ACCOUNTING IN THE NIGERIA PUBLIC SECTOR (ISSUES, PROBLEMS AND PROSPECT)

(A CASE STUDY OF NEPA ENUGU)

By

ONYEMURU FLORA OZIOMA

Presented To

Department of Accounting

ABSTRACT

Today must public sector establishment has been accused of financial recklessness perpetrated by various ministries and parastatals, thus has opened up an can of worms in the bosom of our public sector.

The problem often experienced by operators of government establishment like National Electric Power Authority (NEPA) in maintaining a good accounting system with a view to enhancing accountability is the object of the research work.

However, chapter one deals strictly with the over view of the study in the introduction of the topic, also a brief history of the establishment (NEPA) their target, problems etc.

Chapter two talked about the basis of public sector Accounting, Acts regulating Nigeria public sector Accounting. Financial control in government accounting, comparison between government and commercial accounting, users of public sector accounting and finally some problems were identified.

This research work was carried out through oral interviews and distribution of questionnaires for the collection of data & relevant information from the departments of public affairs and accounts of the National electric Power Authority (NEPA) Enugu. Also information was sourced through secondary data, which includes textbooks, annual report and customer service charter NEPA).

The following chapter death with the analysis of data and testing the formulated questionnaire with chi-square technique.

Finally, the summary of the findings, conclusion and recommendations were discussed.

TABLE OF CONTENT

Cover page

Title page

Certification

Dedication

Acknowledgment

Abstract

Table of Contents

CHAPTER ONE

11 Introduction

12 Background of the Study

13 Objective of the Study

14 Statement of Problems

15 Research Hypothesis

16 Significant of the Study

17 Scope and Limitation

18 Brief history of the establishment

19 Definition of Terms

CHAPTER TWO

21 Literature Review

22 Basis of Public Sector Accounting

23 Objective of Public Sector Accounting

24 Nature of Nigerian Public Sector Accounting

25 The Scope of Public sector Accounting

26 Acts Regulating Nigerian Public Sector Accounting

27 Financial Control In Government

28 Comprise Between Government Accounting And Commercial Accounting

29 Users of Public Sector Accounting

210 Some identified problems of Nigeria Public Sector Accounting

CHAPTER THREE

31 Research Methodology

32 Sources and Method of Data Collection

33 Research Population

34 Sample Procedure

35 Data Technique

36 Analysis of Questionnaire

CHAPTER FOUR

41 Presentation and Analysis of Data

42 Testing & Prove of the Hypothesis

CHAPTER FIVE

51 Summary of Findings, Conclusion and Recommendation

52 Conclusion

53 Recommendation

Bibliography

Questionnaire used

CHAPTER ONE

INTRODUCTION

12 BACKGROUND OF THE STUDY

This historical perspective briefly traces the genesis of government accounting back to the ancient civilization of Babylon, Egypt, China, Greece and Rome as well as to the medieval civilizations of Europe up to the colonial experiences of Nigeria in the early 20^th century

i ANCIENT BABYLON: The temples and government of Babylonian Empire (3000 BC to 300 BC) employed hundreds of scribes as administrators Supervising temple accounts on a great mass of tablets" describe a variety of receipts and disbursements, wage payment, rental income, interest on loan, and real estate transactions Both the temple and the royal treasury sent scribes to distant parts of the Empire as collectors of taxes and tributes These men incurred traveling expenses for which they were later reimbursed Tithe and property taxes were normally paid in kind periodically the scribes prepared inventory of assets on hand Evidences of royal examination and audit exist (Keister 1963)

ii ANCIENT EGYPT: By about 5000BC the two Kingdoms of upper and Lower Egypt were founded They were united under Menes regarded as the first Pharaoh around 3500BC with capital at Memphis for several centuries all the land was owned by the king and the nobility The district governors called nor March's were responsible for the collection of taxes in the "nomes" (that is district) under their jurisdiction These were paid in kind since stamped money was unknown among the Egyptians till about the 4^th century BC

