of government that

deliver public programs, goods, or services.

The regulatory frameworks of public sector

accounting are formulated at different time, some are

reviewed from time to time. Like the constitution of

the federal republic of Nigeria (1999) and Finance

(control and management) Act of 1958 and the

International Public Sector Accounting Standards

(IPSAS). While the appropriation Act and Treasury

letters and circular are issued by the minister of

finance from time to time for the running of

ministries, departments and agencies.

The legal framework of public sector accounting is

to provide a basis for financial management and

control and to ensure uniformity in the preparation

and presentation of government accounts.

1.2 Statement of the problem

The legal framework of public sector accounting is

set out to ensure proper management and control of

government financials and other resources.

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But there are situations whereby different legal bases

are of the same position as to the handling of some

issues, thereby making some of the bases difficult to

be differentiated.

These regulation are put in place in order to prevent

fraud and detect it when they occur, but frauds still

occurs and some are never detected, so they are just

partly productive and not fully.

In some cases, some of these regulations become

difficult to understand and implement in the public

sector. And this cause delay in compliance.

There is the problem of technically making it

compulsory for the government to comply even

when it is not convenient for it to do so. This could

lead to improper application of the regulations.

1.3 Objectives of the study

The objectives of this study includes:

1- To examine the legal and regulatory

framework of public sector accounting.

2- To explain the uses of the regulatory and

legal framework of public sector accounting

in Nigeria.

1.4 Significance of the study

This research work will remind the legislature, the

ministries and the various board that formulate and

pass into circulation the numerous legal and

regulatory framework of the public sector accounting

that the public sector is actually complying with the

regulations issued by them from time to time

1.5 Scope of the study

This research work covers the regulatory and legal

framework of public sector accounting. The legal

framework issued by the government as well as the

regulatory framework and standards issued by the

International Public Sector Accounting Standards are

the focus of this research work. The study reviewed

related articles on legal framework on public sector

accounting.

2.0 LITERATURE REVIEW

2.1 Theoretical framework

Public sector accounting is a system or process

which gathers, records, classifies and summarizes as

reports the financial events existing in the public or

government sector as financial statements and

interprets as required by accountability and financial

transparency to provides information to information

users associated to public institutions. It is interested

in the receipts, custody and disbursement and

rendering of stewardship of public funds entrusted

(Kara, 2012; ICA-Ghana, 2010).

Therefore, the public sector accounting system in

many countries uses cash bases accounting.

However, literature review on existing public

accounting revealed that cash accounting system

provides essential information and it is simple, easier

to understand, facilitate decision making, and much

more objective than other alternatives (Ross, 2003).

Nonetheless, the system is not planned to provide

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information on the cost of services, earned revenues,

account receivables, account payable, long-term

assets and liabilities, accrued interest on external

debt and stock value (Akenbor and Oghoghomeh,

2011; Zakiah, 2007; Saleh, 2007; Jones and

Pendlebury, 1984). To add, cash accounting system

is not significantly effective in providing accounting

information for efficient performance of public

sector organization as indicated by Okoye and

Oghoghameh (2011). They further indicated that, the

cash accounting bases has no indication of long-

term.

The government budget size and the contribution of

public expenditure to Gross Domestic Product are

very great especially in developing economies or

counties. There is a thin line between the public

sector and private sector accounting when looking at

concepts and techniques that are used. Further, the

emerging need and use of information technology by

both the public and private sectors have made the

issue of public sector accounting a pertinent part of

accounting studies in the world (ICA-Ghana, 2010).

2.1.1 Nature of Government or Public Sector

Accounting

The nature of government accounting has the

purpose of determining how much money was

received and its sources, how much was spent and

for what purposes and the financial obligations

accrued. Profit is not the main focus. On like the

private sector which has profit as the prime focus

and determine the profit of the business over a given

period. Hence, many factors influence government

accounting such as the role of government in the

different fields like the armed forces, health and

education and the policies set by government to

achieve its aspirations and goals. Thus, government

accounting is interested in information gathering that

will enable her to prepare Receipts and Payments

accounts (Omolehinwa and Naiyeju, 2012).

