Full Project – AN ASSESSMENT OF PUBLIC SECTOR ACCOUNTING AND ITS IMPACT ON FINANCIAL CONTROL SYSTEM IN NIGERIA

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AN ASSESSMENT OF PUBLIC SECTOR ACCOUNTING AND ITS IMPACT ON FINANCIAL CONTROL SYSTEM IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Accounting has been defined as the business language, and the accounting profession as the backbone of the corporation. This is due to the fact that accounting, in addition to its functions, serves as the custodian of an organization’s resources and also serves as a vehicle for deploying these money in such initiatives as to support survival and growth. According to Akeju (2011), while public sector accounting is theoretically identical to private sector accounting, the focus of public sector accounting is considerably different. The majority of government organizations and municipalities must track monies earned from tax revenues as well as expenditures tied to projects or allocations. Furthermore, governments may be required to adhere to a set of accounting standards that differ from those used in the private sector. The development of an international accounting standard assists nations in adhering to comparable norms in order to display information in a consistent manner.

Government accounting, according to Ibhahulu (2012), is the process of evaluating, documenting, summarizing, reporting, and interpreting the financial transactions of government entities. Olakunrin (2008) developed a more comprehensive definition as the process of recording, analyzing, classifying, summarizing, communicating, and interpreting financial information about the government in aggregates and detail, reflecting all transactions involving the receipt, transfer, and disposition of government funds and property.

According to Olakunrin (2008), government accounting often employs a set of procedures that track financial data. Rather than attempting to calculate how much money a public sector institution has made, the entity is required to publish financial information to interested parties, typically citizens. Because money is separated into several categories, it is more difficult for a government agency or municipality to spend money on unapproved activities. To move monies between government fund accounts, elected authorities or legislatures must make appropriations or spending authorizations. This procedure seeks to limit free-will expenditure of money that can soon deplete an agency resource. As a result, the goal of any government accounting should be to establish a standard of ethics and accountability for a country’s financial information. Standard public accounting rules will also make auditing a country simpler. When governments use public sector accounting norms, it is also more difficult for them to conceal illegal financial activities.

1.2       Statement of the problem

Adoption of inadequate and unsuitable public sector accounting principles and standards has resulted in a lack of financial control in the public sector. This is obvious because the accounts of local, state, and federal governments are marked by deficiencies such as incorrect maintenance and bookkeeping of accounts and other relevant documents, misappropriation of public funds, particularly by senior officials, making internal control difficult in the sector. Strong internal controls, according to Meigs and Meigs (1970), are required in the public sector not just for purchases and sales transactions, but also for all other sorts of activities. They emphasized the need of maintaining effective internal controls over transactions involving cash receipts and cash payments. Thus, internal controls are so crucial that they influence all of a sector’s assets, liabilities, income and costs, and all aspects of operations. However, in the absence of appropriate financial supervision, resources are squandered, fraudulent activities occur, and public sector inefficiency becomes unavoidable. Owing to the gap in literature on recent studies, the researcher perceived a need to understudy an assessment of public sector accounting and its impact on financial control system in Nigeria

1.3       Objective of the study

The main objective of this study is to appraise the impact of public sector accounting in Nigerian financial control system. Specifically, the study seeks to

1. To ascertain the extent at which accounting ethics are adhered to in the public sector

2.  To ascertain whether the control of public fund adopted by the local government is appropriate.

3. To determine if the accounts of  government are characterized by inadequacies such as, improper maintenance and book keeping of accounts and other necessary records, embezzlement of public funds especially by the top officials.

4.  To recommend strategies by which the local government can use in detailing out funds and prevent revenue leakages.

1.4 Research Question

1.        What is the extent at which accounting ethics are adhered to in the public sector?

2.        Is  the financial control of public fund adopted by the local government is appropriate?

3.        what  are the inadequacies  characterized by  government account s?

4.        What are strategies by which the local government can use in detailing out funds and prevent revenue leakages.

1.5       Significance of the Study

Findings of the study will be of immense significance to the staff of Aba South local government. It will go a long way in enlightening them on the concept of public sector accounting as well as the best strategies to be adopted to monitor its generated funds. This research work will as well be of benefit to students and researchers because it will widen their scope from the information contained in this research work and lastly, it will help the entire nation in modifying the methods and approaches used by different ministries, parastatal and other inter-ministerial departments in their financial control system and also it will help them in improving revenue generations and minimizes expenditures since public sector is differentiate able from private sector or bodies.

1.6       Scope of the Study

The scope of this study borders on  the impact of public sector accounting in Nigerian financial control system.  It will ascertain the inadequacies characterized by public accounting and  recommend strategies by which the local government can use in detailing out funds and prevent revenue leakages. However since the topic is related to public sector and all level of government cannot be covered, the study is therefore limited the grass root government which is the local government with particular reference to Aba South Local Government Area in Abia State.

1.8       Limitation of the study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. The significant constraint was the scanty literature on the subject owing to the nature of the discourse thus the researcher incurred more financial expenses and much time was required in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. Additionally, the researcher will simultaneously engage in this study with other academic work. More so, the choice of the sample size was limited  as few civil servant in the Aba South Local  government were selected to answer the research instrument hence cannot be generalize to other  Local Government outside that region. However, despite the constraint  encountered during the  research, all factors were downplayed in other to give the best and make the research successful.

1.8       Definition of Terms

Accounting : Accounting may be defined as the collection, compilation and systematic recording of business transactions in terms of money, the preparation of financial reports, the analysis and interpretation of these reports and the use of these reports for the information and guidance of management

Public Sector Accounting: Public Sector Accounting is the systematic process of recording, communicating, summarizing, analyzing and interpreting the financial statements and statistics of Government in aggregate and details.

Financial Control : Financial controls are the procedures, policies, and means by which an organization. monitors and controls the direction, allocation, and usage of its financial resources.

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Full Project – AN ASSESSMENT OF PUBLIC SECTOR ACCOUNTING AND ITS IMPACT ON FINANCIAL CONTROL SYSTEM IN NIGERIA