| Content | THE IMPACT OF AUDITING ELECTRONIC ACCOUNTING SYSTEM ON CORPORATE PERFORMANCE
ABSTRACT
The primary aim of this research work is to appraise the impact of auditing accounting electronic accounting system on corporate performance. Audits are performed to ascertain the validity and reliability of information, also to provide an assessment of a system’s internal control. The goal of an audit is to express an opinion of the person/organization/system etc, in question under evaluation based on work done on a test basis. Does electronic audit assess how successfully processes have been implemented, for judging the effectiveness of achieving any defined target level? Does electronics audit provide evidence concerning reduction and elimination of problem areas? Does electronic audit contribute to the corporate performance of organizations? To what extent does electronic audit impact on the growth and profitability of organizations? Does electronic audit impact positively on the diverse accounting activities that go on in an organization? For a successful completion of this research work, the researcher made use of both primary and secondary method of data collection for information gathering. The data collected were presented in table and analyzed with simple percentage while the hypothesis stated were analyzed with Chi-Square. Summary of findings, recommendations and conclusion were drawn as regards to this research work.
CHAPTER ONE
Introduction
1.1 Background of the study
Audit could be defined as an independent examination of the accounting books, records and financial statement of an organization by an appointed auditor to enable him express an independent opinion as to whether the financial statement are in agreement in all materials respects with the applicable financial reporting frame work and consequently shows a true and fair view. (Inyiama, 2010:5).
An audit is an evaluation of a person, organization, system, process, enterprise, project or product (Onyike, 2003:34). The term most commonly refers to audit in accounting, but similar concepts also exist in project management, quality management and energy conservation.
Audit are performed to ascertain the validity and reliability of information, also to provide an assessment of a system’s internal control. The goal of an audit is to express an opinion on the person /organization system etc in question, under evaluation base on work done on a test basis.
Due to practical constraints, an audit seeks to provide only reasonable assurance that the statement are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audits, a set of finance statements are said to be true and fair when they are free of material misstatements a concept influence by both quantitative (numerical) and qualitative factors. But recently, argument that auditing should go beyond just true and fair is gaining information about financial systems and the financial records of a company or a business. However, recent auditing has begun to include non-financial system area ,such as safety ,mental concerns non-profit organization and government agencies, there has been an increasing need for performance audits, examining their success in satisfying mission objectives. As a result, there are now audit professionals who specialize in security audits, information systems audits and environmental audits.
Today’s increased use of computer and the correspond trend to eliminate excess paper work by storing files electronically has brought both benefits and challenges to the audit process rather than relying exclusively on dwindling paper trial, many firms and internal, auditors are incorporating electronic auditing techniques into their standard audit procedures for an enhanced corporate performance.
One option for auditing electronic files is to use standard data base programs such as As Assess. By importing information into the software or by linking to electronic transaction files, an auditor can efficiently analyze vast amount of data. Many common test procedures such as aging, counting and totaling of transaction can be automated with these programs. In addition, the software allows the user to perform analytical procedures quickly and easily, such as sorting, stratifying or making comparisms with in the data set.
Electronic auditing, or e-auditing is therefore a computer assisted auditing that uses electronic records to complete all or part of the audit.
1.2 Statement of the Problem
Quality audits are essential to verify the existence of objective evidence showing conformance to required processes to assess how successfully processes have been implemented, for judging the effectiveness evidence concerning reduction and elimination of problem areas and are a hards-on management tool for achieving continual improvement in an organization to benefit the organization, quality auditing should not only report non-conformance and corrective actions but also high light areas of good practice and provide evidence of conformance. In this way, other department may share information and amend their working practices as a result also enhancing continual improvement. Most firms have been lacking in this aspect of quality electronic auditing there by adversely affecting corporate performance.
1.3 Objectives of the Study
The main objective of this research work is to appraise the impact of auditing electronic accounting system on corporate performance. Other objectives include the following:
1. To examine if electronic audit assess how successfully processes have been implemented; for judging the effectiveness of achieving any defined target levels.
2. To find out if electronic audit provide evidence concerning reduction and elimination of problem areas.
3. To find out if electronic audit contribute to corporate performance of organization.
4. To examine if electronic audit impact on the growth and profitability of organizations.
5. To examine the impact of electronic audits on the diverse accounting activities that goes on in an organization.
1.4 Research Questions
The following research questions are formulated for the purpose of this research work.
1. Does electronic audit assess how successfully processes have been implemented; for judging the effectiveness of achieving any defined target levels?