The practice of government sector accounting

evolved over the years with the focused on cash

receipts and disbursements on the cash accounting

basis or modified cash accounting basis. Hence

government revenue is only recorded and accounted

for when cash is actually received and expenditure is

incurred only when cash is paid irrespective of the

accounting period in which the benefit is received or

the service is rendered. It therefore means that, the

amounts incurred by the government in purchasing

fixed assets are treated the same way as expenses.

They are therefore written off as part of expenditure

for the period the costs were incurred (ICA-Ghana,

2010; Omolehinwa and Naiyeju, 2012; Oecon,

2010).

Since the payments made for the acquisition of fixed

assets by the government are written off in the year

of acquisition irrespective of the useful life of the

fixed assets, it follows that fixed assets like buildings

and motor vehicles which are usually used the

preparation of the balance sheet of a private sector

business will be available in preparing the balance

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sheet of government. According to Omolehinwa and

Naiyeju (2012), this explains why, for instance the

Accountant-General’ statement of assets and

liabilities of government will not include anything on

the fixed assets of the government. More so, since

fixed assets are not capitalized, depreciation for

fixed is not necessary in government accounting

system that uses cash basis of accounting. It can also

be pointed out clearly that since revenue is

recognized only when cash is received, debtors as it

is known in the private sector will be absent from

government financial statements.

2.2 Conceptual and Institutional Frameworks

2.2.1 Conceptual Framework

Sound public sector accounting rests on an articulate

framework which has been defined to reflect best

practices in the world. To this end, a conceptual

framework for public sector accounting is structured

to reflect objectives and scope, recognition and

measurement criteria, definition and qualitative

characteristics of financial information shown in

financial and accounting reports of public sector

accounting entities (Izedonmi and Ibadin, 2013).

Izedonmi et al (2013) explain that, conceptual

framework describes the period or time frame of

financial reporting of government levels. It is the

heart of financial reporting in the government sector.

It spells out the government accounting principles

and forms the basis of the preparation and

publication of budgets, maintenance of complete

financial records, provision of full disclosures and

submission to full audit. In other words, the

framework helps monitor incomes, expenses, assets

and liabilities and assist assessment of financial

consequences of transactions and events. This finally

leads to producing user-friendly financial reports on

a periodic basis.

2.2.2 Institutional Framework

The institutional framework comprises the legal,

institutional and the professional standards that

regulate the public sector accounting. The

International Public Sector Accounting Standards

(IPSASs) which is issued by the International

Federation of Accountants International Public

Sector Accounting Standard Board (IPSASB) is

probably the major standard for public sector

accounting. Nigeria is a signatory to IFAC and

adopts the relevant IPSASs issued by IPSASB. The

International Standards of Supreme Audit

Institutions (ISSAIs) is another institutional

framework. These bodies are of the overseeing the

management of public sector accounting to reflect

transparency and accountability within the wider

context of good public governance (Izedonmi and

Ibadin, 2013).

2.2.3 Public Sector Accounting of Nigeria and

its Regulatory Framework

The Nigerian public sector includes the

federal government, the 36 states, the 774 local

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government councils, all government corporations,

commissions and institutions (Omolehinwa and

Naiyeju, 2012).

According to Izedonmi and Ibadin (2013),

Nigeria Institutional frameworks includes statutory

framework, as the 1999 Constitution, the

Finance (Control and Management) Act of 1958

as well as the Audit Act of 1956. The Financial

Regulations, Treasury and Financial Circulars and

Circular Letters are others. They are envisioned

to guide the day-to-day operations of government

Departments and to aid the accomplishment of

probity and accountability. It also provides,

among others, the various types of funds as the

Consolidated Revenue Fund for the Federation and

for States and the various charges at the federal level

and at the state level.

2.3 Review and Assessment of the Legal

Framework of Public Sector Accounting

Over the years the Nigerian financial regulations

have undergone substantial changes as a result of the

need to adapt to the changing socio-economic, socio-

political and socio-cultural environments.

Nevertheless, the financial regulations of the Federal

Republic of Nigeria have remained sound on paper

but grossly inefficient and ineffective in

implementation.

Different laws had been promulgated in the form of

Acts, Decrees, Constitutions, etc, for among other

things, the standardization of its financial activities.

Below is a review and assessment of those laws, or

sections thereof, that serve to regulate the financial

activities of the Federal government of Nigeria.