Government Accounting in Egypt was enhanced greatly by the introduction of papyrus as a writing material as it made record keeping less camber some and permitted a widen use of supporting documents The storehouse bookkeepers were very meticulous in documenting receipts into and issues out of the stores Nothing left the treasuring without a documented authority Extra security was provided by an elaborated internal control system, which required that the records of one official agree with those of another Royal storehouse superintendents audited accounts and fraud was punishable by torture and death (Chatfield, 1977:7)

iii CHINA: Government Accounting reached a peak of sophistication in the Chinese civilization during the Chao Dynasty (1122-256BC) That level of sophistication was hardly exceeded before the emergence of double entry system The hub of Chao's government agencies

The Grard Treasury authorized all expenditures and prepared summaries of receipts and payment at the end of each fiscal year The dynasty prime minister had overall responsibility for the budgetary process and for on site the detail of both functions were delegated to the office of the controller general The Chao's dynasty unproved upon the concepts of financial administration and public accountability inherited from its predecessors particularly Hsia dynasty (2206-1766BC) and Shang Dynasty (1766-1122BC) Every government agency was expected to prepare an annual report on its accomplishments and these were audited by the office of the Controller-General (FU, 1971)

iv GREECE: Owing to its democratic set-up, the citizens of Athens of the 5 ^th century BC possessed real authority over government finance Expenditure levels were statutorily fixed and controlled Members of the popular assembly sponsored financial legislation and controlled the receipts and disbursement of public money Ten state accountants chosen by lot, recorded revenue inflows and complied the list of government debtors (Chatfield 1977:9)

Public financial disclosure was mandatory, thus the records of public holders were examined by government auditors at the end of office and thereafter published The finance of Greek temple-treasures were controlled by the state, not by the priests Untouchable reserves for public emergencies were built up by dedicating surplus funds to the gods However, the most important Greek contribution to public sector accounting was the discovery of coinage by about 630 BC

v ROME: Roman government and bankers account began as an extension of financial documentation ordinarily maintained by households Family receipts and payments were recorded on daily basis in an "adversarial" or daybook and posted at the end of the month to a "Codex accept et expense" which was in effect a cashbook Household accounts were required under Roman law to support tax payments and to disclose the family wealth upon which a citizens civil rights depended to some extent

The Roman senate acting in the name of the people, controlled coinage and public finance under the republic The power to order payments was initially delegated to the consuls, but in 443BC was transferred to the consors, who thereby assumed overall change of the nation's financial administration Receipt & payment were made the responsibility of a small group of quarters that managed the treasury, paid the army, and supervised the government bookkeeping Under their direction clerks kept day books comparable to the family "Adversarial" which were summarized on monthly basis in the "Codex" A register of debtors referred to as a "columbarium" was also compiled A government official supervised by the treasurer audited public accounts At the end of their tenure of office the quaestor were required to render accounts to the senate and to the their successors

Tulius Caesar exercised personal supervision over the treasuring, and emperor Augustus completely revamped this operations Augustus introduced annual budgeting aimed at coordinating the Empire's fiscal activities, limiting expenditures to the amount of estimated revenues and enforcing better control at the various levels

vi ENGLAND: Government accounting in Britain emerged in the Middle Ages Early government tax rolls and manorial account books are among the oldest surviving documents in the English language After the invasion of England Williams the Conqueror took the tithe of all properly in the name of the Crown and 1086AD had a survey made which included all real properties and the taxes due on them The survey was documented in the Domes daybook From this book, the great roll of the exchequer, otherwise referred to as the pipe roll was compiled Beginning in 1130AD, the pipe roll provides 700-year narrative description of rent, fines, taxes and other levies due to the British Crown, together with a summary of payment made on these debts and expenses incurred in collecting them The sheriff was collected of the king's revenues and bailiff of his country estate, which were farmed out for a fixed rent The sheriff collected rent for the use of road, forest and fields, town, fine penalties and other taxes He was the chief executive accountable at the exchequer Twice per year the sheriff of each country was summoned to attend the exchequer session at Westminster There he rendered his account and necessary reconciliation was made When all the crown's counters were balanced by payments, tallies and allowances vouchers, the sheriff was required to swear to the Marshall of the exchequer that he had made his lawful account according to his conscience and thereafter released to returns to his country (Chatfield, 1977:21-24)