2. Does electronic audit provide evidence concerning reduction and elimination of problem areas?
3. Does electronic audit contribute to corporate performance of organization?
4. To what extent does electronic audit impact on the growth and profitability of organizations?.
5. Does electronic audits impact on the diverse accounting activities that goes on in an organization?.
1.5 Research Hypotheses
Hypothesis one
Ho: Electronic audit does not assess how successfully processes have been implemented; for judging the effectiveness of achieving any defined target levels.
H1: Electronic audit not assess how successfully processes have been implemented; for judging the effectiveness of achieving any defined target levels.
Hypothesis two
Ho: Electronic audit does not provide evidence concerning reduction and elimination of problem areas?
H1: Electronic audit provide evidence concerning reduction and elimination of problem areas.
Hypothesis three
Ho: Electronic audit does not contribute to corporate performance of organization.
H1: Electronic audit contribute to corporate performance of organization.
Hypothesis four
Ho: Electronic audit does not impact on the growth and profitability of organizations.
H1: Electronic audit impact on the growth and profitability of organizations.
Hypothesis five
Ho: Electronic audits does not impact positively on the diverse accounting activities that go on in an organization.
H1: Electronic audits impact positively on the diverse accounting activities that go on in an organization.
1.6 Significance of the Study
This research work will be of immense significance to diverse organization, especially accounting organizations. It will go to a target extent in enlightening them on the concept of electronic auditing and its impact in enhancing performance.
It will also benefit students and researchers they will widen their scope from the information contained in this research work.
1.7 Scope and Limitation of the Study
The research work is focused on the impact of auditing electronic accounting system on corporate performance in organizations.
The researcher have limitation in understanding some computer software used by auditors.
Difficulty in sourcing information from the organization of study (consolidated investment limited). Financial constants in sourcing for primary data.
1.8 Definition of Terms
¨ Audit: This is an evaluation of a person, organization, system, process, enterprise, project or product.
¨ Electronic auditing: This is a computer assisted auditing that uses electronic records to complete all or part of the audit. | Abstract
The role of accounting system in measuring organizational performance of transport company ( A Case study of ABC Transport). This research work is designed to show that the best companions in the management of any transport is a good accounting system with particular emphasis on ABC transport company. It is worthy to say that good accounting system is really maintained in most privately owned companies in Nigeria. Only few among them lack good accounting system. Hence this project strives to show that good accounting system exist in most private companies. This discussion in this project is done in five chapters. | THE ROLE OF FINANCIAL CONTROL INSTITUTIONS IN PROMOTING FINANCIAL ACCOUNTABILITY IN THE PUBLIC SECTOR: A STUDY OF PLATEAU STATE NIGERIA UNDER DEMOCRATIC REGIMES
CHAPTER ONE
INTRODUCTION
This project focuses on the role of financial control on selected institutions in promoting financial accountability in the public sector with a study of plateau state under democratic regimes. Nigeria, a federation of thirty-six States and Seven Hundred and seventy-four local governments, was a colony of Britain but became an independent State in 1960. It has a population of nearly one hundred and twenty million people and the dominant source of income is oil (Oladosu and Oyelakin 2003:1).
Nigeria has been divided into six geo-political zones - South-South, South-West, South- East, North- East, North -West and North- Central. Plateau State falls within the geo-political zone of North-Central. The State was first created as Benue-Plateau in 1967. It later became Plateau State with the creation of Benue State in 1976. Nassarawa State was also created out of Plateau State in 1996.
The Nigerian public sector consists of the governments at the Federal, States, Federal Capital Territory, Local Governments and all government parastatals. The public sector plays an important role in economic development. It provides services which the private sector may not be willing or able to provide. Chan (1988:15) argues that
the public sector provides many essential services to society. It plays an essentially compensatory function; that is, it performs those functions that the market economy does not do efficiently or lacks the incentive to do at all.
Musgrave and Musgrave (1976) classify these functions as
- Resource Allocation - the provision of public goods and services.
- Income Distribution - the adjustment of the distribution of wealth or income in the society to conform to some principle of fairness.
- Stabilization - the use of fiscal policies to achieve high employment, price stability and economic growth.
In a Federal system like Nigeria, the different tiers of government perform these functions in varying degrees. Governments at all levels desire to deliver good governance to all their citizens. This is because “good governance is central to creating and sustaining an enabling environment for development” (Asselin, 1995:3). A strong link exists between economic development and good governance, and between good governance and fiscal transparency.