The regulatory frame work or legal basis of Public

Sector Accounting are the basis upon which

preparation of Government Accounting is based

these includes:

2.3.1 The Constitution

The 1999 Constitution of the Federal Republic of

Nigeria is a legal document that regulates not only

government accounting but the whole aspects of

financial management in government.

In Chapter V, part 1 (E) of the Constitution, the

National Assembly was given certain powers and

control over public funds as a way of regulating and

controlling the operation of the different types of

government funds. Section 120(1), which is on the

Establishment of Consolidated Revenue Fund

(CRF), says “All Revenues or other moneys raised

or received by the Federation (not being revenue or

other moneys payable under this constitution or any

Act of the National Assembly into any other public

fund of the Federation established for a specific

purpose) shall be paid into and form one

Consolidated Revenue Fund of the Federation”.

On the withdrawal of money by the government for

public services, section 120(2) says “No moneys

shall be withdrawn from the Consolidated Revenue

Fund of the Federal except to meet expenditure that

is charged upon the fund by this Constitution or

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where the issue of those moneys has been authorized

by an appropriation Act. Supplementary

Appropriation Act or an Act passed in Pursuance of

Section 121 of this constitution”

Other sections with the objectives of financial

regulations at Federal government level are on

withdrawal of money from other Public fund Section

120 (3), Authorization of expenditure in default of

Appropriation Section (127), Contingencies Fund

Section (123), Remuneration of the President and

certain other officers Section (127) and Audit of

Public accounts Section (125),

All the sections of the constitution mentioned above

are meant to give a perfect guidance as to the

financial planning and control of the federal

government. The constitutional emphasis on the

concept of check and balance between the legislature

and the executive arms of government is enough

concern for a need to instill proper accountability

and sound control over the Public Funds. But

unfortunately, the constitution is almost always

under suspension by the Military. Decrees, which

would be skewed towards the interest of the military

junta, are, in the greater part of Nigeria’s post-

independence period, the supreme laws of the land.

The constitutional provisions, which are determined

by the representatives of the masses and

implemented by them, are a better means of attaining

accountability and control over public funds.

2.3.2 Finance (Control And Management) Act

1958 (As amended)

The Federal Ministry of Finance issues financial

regulations in accordance with and under the

authority of this Act. The Act governs the

management and operation of government funds. It

also regulates the accounting system, the books of

accounts to be kept and the procedures to be

followed in the preparation of accounts and financial

statements.

In the Revised Financial Regulations (1976),, which

were issued under the authority of this Act,

regulatory arrangements were forwarded in respect

of:

1. Government finance and Accounts and

2. Government Stores Under finance and

accounts, issues regulated include:

(a) Financial responsibilities of government

officers

(b) Procedures for revenue collection

(c) Classification and control of expenditure

(d) Consideration in award of government

contracts

(e) Establishment and duties of internal audit units

(f) Uses of and proper control of government

vehicles etc.

Under stores, issues regulated include:

(a) Classification of stores (allocated and

unallocated),

(b) Responsibility for supervision and custody of

government stores

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(c) Procedure for handing over of stores

(d) Treatment of loss on stores and unserviceable

stores.

(e) Regular stores inspection procedure, etc. Store

was defined as any material, moveable or

unmovable, belonging to the government.

Section 33 of the Finance (Control and management)

Act 1968 stipulates that the Accountant General shall

render to Auditor General accounts showing

government finances at the end of the financial year

and these shall include:

a. A statement of Assets and Liabilities.

b. A statement showing the sums estimated to

be received as revenue into the Consolidated

Revenue Fund and the sums actually received

in the period of account.

c. A statement showing the sums estimated to

be issued out of Consolidated Revenue Fund

and the sums actually so issued in the period

of account.

d. A statement showing the sums estimated to

be received as revenue into the Development

Fund and the sums actually received in the

period of account.

e. A statement showing the sums estimated to

be issued out of Development Fund and the

sums actually so issued iii the period of

account.

f. Any other statement as the Minister of

Finance may from time to time require.

With careful study one can understand and agree

that:

These regulatory provisions are capable of bringing

about financial discipline in the operations of

government if well applied. But the fact is that the

provisions are only on paper and are not to the

knowledge of most of those who are expected to

apply them. So, no application! The financial

regulations themselves might be considered outdated

considering the fact that the last time they were

reviewed was in 1976, about two decades ago.