The origins of English Budgeting are closely associated with the long struggle to democratize taxation The bill of rights of 1989 provided for the parliamentary consent before any one may be taxed During the 18 ^th century, parliament required the crown to prepare annual estimates of all other government departments It became an accepted practice for the Chancellor of the Exchequer to deliver to the parliament, on behalf of the king, a comprehensive report on national finances at the beginning of each fiscal year Having taken over the king's taxing and spending power, parliament faced the task of holding officials at all levels accountable for their use of public funds

In 1785 an act for the better examining and auditing of the public account as passed to ensure a rigorous examination of the accounts of every department of government This was followed in 1787 with the passage of the consolidated fund act, thus providing an overall basis for accountability via a general fund through which all government revenue and expenditure passed Starting from 1802, these statements included details of revenues and expenditure and indicated the prospective surplus or deficit

vii NIGERIA: The making of a nation, Nigeria spans several hundreds of years and embraces periods of Arabic influences in the north and European influences in the South Prior to the arrival of the Europeans, great ancient kingdoms of Hausa-land, Igbo-land, Kanri-land and Yoruba-land had existed within the country's frontiers There had been some system of tributes taxes to the raling monarchs For example the revenue of Hausa states were obtained from various forms of taxes, Zakat" a tax on morale property which was used for charitable purposes; "Jangali-a tax on livestock; "Kharaj"-a land-tax based on annual production; "Jizyah"-a tax on conquered people (Slaves) The subjects of the kanuri empire paid in kind-one was a tax on the harvest to provide for the upkeep of the royal palace of the Mai of Borno, the other was to supply the needs of local government officials There had also been some system of tribute taxes paid to the Obas in Benin, Egba, Oyo and some other Yoruba Kingdoms of West Nigeria

In 1900 the British government took over the administration of the area and gave it the present name, Nigeria In that year it the royal charter granted the royal Niger company in 1885 to administer the territories which it held under treaty and concession was revoked and the protectorate of northern Nigeria was created with Lord Fredrick Lugard as its first High commissioner The country was divided into two protectorates, one in north and the other in the south

Britain had neither the men nor the money to govern Nigeria's vast regions directly so the natural rulers were enlisted to rule on her behalf The chiefs were allowed to stay in office as long as they ruled fairly, and British officials known as residents acted as their advisers Lugard is mostly remembered for the indirect rule: an administrative strategy considered suitable for Nigeria by the colonial powers But Lugard's greatest contribution to the making of modern Nigeria was the amalgamation of the North and South in 1914 as a political unit in the modern sense, Nigeria really came into being only in 1914

Income tax was first introduced into modern Nigeria in 1904 by Lord Lugard when community tax became operative in Northern Nigeria

Government Accounting in Nigeria can be traced into the Native Revenue Proclamation No 2 of 1906 which was the first step taken by the British colonial government to Introduce a comprehensive legislation on direct taxation in the colony It applied only to Northern Nigeria and empowered the resident of each province with the approval of government to fix and access the tribute payable by the people These taxes were "Kurdin Savauta" (accession duty) "gaisua" (Homage to elders) and "Ganglia" (cattle tax)

The 1914 amalgamation gave Nigeria one consolidated revenue Thereafter the government regularly faced the problem of how best to use this revenue for the benefit of the people all over the country The problem of revenue allocation in Nigeria's administrative history predated federations It formed part of the negotiations for the amalgamations o Nigeria, and was examined by the Niger committee in 1893 under the need for pooling economic resources The amalgamation gave Nigeria common railway telegraphs, customs and excise a Supreme Court, a standard time, a common currency and common civil service

