THE IMPACT OF PUBLIC SECTOR ACCOUNTING IN NIGERIA FINANCIAL CONTROL SYSTEM (A CASE STUDY OF ESAN SOUTH EAST LOCAL GOVERNMNENT AREA, EDO STATE).

CHAPTER ONE


                                  INTRODUCTION


1.1 BACKGROUND OF THE STUDY


Public  sector  is  that  sector  of  the  economy  established  and  operated  by


  government and its agencies distinguishable from the private sector and are


  organized on behalf of the whole citizens while Public sector accounting is


the process government agencies and municipalities use to record financial


  transactions.


  Mathias, (2004:78). Said, similar to private sector accounting in theory, the


focus of public sector accounting is somewhat different. Most government


agencies  and  municipalities  need  to  track  funds  generated  from  tax


revenues and expenditures related to projects or appropriations. In addition,


nations  may  need  to  follow  a  set  of  standard  of accounting principles


different  from  private  sector accounting rules.  The  creation  of  an


  international accounting standard helps  nations  to  follow  similar  rules  in


other to present information in a similar manner.


  Government accounting typically  uses  a  set  of  rules  that  tracks  financial


  information.  Rather  than  attempting  to  determine  how  much  money  a


  public sector entity has made, the entity must report financial information


to  interested parties,  primarily  constituents.  The  separation  of money  into


these  funds  makes  it  difficult  for  government  agency  or  municipality  to


spend  money  on  unauthorized  purposes.  Elected  officials  or  legislatures
 


must  create  appropriations  or  spending  authorizations  to  transfer  funds


  amongst  government  fund  accounts.  This  process  attempts  to  restrict  the


  spending  of  money  on  a  free-will  basis  that  will  quickly  deplete  an


agency?s resources


Similar  to private sector accounting, public sector accounting principles


often seek to lay a framework for accounting practices. 


  Afolabi,( 2004:320). Said rather than creating a hard set of rules to follow,


the principles allow for an application of basic principles to either large and


small  entities  or  municipalities.  An  international  set  of accounting


  principles is also necessary for smaller nations to learn and adopt rules that


will  enhance  their  internal  national accounting process.  Most  times,


  developing  nations  cannot  or  do  not  have  the  resources  capable  to  create


and  instil  a  framework  for  their public sector accounting practices.


  Adopting an international set of accounting rules will help them overcome


this problem and typically helps them start on the path better infrastructure


  development.


Another purpose of public sector accounting is  to  create  a  standard


  expectation  of  ethics  and  accountability  for  a  nation?s  financial


  information. Standard public accounting principles will also make it easier


for  a  nation  to  undergo  an audit.  it  is  also  harder  for  countries  to  hide


  inappropriate  financial  transactions  when  using public sector accounting


  principles. This research study will therefore appraise the impact of public



sector  accounting  in  Nigerian  financial  control  system  focusing  on  Esan


South East local government.


1.2 STATEMENT OF THE PROBLEM


The  problems  inherent  in  this  research  study  as  investigated  by  the


  researcher are;


1. INADEQUATE REVENUE: that is, the source of revenue available to


    Esan South East Local Government authority most often is not enough


    for them, as this invariably affects diverse activities that are carried out


    in the local government area.


2.  Poor administration of local government funds.


3. Another problem is the fact that the control of public fund adopted by the


    local government is inappropriate. It is as a result of this that there are


    still  setbacks  in  the  local  government  as  regards  to  infrastructural


      development.


4.  The  adoption  of  inappropriate  and  ineffective  public  sector  accounting


      principles and guidelines.


5.  Another  problem  is  that  the  accounts  of  the  local  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.



1.3 OBJECTIVES OF THE STUDY


The main objective of this study is to appraise the impact of public sector


  accounting  in  Nigerian  financial  control  system  and  also  to  aid  local


  government  improve  on  their  revenue  generation  and  collection  to  that


point  where  all  collectable  revenue  are  actually  collected  and  safely  paid


into the council treasury.