2.3.3 Audit Ordinance 1956 (as amended by

Audit Act 1958)

This act covers the area of audit and accountability

within the government. According to Section B, Sub-

sections 1-3, of the Act and its subsequent

amendments, the accounts prepare by the

Accountant-General of the Federal (who is the Chief

Accounting Officer of the receipts, payments and has

the general supervision of the accounts of the

Government of the Federation) are to be submitted to

the Auditor-General for the Federation for audit. The

Auditor-General is the officer responsible, under the

constitution of the federation, for the audit of the

accounts of all Accounting Officers and for the

certificate of the Annual Accounts of the

Government.

The accounts are to be audited in order to ensure,

among other things,

1. Compliance with rules and regulations

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(financial and other wise),

2. Maintenance of proper books of account and]

3. Adequate security of public funds and

properties

The auditors reports on the accounts prepared are

submitted to the legislators for review and

consideration within 60 days and any adverse

report is sent to the Public Accounts

Committee (PAC) for thorough investigation.

The PAC is expected to represent the interest of the

general public since it is to be made up of the

representatives of diverse groups of people. It

is entrusted with necessary powers to

adequately carry out its functions:

(i) to provide a forum in which the accounting

officers are called upon to explain, in public,

matters on which their departments had been

queried by the Auditor-General;

(ii) to inform the National Assembly and the

general public of “defects in financial

administration” and the explanation of the

accounting officers when confronted with

them;

(iii) to serve as a vital link between the Auditor-

General and the National Assembly. There is a

lot of criticisms about the implementation of

the provision of the Act. In the first place,

Nigeria has not experienced much of civilian

rule, which allows the formation of PAC out

of the members of the National Assembly.

The Military which has been ruling the

country since 1967, save for the short break

of Shagari’s regime, has always suspended the

constitution and are only accountable to

themselves. When they put up what may look

like PAC they don’t appear to bother about its

report, let alone thinking of actually

implementing its recommendations. So, PAC

especially under the Military is seen as a

toothless bulldog! Decree 8 of 1987 and

Decree 34 of 1990, which are on PAC and

implementation of its decisions, are a

mockery.

Secondly, the Accountant-General of the Federation

appears not to be able to submit the annual Reports

to the Auditor-General in time. The Auditor-General

for the Federation once complained that the

Accountant-General was giving him accounts of the

Federation in a piecemeal manner (Lawanson,

1992). This shows that the treasury has been unable

to meet some of the qualities of a good report, which

include timeliness, completeness accuracy,

reliability, objectivity, understandability and

comparability. With a piece meal presentation of

reports, and in a delayed manner, none of the

qualities mentioned would be achieved and, so, there

would be no control.

2.3.4 Government Budget (Appropriation Act)

Budget is a written future plan of actions based on

projected revenue. In government in particular, the

budget is viewed as the principal means of securing

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accountability and control over the use of public

funds.

Government budgets contains the annual estimates

of capital and recurrent expenditures and revenues of

the government since the government is expected to

restrict its financial sourcing and spending on the

plan contained in the budget. Over the years,

Nigerian governments, civilian or military, have

been making annual financial planning in the form of

a budget also as to regulate their financial activities

for the achievement of national goals and objectives.

For a civilian government, there are usually some

constitutional provisions empowering the legislative

body to grant approval on modifications to both the

capital and recurrent expenditure and revenue

estimates before any funds can be expended or

collected. The Executive undertakes the execution of

the budget in relation to the collection of revenues

and disbursement of public funds. At the end of a

financial year, the actual results (in the form of

Accountant-General Reports) have to be measured

and released for comparison with Budgeted results,

so that appropriate actions could be taken on the

variance that might arise. This has not been possible

in Nigeria because of the reporting problem already

mentioned in this paper.

Military governments usually have military councils:

Armed Forces Ruling Council, Provisional Ruling

Council, Supreme Military Council (AFRC, or PRC,

SMC) that perform the same budgetary approval

work as the National Assembly in the civilian

government. But the councils are not made up of

representatives of the people – rather, members are

representing their military formations. They don’t

subject the budget estimates to much scrutiny, as the

civilian representatives would do. This, again, means

no control.