The importance of good financial management in achieving the objectives of government has not lost its relevance. Because of this, the financial accountability of most countries is enshrined in the Constitution to facilitate the discharge of financial accountability. Oshisami and Dean (1984:36) remark that in recognition of the importance of finance as a basis for political power, and the opportunities which absolute control offers for its abuse, power over finance is divided, the division being formally recognized Constitutionally in virtually all countries.
Global practice shows that power over finance is shared between the Executive and the legislature and in some cases with an independent body - the Supreme Audit Institution. Has this Constitutional sharing of power over finance achieved the desired result?
In view of the enormous responsibilities placed on government for the welfare of its citizens, the public sector needs a lot of resources. In pursuit of this, the government needs to put up a framework for the management and control of the public purse. The formalities established in relation to accounting and financial control support the process of governance
The term ‘control’ has long been recognized as one of the principles of management. Control exists in most human endeavors. Most authorities agree on what constitutes control. Lucey (1996:137) states that control is concerned ‘with the efficient use of resources to achieve a previously determined objective, or set of objectives, contained within a plan’. Similarly, Koontz, Donnel and Wiehrick (1980:81) define control as the measurement and correcting of activities of subordinates to assure that events conform to plans. Ekwonu (1996:35) states that control ‘is the measurement of the performance of the activities of subordinates in order to make sure that objectives and plans devised to attain them are being accomplished’. All these definitions point to the fact that control exists to ensure that organizational objectives are met through measurement of performance. The control process according to (Koontz et al 1980:722) involves three steps:
- Establishing standards
- Measuring performance against these standards and
- Correcting deviations from standards and plans
Finance occupies a special place in the conduct of government business. Public finance has been defined by Buhari (1993:66) as ‘a branch of economics concerned with the finance and economic activities of the public sector’.
From these definitions, we can state that public finance not just deal with the ways government raises money, but also the manner such money is expended with the aim of achieving economic growth.
In Nigeria, the Federal government raises money through the following major sources: Petroleum profit tax, Mining, Company income tax, Import duties, Export duties, Excise duties, Interest and repayment of loans granted by the government (Buhari, 1993:169).
Others include; Education tax, Value added tax, Pay-as-you-earn, Fees and charges, Royalties, Rent of government property, Grants, aids and loans.
The money raised through the above sources is expended on the following items: Administration, Infrastructural services, Productive services, Defense, Interest on internal and external loans, and Diplomatic missions (Buhari, 1993:168)
In connection with government finance, we can identify two basic groups of control- administrative and financial control; the former referring to those techniques which have indirect bearing upon expenditure operation while the latter denote techniques of control relating to fiscal control. The emphasis of this study is on financial control.
Financial control is a very important type of control in the management of government finance. Oshisami (1992:29) defines it as the process which ensures that financial resources are obtained at cost considered to be economical and utilized efficiently and effectively for the attainment of established objectives.
A comprehensive definition of financial or fiscal control is given by Ekwonu (1996:33) as the sum total of the work, which guides, directs and interprets the budget cycle. It covers the activities of the Executive branch, involving finance and the ministries... the audit department and the legislature...
In a democratic era, financial control may operate internally and externally.
Within the Executive arm of government control by the finance ministry is internal while audit by the Auditor-General and legislative oversight constitute external control.
- Institutions of Financial Control in the Public Sector
There are formal and informal institutions of financial control over public revenue and expenditure. The formal institutions of financial control include the Executive arm of government, Legislature and Office of the Auditor-General or Supreme Audit Institution. The informal institutions of financial control include; the media, the organised civil society and donor agencies.
With respect to the formal institutions of financial control, the Constitution of the Federal Republic of Nigeria, 1999, establishes a cycle of financial accountability for public funds. The cycle provides that:
- Legislature authorizes expenditure
- The Executive controls the collection and issue of funds. In addition, it prepares the accounts.
- The prepared accounts are audited by the Auditor-General and
- The Auditor-General submits the results of his audit to the Legislature through its Public Accounts Committee (PAC). PAC acts on the report by inviting accounting officers to appear before it where need be.
The wisdom in sharing these responsibilities is that absolute conferment of this power on one arm of government can create abuses in financial administration. In other words, financial administration requires a series of checks and balances so that public funds are not wasted or misapplied. But, is this what we find in practice? Are these checks and balances observed?