In preparation for the introduction of direct taxation in the South partly to provide government with more revenue and partly to provide funds for the Native administration, the 1906 proclamation was re-enacted with modification, as a Nigerian Ordinance tithed Native revenue (proclamation ordinance No1) 1917 Public revenue rose from 1,000,000 in 1906 to E2, 668,000 in 1913 as a result of the increased direct taxes and more custom duties The Native Revenue Ordinance of 1917, 1918 and 1928 were later incorporated in the direct taxation ordinance No 4, 1940

It was not until 1st April 1957 that the Audit Ordinance No 38, 1956 came into force to provide for the appointment salary, tenure of office and duties and powers of the Director of Federal Audit (ashes was then known) and for other purposes incidental thereto and connected therewith Another ordinance tithed finance (control & management) ordinance No 33, 1958 came into operation on July 31, 1958 to provide for the control and management of the public finance of the Federation and for matters connected there with

13 OBJECTIVE OF THE STUDY

The following needs are the objectives of this research work:

a To determine the adequacy of the existing system of accounting in the Nigeria public sector

b To ascertain the evidence of accountability for the stewardship of government funds

c To make available vital information on government control and prudent management of government resources

d To identify and analyze the problems associated with the system of accounting adopted by this with a view of tracing their cause and make necessary recommendations

14 STATEMENT OF PROBLEMS

Government establishment are set up to provide social services at affordable price for the public welfare Their finance mainly comes from government subvention

The following are the problems facing public sector

1 Financial indiscipline and lack of accountability in the public sector

2 High wave of crimes, corruption and fraud

3 The effect of technology and intensified use of computer

4 Lack of audited financial reports

5 Incompetence among accounting personnel

6 Budgeting practices

7 Inadequate bookkeeping records and accounting systems

15 RESEARCH HYPOTHESIS

To carry out extensive work on this project, the following relevant hypotheses have been formulated In my hypothesis, the null hypothesis is Ho while the alternative hypothesis is HI These hypothesis are shown below:

HYPOTHESIS (1)

Ho: Most government establishment does not keep proper books of Account

Hi: Most government establishment does keep proper books of Account

HYPOTHESIS (II)

Ho: Average accountants in government establishment perform below expectations

Hi: Average accountants in government establishment do perform below expectations

HYPOTHESIS (III)

Ho: The general attitude of accounting staff toward accountability is very poor

Hi: The general attitude of accounting staff toward accountability is not poor

HYPOTHESIS (IV)

Ho: privatization and commercialization of government establishment is not the solution to the existing problem

Hi: privatization and commercialization of government establishment is the solution to the existing problem

HYPOTHESIS (V)

Ho: Public sector accountants do not work hard as their counterparts in the private sector

Hi: Public sector accountants do work hard as their counterparts in the private sector

HYPOTHESIS (VI)

Ho: Subvention from the government account does not form major source revenue

Hi: Subvention from the government account form major source revenue

HYPOTHESIS (VII)

Ho: Internal audit and check will not help in solving financial recklessness

Hi: Internal audit and check will help in solving financial recklessness

HYPOTHESIS (VIII)

Ho: Inadequate funding is one of the major problem militating against the smooth operation of NEPA

Hi: Inadequate funding is not one of the major problem militating against the smooth operation of NEPA

HYPOTHESIS (IX)

Hi: Inability and unwillingness to settle bills by customers is not affecting authority

HYPOTHESIS (X)

Ho: Management does not control outside the day to day routine of your department

Hi: Management control outside the day to day routine of your department

HYPOTHESIS (XI)

Ho: Cash basis accounting principle adopted for government sector is a problem militating against effective accounting system

Hi: Cash basis accounting principle adopted for government sector is not a problem militating against effective accounting system

HYPOTHESIS (XII)

Ho: The authority is not generating enough power for its consumption

Hi: The authority is generating enough power for its consumption

16 SIGNIFICANCE OF THE STUDY

The importance of this project cant be over emphasis, as this will improve the quality of accounting system in most government establishment