2.3.5 Financial Regulation 2000

These are regulations which are issued to regulate

various financial matters and set rules and

procedures for Public Accountability. They specify

the rules and regulations on opening of Bank

Account, collection of revenue, security of

documents. Revenue Control, issuance of cheques,

Payment procedure etc.

2.3.6 Treasurer Letters & Circular

These are directives issued in form of circular, letters

or memo to guide the day to day activities of

government ministries or departments. They are used

to amend existing financial regulation orb introduce

new policy.

2.3.7 Gazette

This is the government official newsletter. It is

published periodically and contains all government

policy statements like appointment of new officers,

retirement, financial statement, release of warrants,

advertisement on contract etc.

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2.3.8 Public Service Rule

Though this deals mostly on personnel matters but

there are some sections that are related to account for

example FR 2006 stated that hand over of

government furniture should be in line with public

service rule.

2.3.9 International Public Sector Accounting

Standard

These are standards approved by International

Federation of Accountants (IFAC) to be used in the

Public Sector. Presently there are twenty one IPSAS.

2.3.10 Others

Since government participates in others areas like

manufacturing banking, insurance etc. then

regulations like CAMA, BOFID, IFRS should be

observed by government companies operating in

such areas.

2.4 International Standards Boards And

Frameworks

Historically, local, state, and federal governments

and other public sector entities have exercised

jurisdictional powers to set individual standards for

accounting, measurement, and financial reporting.

Typically these frameworks are based on the

principles of cash accounting.

A number of different public sector standards have

evolved. Some standards are established at the

national level, with countries developing their own

set – or sets – of standards. For example, the

following three boards operate in the United States:

the Governmental Accounting Standards Board

(GASB), the Federal Accounting Standards

Advisory Board (FASAB), and the Financial

Systems Integration Office (FSIO, formerly Joint

Financial Management Improvement Program, or

JFMIP).

Public sector organizations face accounting

challenges that stem from the use of cash-based

accounting systems and a historical lack of

standardized international reporting practices.

Without a widely accepted set of rules, definitions,

and guide -lines, financial reporting data cannot be

accurately compared among organizations around

the world. The problems associated with a lack of

shared guidelines have long been recognized. In

response to this situation, a recent trend is the

development of uniform international accounting

standards. Many public sector entities are in the

process of adopting uniform standards, leading in

turn to compliance issues. As the move to

international standards continues, organizations are

starting to come to terms with the challenges

involved.

Other national standard setters include the Public

Sector Accounting Board (PSAB) in Canada and the

Australian Accounting Standards Board. At another

level, there are international standards included in

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the Government Finance Statistics Manual (GFSM),

issued by the International Monetary Fund (IMF),

and there are the International Public Sector

Accounting Standards (IPSAS),

International public sector accounting standard

(IPSAS are accounting standard issued by IPSAS

board. These standards are to be used by public

sector entities all over the world in the preparation of

government financial statements. These standards

are based on International Financial Reporting

Standards (IFRS) issued by the International

Accounting Standard Board (IASB).

2.4.1 Objectives of IPSAS

IPSAS aims to make improvement in the quality of

general purpose financial reporting by the public

sector entities, thereby leading to better informed

assessments of the resources by all concerned.

2.4.2 The scope of IPSAS

IPSAS as accounting standards are to be applied by

national governments, regional like: state, provincial,

territorial governments, local government like cities

and towns. They are also to be applied by related

governmental entities. E.g agencies, boards and

commissions. IPSAS are standards widely used by

international government organization like UN, AU,

EU and IMF as of now, IPSAS do not apply to

government business enterprises.

2.4.3 Adoption of IPSAS

Some of the international government organization

that have adopted IPSAS are:

International Monetary Fund (IMF)

Agricultural Development Bank (ADB)

United Nation (UN)

United Nation Development Programme (UNDP)

European Union (EU}

2.4.4 Convergence of IPSAS with IFRS.

IPSAS are based on the international Financial

Reporting Standards (IFRS). Formally known as IAS

(International Accounting Standards). IFRS on

which IPSAS is based are issued by the International

Accounting Standards Board (IASB), International

Public Sector Accounting Standard Board ((IPSAB)

adoptes IFRS to a public sector context when

appropriate.

In the process of doing this, IPSASB attempts

wherever possible, to maintain the accounting

treatment and original text of the IFRS, unless there

is a significant public sector issue that will warrant a

departure.