The financial accountability cycle provides that the Executive arm of government collects, disburses and prepares the accounts of government. The other formal institutions of financial control are excluded from this very vital stages. Their involvement in public sector financial control is only visible when funds have been expended. Is this not the same as calling a medical doctor to give an autopsy report? What guarantee do we have that this sharing of financial responsibilities promote sound financial management in the public sector? Haven been excluded from the critical stages of collection and disbursement of public funds, can the Legislature and State Audit significantly influence public finance?
In the cycle of financial accountability established by the Constitution, the budget is a legislative instrument of financial control over the Executive. Funds should be expended according to legislative intent as expressed in the budget. Has the Legislature been able to control public expenditure using the budget?
The Office of the Auditor-General is a creation of the Constitution. Therefore his status and duties are constitutionally determined. His basic duty is to report on the accounts prepared by the Executive. In his report to the Legislature he states whether the Executive has complied with legislative approval in its execution of the budget. For the Auditor-General to be able to play this important role he has to rely on the financial data supplied by the Executive. He also needs a strong Legislature to help implement his findings. In practice, does the Auditor-General derive the required support from the Executive and Legislature to perform his Constitutional duty? Has he been able to discharge the functions of his office as stipulated by the Constitution?
Informal institutions of financial control may promote financial accountability over public finance and these include; the mass media, the organized civil society, the World Bank and other international donors.
A vibrant media may promote financial accountability by reporting the findings of the Auditor-General. By exposing wrong doings the media may influence the behavior of public officials who may not want to be publicly exposed.
The organized civil society too, may play a significant role in promoting financial accountability in the public sector. This can be achieved by an active inter-reaction between them and the legislature. Krafchick and Wehner (2002:1) argue that inter-reaction between legislatures and civil society organizations is increasing in many countries... From the legislature’s perspective, the input of civil society can help to make the legislature’s engagement with the budget more effective.
The donor community today is an important institution that promotes financial accountability in recipient countries. They encourage borrowers to strengthen domestic institutions of financial control. Sahgal (2001:1) states that “most donors are now looking for ways to improve their performance in terms of promoting good governance and accountability.”
While these informal institutions may also promote financial accountability, however, it is the formal institutions that are the focus of this research.
Researches targeted at strengthening the institutions of financial control over public funds have ignored the influence of the link between the institutions of control, especially the influence of the Legislature on State Audit performance. For example the researches of Ball et al (1999); Bartel (1996); Asselin (1995); Premchand (1989); Hogy (2004); Dye and Stapenhurst (1998); Martinez-Soliman (2003); Krafchik (2002); Sahgal (2001) and Ahsan (1994) emphasize strengthening the institutions of financial control over public funds in isolation, without establishing the interaction between them.
These researches address the problem of public sector financial accountability arrangements on institutional basis only. They fail to identify the shortcomings of the present cycle of financial accountability over public funds in Nigeria. This research intends to address these shortcomings in the context of Plateau State of Nigeria.
Control of public finance is very important to public governance. That is why power over public finance is enshrined in the Nigerian Constitution. To promote financial accountability in Plateau State, power over finance is shared between the Executive, Legislature and the Supreme Audit Institution or the Office of the Auditor General. Have these institutions been able to play the roles assigned to them?
It is observed that there is the problem of non or partial implementation of the budget by the Executive arm of government in Plateau State. The budget is the legislative instrument of control over public finance.
Related to the issue just raised above, is the problem of spending without legislative authority. The checks and balances on public finance requires that the Executive cannot spend without legislative approval. Even where voted funds fall short of requirements, the spending agency must apply for supplementary appropriations provisions and obtain legislative approval for such additional expenditure before incurring them. It has been alleged that this requirement of the law is not usually followed.
The Executive arm of government which implements budgets is required to ensure that expenditures are properly covered in the relevant Appropriation Acts. Funds are supposed to be apportioned to spending departments in line with the approved budget. It has been noted that public expenditure are frequently made on items not budgeted for, which of course means that such expenditure have no legislative approval. Once the budget has been approved, it is alleged that funds are shifted to purposes other than those for which they were meant.
Limits of expenditure are imposed by the budget. However, spending agencies do not observe these limits when incurring expenditure. In the course of budget implementation, a vote book is maintained to ensure that approved budgetary limits are not exceeded. This aspect of expenditure control is often abused. We may ask, why should spending agencies not respect limits when incurring expenditure? With all these abuses, what has happened to the legislative oversight function?