The following will also benefit from this study:

1 Staff and practitioners of government who might find the information very useful in improving their job

2 Operators of government establishment need these financial information for decision making

3 It also serves as references materials to lecturers, students, researcher etc who might need them for academic purpose in the future

17 SCOPE AND LIMITATION

SCOPE

This study is basically intended to cover the objective nature of public sector accounting functions and control of government accounting it will also access the problems confronting the establishment and indeed how to maintain a good accounting system with a view to enhancing accountability

LIMITATION

The researcher was faced with so many problems during the research work These problems includes the following:

a INSUFFICIENT FUND: One of the major problems inherent during the research period which the researcher suffered most was insufficient fund to carryout the research work conveniently, due to visits the various data centers to sources for relevant data

b INADEQUATE DATA: Most of the collecting centers visited to do not have adequate data for the information needed and some of them were not willing to give out their material to researcher

c INSUFFICIENT TIME: Another constraint faced by the researcher during the research work is insufficient time The time given for this research work is too short for the researcher to combine both class work and the research work This affected the researcher most

18 BRIEF HISTORY OF THE ESTABLISHMENT

Electricity development in Nigeria started towards the end of the 19 ^th century, when the first generating plant was installed in the city of Lagos in 1898 Later, native and municipal authorities in different parts of the country set up other electricity undertakings

In 1950, in order to integrate power development in the country and make it effective, the federal government passed the electricity corporation of Nigeria Ordinance No 15 of 1950 This Ordinance brought under one umbrella all the electricity undertakings owned and controlled by the Native and municipal authorities under the public works department

The electricity corporation of Nigeria (ECN) thus became the statutory body responsible for generation, transmission, distribution and sale of electricity to all electricity customers in Nigeria

The Niger Dams authority was established by an act of parliament in 1962 it was charged with the responsibility of construction and maintenance of Dams and other works on the River Niger and elsewhere Its function also included generating electricity by means of after power, improving navigation and promoting fisheries and irrigation

By decree No 24 of 27^th June, 1972, the electricity corporation of Nigeria (ECN) and Niger Dams authority (NDA) were merged by the federal government to become the National electric power authority

Power in Nigeria started in Nigeria with a humble but steady beginning with only the Ijora, Delta, Egbin, Sapele and Afam Thermal power stations, Kainji, Jebba and Shiroro Hydro power station, with the generation capacity increased from 20mw to over 6000MW in the year 2002

a MISSION STATEMENT:

I NEPA and its successor companies resulting from the ongoing reform of the sector are responsibilities for generating, transmitting and delivery electricity to all homes and businesses in Nigeria

Our mission, as a service industry, is to satisfactorily meet customer's electricity demand in the most cost-effective manner using proven technology and a well-motivated customer friendly work force with adequate consideration for the environment

b OUR GOALS

i To continuously improve our service to our customers

ii Realize full payment for timely accurate and completely billing of electricity delivered

iii Institutionalize business and commercial orientation amongst the workforce

iv Gradually close the gap between demand and supply by the year 2007, by rehabilitant, upgrading and expanding generating transmission and distributing infrastructure

v Improve skills and motivation of staff

Although NEPA is still under the control of the government not with standing the privatization and commercialization process that will soon break the monopoly of NEPA

The authority is plagued with numerous problems which unfortunity have turned into a vicious circle, these include:

i Many power plants are due for rehabilitation

ii Over 90% of power input are imported

iii Inadequate supply of meter

iv High cost of fuel and lubricant resulting in high running operational cost

v Huge debt owned by public and private sector

vi The nefarious activities of vandal in the vandalization of major transmission network and minor electricity projects affected the authorities abilities to significantly impact the economics and social activities in the country