2.4.5 The language of IPSAS

IPSAS standards text that is approved that which

was published by IPSASB in the English language.

However, this IPSAS handbook has been translated

into a number of language like French, Spanish,

Germany and Arabic from the English version.

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2.4.6 Features of IPSAS

Presently there are 31 standards on the accrual basis

of accounting while on the cash basis of accounting,

there is just one standard as contained in the IPSAS

handbook that was published in March 2011.

When the accrual basis of accounting underline the

preparation of the financial statements, the statement

will include the following:

- The statement of the financial position of the

ministry or department (IPSAS 1).

- The sratement of the financial performance in the

public sector (IPSAS 1).

- Cash flow statement (IPSAS 2).

- The statement of change in net assets (IPSAS 1).

- Notes to the financial statements (IPSAS 1).

And when the cash basis of accounting underlines

the preparation of financial statements, the main

financial statement is the statement of cash receipts

and cash payment.

2.4.7 Due process about IPSAS

IPSAS are issued by International Public Sector

Accounting Standard board which is an independent

organ of IFAC (International Federation of

Accounts), The IPSASB which provides the

opportunity for comment by interested parties

including preparers standard setters and individuals .

IPSASB usually meets to discuss the development of

IPSAS, and approve the issuance if these IPSAS so

developed. Agenda prepared and minutes of the

meetings of the IPSASB are published on the IPSAS

website: www.ipsasb.org.

Observers on the International Public Sector

Accounting Standard Board (IPSASB) includes:

- United Nation (UN)

- European Union (EU)

- World bank

- International Monetary fund (IMF)

- United nation development programme.

- Organization for economic co-operation and

development (OECD)

- International Organisation of Supreme Audit

Institutions (INTOSAI)

International Organisation of Supreme Audit

Institutions (INTOSAI) is a worldwide affliation of

government entities. Its members are the chief

financial controller and Auditor General offices of

the nation.

The organisation was founded in 1953 in Havana,

Cuba. Originally, it wa formed by thirty four (34)

audit organisation, but currently as of 2010, the

membership of the organisation includes 193

institutions (188 national institutions, the European

court of auditors and four (4) associated members.

This organisation holds a triennial conference

entitled the International Congress of Supreme Audit

Institutions (INCOSAI) it publishes the quarterly

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international journal of government Auditing. This is

the official publication of INTOSAI

The adoption of IPSASs by governments will

improve both the quality and comparability of

financial information reported by public sector

entities around the world. It will improve the

comparability of reports between various

government agencies, parastatals, donor funded

projects etc. Reports prepared in accordance with

IPSASs provide for comparability between different

financial periods, even within the same institutions,

hence facilitating management decisions.

2.4.8 Transparency

Disclosure information requirements of various

reports will facilitate transparency in the facial

dealings of public institutions. These disclosures will

enable users of financial information interpret the

reports in the right context and better decision

making processes.

The adoption of IPSASs by governments will

improve both the quality and comparability of

financial information reported by public sector

entities around the world. It will improve the

comparability of reports between various

government agencies, parastatals, donor funded

projects etc. Reports prepared in accordance with

IPSASs provide for comparability between different

financial periods, even within the same institutions,

hence facilitating management decisions.

There are cost to be incurred in the implementations

of IPSASs. Statutory bodies responsible for

enforcing accounting regulations require funding to

roll out implementation of IPSAS. These costs

include research, training, technology and

consultancy costs.

There is call for political goodwill in the

implementation of better accountability in the Public

Sector due to divergent views on accountability.

2.4.9 Compliance with International Public

Sector Accounting Standards (IPSASs)

The International Public Sector Accounting

Standards (IPSASs) have been accepted by the

World Bank and the International Monetary Fund

(IMF) hence, they are requiring that all countries or

bodies use these standards for accounting for funds.

Also, other international organizations which

provide funds to developing countries stipulate

IPSASs compliance as a condition. Thus, creditor

countries are beginning to use public sector

accounting compliance to IPSASs to assure

themselves that funds and grants given are being

used in the public (Izedonmi and Ibadin, 2013).

Chan (2008) described IPSAS as defacto benchmark

for evaluating government accounting processes and

practices worldwide.