The performance of the Auditor General in Plateau State has been called to question. It is alleged that the Auditor General is incapable of discharging the functions of his office which is constitutionally prescribed. If this is true, why?
The Plateau State Legislature is seen to be weak and unable to discharge its constitutional responsibility of exercising its power of financial oversight on the
Executive arm of government. This problem is alleged to have adverse effects on the performance of the State Auditor General.
Public financial control in Plateau State also suffers from poor financial record keeping. Where financial records are poorly maintained, can the reliance of the Auditor General on these records adversely affect his performance? In addition, if it is true that financial records are poorly maintained in Plateau State, is this a function of the qualification of those who keep these records? How do these problems listed above impact on financial accountability in Plateau State?
The questions of this research are as follows:
- Is the Budget a significant instrument of Legislative control over public finance in Plateau State?
- Are the rules and regulations governing the use of public funds being observed in Plateau State?
- Does the quality of legislative financial oversight enhance the performance of State Auditors?
- Does the reliance of the Auditor-General on financial statements prepared by the Executive enhance his performance?
- Is there any relationship between educational/professional qualification and the number of financial records kept in Plateau State?
- Do the formal institutions of financial control play their roles as spelt out by the Constitution?
This research sets out to evaluate the role of the formal institutions of financial control over public finance in Plateau State. Specifically the research has the following objectives:
- To evaluate the significance of the public budget as an instrument of legislative control over public finance in Plateau State.
- To determine whether the reliance of the Auditor-General on the financial data supplied by the Executive enhances his audit work.
- To examine the quality of legislative oversight function on State Audit performance.
- To investigate the significance of the qualification of Treasury staff on the number of financial records kept.
- To recommend measures on how to improve financial accountability in Plateau State.
Hypothesis One
Ho The public budget is not a significant instrument of Legislative control over
public finance in Plateau State.
H1 The public budget is a significant instrument of Legislative control over
public finance in Plateau State.
RATIONALE/JUSTIFICATION
The budget is an expression of legislative approval on how public funds should be disbursed. Budget implementation is used to judge the Executive’s conformance to this legislative approval.
This hypothesis is formulated to find out whether or not the Executive complies significantly with Legislative approval during budget implementation.
Hypothesis Two
Ho The performance of the Auditor-General is not significantly dependent on the
financial statements prepared by the Executive arm of government.
H1 The performance of the Auditor-General is significantly dependent on the
financial statements prepared by the Executive arm of government.
RATIONALE/JUSTIFICATION
The Auditor-General is an agent of the Legislature. The Auditor-General has the duty of overseeing the management of public funds and the quality and credibility of governments’ reported financial data. The Auditor-General ensures that the budget is implemented according to legislative approval. This hypothesis will reveal whether or not the Auditor-General is able to exercise his duties inspite of his reliance on the financial statements prepared by the Executive.
Hypothesis Three
Ho State Audit performance is not significantly dependent on the quality of
legislative financial oversight.
H1 State Audit performance is significantly dependent on the quality of
legislative financial oversight.
RATIONALE/JUSTIFICATION
This hypothesis seeks to establish whether the quality of legislative oversight (through its public accounts committee) has any influence on State Audit work. Does the quality of legislative financial oversight influence the work of State Auditors?
Hypothesis Four
Ho: There is no significant difference between the qualification of treasury
operating staff and the number of financial records kept.
H1: There is significant difference between the qualification of treasury staff and
the number of financial records kept.
RATIONALE/JUSTIFICATION
Where there is a culture of poor financial record keeping, no meaningful control can be exercised. Good financial record keeping is a necessary condition for the production of auditable financial statement. The aim of this hypothesis is to evaluate whether qualification has a significant effect on financial record keeping in Plateau State.
- SIGNIFICANCE OF THE RESEARCH
A research on the public sector, especially on financial control is very important. This research is significant in a number of ways.
The research will assist financial policy makers in Plateau State and indeed other States in Nigeria formulate policies that will promote financial accountability. The academic community will benefit tremendously from this research. Other researchers may use this research to investigate further issues on public finance control.
The three formal institutions of financial control in Plateau State, that is, the Executive, the Legislature and the Auditor General will discharge their financial responsibilities effectively if the recommendations of this research are implemented.
This research evaluates the role of the formal institutions of financial control over public finance under a democratic setting. This is because the institutions of financial control are fully operational only during democratic dispensations. The Legislature does not exist during military rule.
The role of the informal institutions of financial control such as the media, the organised civil society and international donor agencies though important are not the immediate focus of this research.