The authority's target/objective is to sustain the gains of the previous year, and further improve generation The following strategies will be adopted to make this target achievable:

i IMPROVEMENT POWER GENERATION MANAGEMENT BY:

a Development programme for sustaining power generation especially through the application of computerized maintenance management system (CMMS) in the entire major power stations, plants rehabilitation, repairs and scheduled overhaul

b Further strengthen the developed strategies for plant efficiency especially through performance management

c Development strategies for provision of spare

2 Reinforcement of re-orientation of the staff for the challenges ahead under the new dispensation through training and re-training under the change management programme

3 Consolidate distribution network expansion upgrade and maintenance programme

4 Development station for improved customer service that will enhance billing and cash collection

5 Consolidate on the gain of restructuring and unbundling while facilitating the reform programme of the industry

19 DEFINITION OF TERMS

i ACCOUNTING:

This is concerned with verifiable facts about the future It may be defined as the process, which deals with measurement and involves the collection, classification and presentation of information in money terms on economic activities in the form of events and transactions, and the communication of the information in appropriate form to internal and external user groups

ii PUBLIC SECTOR:

It can be defined as that sector of any economy distinguishable from the private sector, which is under the control of government unit possessing the over-riding goal of deliberate delivery of goods and services at low profit most of the time

iii PUBLIC SECTOR ACCOUNTING:

This may be defined as the composite activity of recording, classifying, analyzing, summarizing and interpreting government transactions for the benefit of interested parties in government accounting information

iv FINANCIAL REGULATION:

It is defined as a body of rules setting the procedure for collection, custody and transmission of funds and property, procurement and of funds and property, procurement and payment for goods and, service tenders boards procedures, stores and inventory verifications operation of departmental budgets, commitment accounting, accounting for imprested and official advances, wages and payroll control system and returns, banking transactions, insurance and claims, importing and clearing, authorization of expenditures internal checks and internal audit

v FINANCE 9CONTROL AND MANAGEMENT) ACT 1958:

This act as amended governs the management and operation of government funds

vi TREASURY AND FINANCE CIRDULARS:

These are administrative instrument, which are used to amend the existing provisions of financial regulations civil service rules The office of the accountant general of the federation and the civil service commission issues them

vii APPROPRIATION ACT:

The appropriation act is enacted each year to regulate finance and accounting matters It is made to back up withdrawal of money from the consolidated revenues fund or any other government fund

viii FINANCIAL YEAR

Any period of twelve (12) months adopted by the government as its accounting year

ix ACCOUNTING MANUALS:

This is a statement written code of instruction and administrative practice dealing with department procedure and clerical process relating to transaction

x ACCOUNTANT GENERAL

This is the chief account officer, which ensure that proper system of account prescribed by the relevant activity also responsible for the supervision of the accounts of all ministries and department within the federation and also preparation of financial statement as required by the law

xi CONTINGENCY FUND

This is a fund created specially for urgent and unforeseen expenditure use during emergence case like war, flood, and earthquake

xii CASH ACCOUNTING

It refers to when revenue and expenditure transactions are reported in the period in which it occurs, any expenditure or income in that year cannot be carried forward to the next financial year

xiii AUDITOR GENERAL

The auditor general of the federation is charged with the audit of the accounts of all accounting officers and all persons entrusted with the collection, receipt, and custody of cash

xiv CALL CIRCULARS

These are sent by the government to all ministries, which is aimed at focusing government objective in the year under review Each department in response to the call circular constitutes a budget committee, which examine the draft proposal submitted by the different department or ministries If approved by the ministry, then passed to the inter-ministerial estimate committee thus, this inter-ministerial committee comprising all the government ministries and each ministry defend his ministry submission and once they are approved, the estimate are passed onto the executive council for final approval at the executives level

xv CONSOLIDATED REVENUE FUND

This is a statutory established fund in which al public revenue paid or received by government are kept Thus this fund is used for recurrent expenditure and 75% of the development fund comes from this consolidated revenue fund any withdraw from the (CRF) must be approved and authorized through the appropriate law

xvi DEVELOPMENT FUND

Is used to finance general capital expenditure of the federal government & the account are kept by the accountant general of the federation