Other objectives include the following:


1. To investigate whether the sources of revenue available to Esan South


    East Local Government authority is enough for them.


2. To find out whether the revenue generated within the local government


    is put into good use.


3. To  ascertain  whether  the  control  of  public  fund  adopted  by  the  local


    government is appropriate.


4. To  determine  if  the  accounts  of  the  local  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.


5. To  examine  if  the  public  sector  accounting  principles  applied  by  the


    local  government  is  appropriate  and  effective  and  also  to  recommend


    strategies by which the local government can use in detailing out funds


    and prevent revenue leakages.



1.4 RESEARCH QUESTIONS


The  following  research  questions  are  formulated  for  the  purpose  of  this


research work:


1. Are  the  sources  of  revenue  available  to  Esan  South  East  Local


    Government authority enough for them? 


2. Are  the  revenues generated  within  the local government put  into good


    use?


3. Is the control of public fund by the local government appropriate?


4. Are the accounts of the local government characterized by inadequacies


    such as improper book keeping and maintenance of other records etc?


5. To what extent do the irregularities as regards to public fund in the local


    government affect the diverse activities of the local government?


6. Are  the  public  sector  accounting  principles  applied  by  the  local


    government appropriate and effective?


1.5 FORMULATION OF RESEARCH HYPOTHESES


The  following  hypotheses  are  formulated  for  the  purpose  of  this  research


work:


HO: the  public  sector  accounting  principles  applied  by  Esan  South  East


Local Government authority is inappropriate and ineffective


HI: the  public  sector  accounting  principles  applied  by  Esan  South  East


Local Government authority is appropriate and effective
 


HO: the  sources  of  revenue  available  to  Esan  South  East  Local


  Government authority is not enough for them


H2: the  sources  of  revenue  available  to  Esan  South  East  Local


  Government authority is enough for them


HO: the control of public fund by the local government is inappropriate


H3: the control of public fund by the local government is appropriate 


1.6 SIGNIFICANCE OF THE STUDY


This  research  work  will  be  of  immense  significance  to  the  staff  of  Esan


East  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,  parastatals  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.  



1.7 SCOPE OF THE STUDY


This research work on the impact of public sector accounting in Nigerian


  financial control system is focused on Esan East local government of Edo


state.


1.8    LIMITATIONS OF THE STUDY


This research would have been generalized to all local government areas in


Nigeria but due to some numerous factors, I have decided to limit my study


to Esan south East local government area, Edo state.


The following are the constraints encountered in this research:


1. FINANCIAL CONSTRAINT: Finance is the key to the success of every


research work and the said finance was readily unavailable on my part as at


the time I was carrying out this research and as such, proper research will


not be carried out if I go about all local governments in Nigeria.


2.  TIME  CONSTRAINT:    The  time  stipulated  for  the  submission  of  this


work was obviously too short and as such was unable to go about all local


  government areas in Nigeria.


3. LACK OF KNOWLEDGEABLE AND SINCERE PERSONNEL: some


of  the  officials  employed  or  appointed  in  most  local  governments  in


Nigeria  including  that  of  Esan  south  East  local  government  has  no


  knowledge  of  what  public  sector  accounting  is  and  they  are  also  not


  approachable  because  they  placed  themselves  on  a  very  high  esteem  and


even  when  one  is  opportune  to  interview  them,  there  is  sure  to  be



  shortcomings arising from the basis such as, misinformation, and deliberate


  distortion  of  facts  and  these  is  as  a  result  of  not  letting  one  know  where


revenue comes from and how it is been utilized.


4.  LACK  OF  RESERCH  FACILITIES:  Research  facilities  such  as


  transportation  makes  research  work  easier  and  interesting  but  it  is  noted


that  Nigeria  has  a  poor  transportation  system  especially  in  the  area  were


most local government secretariat are situated and this restricted me from


going about all local government areas and as such, I was forced to focus


my  study  on  Esan  south  East  local  government  area  though,  the  research


was still very difficult to carry out.