Plateau State which is chosen as the case study is an old State - first created as Benue-Plateau State in 1967. The State has witnessed flashes of democratic rule from 1979 to date.
The research period covers years under democratic regimes. These are 19791983; 1991-1992; and 1999-2003. The research period covers ten years of democratic rule. The broken periods are periods of military rule.
The research covers only ministries. Parastatals are excluded because the 1999 Constitution S. 85 (3) does not authorize the Auditor-General to audit or appoint external auditors for government parastatals. Local governments are also excluded since they are guided by a different financial rule called the financial memoranda.
A number of limitations were encountered in this research. The major ones included:
- Literature Review - Getting materials for literature review was difficult - An extensive search for literature took over one year. The cost incurred in obtaining the relevant materials was also enormous.
- Questionnaire Administration - During the main research, we had to deal with an enlarged number of participants in the research. Since the questions were randomly administered, many of the participants were seeing the questions for the first time. Many of them felt that participating in this research would amount to “leaking of government secret”. They were visibly uncomfortable - that was even in spite of assurances given by research assistants that the information required was strictly for research purposes. Some of them asked for time to make up their minds as to whether to complete the questionnaires. For this category of respondents, research assistants had to plead and make repeated visits before the questionnaires were completed and returned.
- Secondary Data Collection - Getting information on public sector activity is difficult. But it is even more difficult getting information on financial activities. Information that is supposed to be publicly available is treated as confidential. Enquiries for financial information are viewed with suspicion. A very high official must authorize the release of such financial information. But getting such an official to authorize the release of the information is pretty difficult. The research assistants were suspected to be agents of opposing political parties. They were thus to be kept at arms’ length. It took a long time to convince the custodians of the required information to release the information.
- State of Emergency - The state of emergency declared in Plateau State on the 18th of May 2004 adversely affected this research. The Plateau State House of Assembly, it will be recalled was also suspended during the period. Reaching out to the suspended members to participate in the research was difficult. Even where contacts were established eventually, completing the questionnaire was not seen to be of any immediate importance. Some of the lawmakers told me that their immediate concern was whether they would be reinstated. They eventually participated. Democratic structures were restored at the end of the state of emergency in November 2004. To God be the glory.
| This project looks at The impact of development finance institutions (DFIS) in economic development of Nigeria. The need to stimulate the economy led to the establishment of Development finance institutions (DFIS) to contribute to the development of specific sectors of the economy especially agriculture and industry. The objective of the study is to find out the impact of the Nigerian agriculture credit and rural development bank (NACRDB) and the bank of industry (BOI) to economic development of Nigeria and in particular in Owerri. It will look at the contributions i.e. loan disbursement to agriculture and industry in Owerri between 2002 and 2011 (a period of ten years). The result of the analysis showed that Development finance institutions made significant contribution to economic development.
| EVALUATION OF CHALLENGES OF FINANCIAL MANAGEMENT IN NIGERIA LOCAL GOVERNMENT SYSTEM: A CASE STUDY OF IVO LOCAL GOVERNMENT COUNCIL OF EBONYI
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This project is on Evaluation of challenges of financial management in Nigeria local government system: A case study of Ivo local government council of Ebonyi. According to aborisade, (2003) in his write up defined or state that financial management in any local government involves the inflows of payment, it can also be said to be the art of raising and spending money which is ever prominent facts to any local government.
Financial management in any local government system is like a vehicle as whole with many parts, that when one part of it most especially the engine part is not properly perfectly maintained and guild not strictly adhered to can cause damage to the vehicle thereby and therefore affectively the various other part and will prevent the vehicle from functioning, in relate to our topic which will prevent the local government even organization from performing it’s function. Part of the responsibilities of local government is to ensure efficient service delivery to the people, and for any organization to deliver it’s function efficiently, huge amount of money is needed and efficiently financial management must be adopted.
This therefore, follows Orewa, G.O (1991) whom states that finance must be handled with care and disturbed according financial regulation. The ideal is to analyze the efforts, made by the council to regenerate funds internally to supplement those from the state and federal source and finally make recommendation on some possible course of action that will enhance improving the situation. It is said that resources are limited want are uncountable. The same thing can be said of any government, be it rid federal is appreciated that the place of financial accountabilities can be recognized fully in attaining other objective of local government.
Again, the issue of participatory democracy can not be consolidated fully in financial management is not well studied. The masses are represented by representatives since it is not possible for all to be in government. The only way the masses participate in government is any time their representatives are called to give account of their stewardship. The highest stewardship is financial accountability.