The World Bank in collaboration with the office of

the Accountant-General cited in Omolehinwa and

Naiyeju (2011), conducted research and found that

the 2010 financial report of Nigeria has no record in

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the consolidated account for external aids and grants;

no complete disclosure of financial activities of

controlling entities such as NPA, NNPC and CBN;

unrealistic gains/losses due to foreign exchange were

not reported; payments on behalf of third parties

were not disclosed; inability of controlling entities of

the Federal Government of Nigeria to pay their

account as at when due; no account for undrawn

assistance and inadequate disclosure of cash out of

direct controls for instance under litigation.

However, according to Wynne et al. (2011), some of

the good financial practices identified in Nigeria

using the 2008 financial statements include:

inclusion of audit certificate from the auditor

general; inclusion four statements cash flow, assets

and liabilities, consolidated revenue fund and capital

development fund and the consistency of the main

totals between them; inclusion of comprehensive set

of notes and accounting policies including

outstanding impress and advances; detailed schedule

provided of internal and external loans; details

provided of subventions to parastatals by the

overseeing of ministry, department and agency;

consistency of the financial statements from t 2005

to 2008 (when the new format stated); financial

statement appear on the internet; the development of

some financial reporting guidelines by FAAC.

According to Obazee (2008), even though in Nigeria,

government operations and accounts have been

conducted within the general framework of the

principles of fund accounting, there is a major

problem when it comes to the absolute application of

the principles to financial reporting.

2.5 Problems and Challenges

The specific problems hampering financial

regulations at the Federal government level, and

which are manifesting in continuous financial in

efficiency, can be discussed under the following sub-

headings:

2.5.1 Human Elements:

This, in any system, is the most essential but the

most difficult to control. Getting qualified people

who can accurately interpret and apply the financial

regulations is a source of worry in government

quarters. The attitude to work of the officers who

interpret and apply the regulations, and the speed

with which the regulations are being applied and

interpreted, count very much in the realization of

efficiency in the operations of government.

The government is finding it very difficult to obtain

and retain an adequate number of qualified

accounting and finance personnel that can manage its

accounting and financial duties as expected by

various legislation. Government accounting and

financial systems are not being managed by people

who have got their training from some professional

bodies like ACCA, ANAN, ICAN, ICMA, etc it is

managed mostly, by people who joined the civil

services after basic education, with the intention of

making a career in the civil service. Accounting and

Page - 15 -

finance graduates are not being attracted to the civil

service may be because of the comparatively poor

conditions of service of the public sector.

2.5.2 Implementation Problems

Programmes implementation is a basic problem in

Nigeria. Plans might look very good, but when it

comes to implementation, performance is poor. This

attitude can be said to be the bane of the country’s

development. The attitude is attributable to the

indiscipline, selfishness, arrogance and blatant in

consideration for the rights of others are the

characteristics of most government. Cases of frauds

or financial malpractice and financial

misappropriation or mismanagement are rampant in

the government, an indication that the financial

regulations set are not being followed to the later.

It is, therefore, a challenge to whoever is in control

of the government, civilian or military, to make it a

point of duty the attainment of financial efficiency

through strict adherence to the financial regulations.

2.5.3 Public Awareness:

There is general lack of awareness of the existing

financial regulations and the right of the citizenry

that the regulations seek to protect. The citizenry has

no concern over the way government resources are

being utilized and how the resources are being

accounted for. This may be due to unawareness of

the purpose of government accounting. “Often there

are very scanty and weak public and social reactions

to excesses, even when such excesses include

deliberate misallocation, mismanagement, fraud,

embezzlement conversion and other wastages”

Oshisami and Dean (1984). This observation is a

pointer to the fact that there is almost zero need for

accountability by public officers to the masses and

this seduces the officers to spend public funds

anyhow. The masses are not aware of the financial

regulations to be respected and as they are not being

informed of what public officers are doing, they tend

not to worry themselves thinking of how to deal with

the corrupt leaders.

Sometimes, those who are expected to be well

informed, like politicians, legislators, businessmen

and administrators, also demonstrate ignorance of

the existing financial regulations and the purposes

they were set to serve.

3.0 SUMMARY, RECOMMENDATION

AND CONCLUSION

3.1 Summary

The study examines the legal and regulatory

framework which forms the basis of accounting in

the public sector. Issues regarding government

budget (appropriation act) and financial regulations

2000, treasury letters and circulars issued from time

to time, regulating the running of ministries daily

activities, the federal government gazette, public

service rules are also examined in the research work.