This is necessary because governments are established to bring good welfare to the citizen. So, the stewards are always made to do this to those they are representing i.e. the masses.
Finance is the backbone of any functional organization depends on the effectiveness of management of its finance to achieve the aims and objective of establishing such organization. If finance is well managed in our local government then there is no doubt that the organization will not attain it goal and objectives.
The reverse is the case when there is mismanagement of finance in the local government. Lack of funds which are experienced in the local government are caused by such function such as those posed by depressed state of the nations economy. Management has to do with the aggregation of planning, organization, staffing, directing, leading and controlling.
According to Pendey (1996) financial management is that management activity which concerned with the planning and controlling of firms financial resources, for the attainment of sound financial management in any organization, the functions of financial management must be well executed.
This research work therefore focuses on the challenges facing financial management in Nigeria local government, which our case study will focus on local government council in Ebonyi State. Also, the importance of finance in Nigeria local government system cannot be over took, because of its contribution to the growth and development of any functioning organization which Nigeria local government is one of them.
1.2 STATEMENT OF THE PROBLEM
This study has been undertaking in order to identify and analyzed the low internally generated revenue and the challenges that hinder efficient and effective management of the council’s financial resources.
This research tends to solve the following problems;
- To find out what was responsible for mismanagement of local government finance.
- To know those who are involved in the mismanagement of the local government finance.
- To know whether enough revenue is appropriated in the local council.
- To design strategies that will ensure proper accountability in the council.
1.3 RESEARCH QUESTION.
- What challenges inhibit the effective and efficient management of local government Finance?
- What are the main sources of revenue generation in local government council in Nigeria?
- What the consequences of financial mismanagement in local government administration.
1.4 OBEJECTVE OF THE STUDY
The following shall constitute the objective of the study.
- To identify the problems or challenges that inhibits the financial management of ivo local government of Ebonyi state.
- To examine and expose the prevailing consequences of financial mismanagement in Nigeria local government.
- To determine source ivo local government generate its funds, in order to carry out it local responsibilities.
1.5 SIGNIFICANCE OF THE STUDY.
- To stimulate further research.
- To help policy makers.
- It serves as literature to the general public.
- Finally, this study is a great importance to local government workers as it is going to bring their activities into time light through showing some areas of defects and strength.
1.6 SCOPE OF THE STUDY.
The study was restricted to Ivo local government area. However, the study looked at the various source of financing in the local government system in Ebonyi state in particular and Nigeria in general.
1.7 LIMITATION OF THE STUDY
In the course of conducting this research work, a lot of constraints were encounter.
The problem of procuring accurate, relevant and current data, constituted the major constraints that affected the study.
1.8 DEFINITION OF TERMS
Our definition of terms will focus on local government, finance, management, financial management, challenges and local government.
- LOCAL: This is relating to the particular area you line in.
- GOVERNMENT: This is a large societies special institution for making and enforcing collective decision.
- LOCAL GOVERNMENT: This is the government of smaller units within nations or state mostly at the level of the country, town or district.
- FINANCE: This is a term applied to purchase and sales of legal instrument that give owners specified right to a series of future cash flows.
- MANAGEMENT: This is defined as the process of combining and utilizing allocation organization inputs(men, material and money) by planning, organization, directing and controlling for the purpose of producing outputs(goods and services) deseired organizational objective or accomplished.
- FINANCIAL MANAGEMENT: This is that fact of management which is concerned mainly with raising funds in most economic and suitable manner.
| CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This study is on Impacts of accounting system common in public sector. History has it that the concept of accountability of public funds dates backs to the history of ancient Greece. As old as theory is, it would not be enormous to say that the idea has been equally lost to antiquity although not much is known about it, this makes the subject, government accounting to remain a myth.
Accounting in the public sector has received such a wide attention from scholars that the field of public sector accounting scans to be neglected.
However, there is general awareness all over the world of the need to pay greater attention to the development of government accounting and financial control. The reason is obvious, government, in most, if not all nations constitute the largest single business entity in many places, the core of the economy. Government in any society is basically for maintaining law and order. With changes and the complete nature of the society, government responsibility has automatically changed from the role of maintaining law and order to business like nature in the modern era. The enormous activities of government, equally call for enlarged government accounting in order to accommodate the immense task. As a result of this development, the traditional cash procedures of accounting can hardly meet the demands of reasonable accounting for modern government in providing necessary services or information. Therefore, there is need for government accounting to be dynamic in order to accommodate both the fundamental roles and the developments.