In addition, IPSAS, INTOSA and PFMI (1999) have

also been examined by the research work.

Page - 16 -

According to the paper, all the legal documents

regulating financial activities at the Federal

Government level need to be overhauled and made

workable under the current and future dispensations,

if the country is to move forward. The paper is of the

view that the legal documents as they now exist, do

not bring about good accountability, control and

decision making at the Federal Government level,

and by extension, at the other levels of government

namely state and Local Governments.

The specific problems facing financial regulations at

the Federal Government level include: inadequate

and unqualified personnel for the interpretation and

application of the regulations; unpatriotic tendency

on the part of the leaders, as regards the implantation

of the regulations; and the general lack of public

awareness of their right to know how the

government is spending the public funds.

3.2 Conclusion

There is no doubt that the legal and regulatory

framework which form the basis of accounting in the

public sector has done much in the management and

control of the public resources for the benefit of the

citizens.

But despite this benefit, some of the intended

objectives have not been fully achieved, the

elimination of fraud and waste of public resources.

Fraud and waste of resources still go on in the public

sector today.

In addition, there are still cases of non-compliance

with some of these regulation, in some situation due

to lack of fund. And in some situation, it is due to

lack of enough human skill to put into use some of

these regulations.

3.3 Recommendation

The following are the suggested solution which is

believe that when implemented will go a long way in

solving the problems.

1. Government should be able to employ qualified

accountants and accounting graduates who can

interpret and apply the financial regulations.

Alternatively, all those civil servants managing

the finances of the government should be

adequately retrained in line with the challenges

of their different offices. Also training and

retraining should be organized for government

staffs to get them updated on the new

international public sector accounting standard

(IPSAS).

2. The government should embark on a public

enlightenment programmes that would help

educate the citizenry about the financial

responsibilities of the government and what they,

too, are expected to do so as to ensure proper

accountability and control over the financial

resources of the government. No reasonable

progress, growth or development can be made

without public awareness of the financial

regulations that are designed to guard against

abuses, inefficiencies and mismanagement.

Page - 17 -

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Appendix 1: International Public Sector Accounting Standards

IPSAS Title Basis

IPSAS 1 Presentation of Financial Statements IAS 1

IPSAS 2 Cash Flow Statements IAS 7

IPSAS 3 Net Surplus or Deficit for the Period, Fundamental Errors IAS8

IPSAS 4 The Effect of Changes in Foreign Exchange Rates IAS 21

IPSAS 5 Borrowing Costs IAS 23

IPSAS 6 Consolidated Financial Statements and Accounting for Con IAS27

IPSAS 7 Accounting for Investments in Associates IAS 28

IPSAS 8 Financial Reporting of Interests in Joint Ventures IAS31

IPSAS 9 Revenue from Exchange Transactions IAS 18

IPSAS 10 Financial Reporting in Hyperinflationary Economies IAS29

IPSAS 11 Construction Contracts IAS 11

IPSAS 12 Inventories IAS 2

IPSAS 13 Leases IAS 17

IPSAS 14 Events After the Reporting Date IAS 10

IPSAS 15 Financial Instruments: Disclosure and Presentation IAS 32

IPSAS 16 Investment Property IAS 40

IPSAS 17 Property, Plant and Equipment IAS 16

IPSAS 18 Segment Reporting IAS 14

IPSAS 19 Provisions, Contingent Liabilities and Contingent Assets IAS 37

Page 20

IPSAS 20 Related Party Disclosures IAS 24

IPSAS 21 Impairment of Non-Cash Generating Assets IAS 36

IPSAS 22 Disclosure of Financial Information About the General Government Sector -

IPSAS 23 Revenue from Non-Exchange Transactions (Taxes - and Transfer)

IPSAS 25 Employee Benefits IAS 19

IPSAS 26 Impairment of Cash-Generating Assets IAS 36

IPSAS 27 Agriculture IAS 41

IPSAS 28 Financial Instruments: Presentation IAS 32

IPSAS 29 Financial Instruments: Recognition and Measurement IAS39

IPSAS 30 Financial Instruments: Disclosure IFRS 7

IPSAS 31 Intangible Assets IAS 38