Government accounting is the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about government in aggregate and in detail, reflecting all transactions involving the receipts, transfer and disposition of government funds and property. The purpose are to demonstrate the propriety of transactions and their conformity with established rules to give evidence of accountability for the stewardship of government resources and to provide useful information for the good control and efficient management of government operation.
Financial management in the public services as can be observed has failed to encourage and promote the efficient utilization of public funds or serve as effective basis for planning and decision making as well as to ensure proper accountability. Besides, it does not mean that financial irregularities being detected in public sector at large is basically based on traditional cash procedure of accounting but it does arouse a question whether the modern system of accounting will make both modern management and financial management viable.
1.2 STATEMENT OF THE PROBLEM
The problem of this research is to identify these weaknesses and limitations inherent in the cash accounting system of the public sector (in relation to the accounting system of the sample ministry).
This is with a view to propose means of eliminating them completely or at least reducing them to the barest minimum. Put in question form, what are those weaknesses and limitation that militates against adequate and efficient accounting system and financial reporting in the public sector and how can they be eliminated?
Some of these problem witnessed in the public sector includes: the lack of accountability and abuse of delegated authority by the officers in authority, fraud and misappropriation of government funds, as well as lack of expertise and business acumen on the part of those officers. Due to the fact that government operation have been termed ?Non-profit oriented operations?, there is no pressure on the part of these government officers to perform up to optimum expectation, accounts are kept in messy shape while the officers get away with lack of proper accountability.
This research is carried out in order to examine the extent to which proper accounts are being kept in the public sector and to offer solution to the inherent problem discovered. The Enugu State Ministry of Finance and Economic Development is used as a sample ministry for this research work.
1.3 OBJECTIVES OF THE STUDY
The objectives of this research work/study include the following:
- To determine the extent to which the sample Ministry has installed an accounting system.
- To determine the factors that promote or constrain the accounting system of the sample ministry.
- To determine the impact of the accounting procedures of the sample ministry upon its financial reporting.
- To make recommendations based on my findings.
1.4 IMPORTANCE OF THE STUDY
This research paper is intended to examine the accounting system common in public sector with a view to exposing and highlighting the inherent limitations in the system. Therefore, the research paper will be of interest and useful to the general publics, the government as well as the governed.
Government entrust public funds in the hands of its officials hence government reporting has traditionally stressed stewardship. Original accounting emphasis has been directed towards measuring the public funds generated and expended by the government programme or activities. The traditional reporting approach is filled with many weaknesses of which it is hoped that this study will make useful recommendation on how to improve upon the accountability and financial reporting system of the government.
The duty to report all its financial activities to the general public is a debt that government must pay. Such report will enable the people know how public funds entrusted in the hands of the government have been utilized, this type of report is very sensitive and useful to the public but very few of them (the public) can understand it. This study will serve as a useful medium to such member of the public who find government financial reporting very ambiguous and hard to understand.
In many institution of higher learning the accounting curriculum offered is tailored specifically to provide students with an understanding of financial reporting as it relates to profit oriented enterprises. For this purpose, students are frequently surprised to discover that the basic framework of financial accounting is significantly altered when the profit motive is removed. Though the accounting terminology may initially appear to resemble foreign language to all students of accountancy, and related professions who always depraved of knowledge of accounting system of the public sector, this study will be very useful.
Moreover, potential researcher in this aspect of accounting will find this research paper a very reliable reference base.
1.5 RESEARCH QUESTIONS
Three dominant questions being reviewed by this research include;
- Is the accountancy/accounting system in the public sector effective and adequate?
- Does the accounting system in the public sector provide for proper financial control and accountability of stewardship?
- Does the accounting system in the public sector provide useful information for the effective control and management of government operations?
1.6 SCOPE AND LIMITATION OF THE STUDY
As the research topic would suggest at a glance, the scope of this, is essentially focused on the accounting system of the sample ministry as a general overview sample study of the accounting in the public sector.
Therefore, this study will look into the nature of the accounting system of the sample ministry; how the system operates, the relevance of the system to the environment, problems and prospects of the system.
1.7 LIMITATION
- Scarcity of material: This aspect of accountancy (as pointed out above) has received very little attention from scholars despite its long historical age. Consequently, there are few literary publication on the student; the researcher was therefore limited to reviewing few literature which are mostly in origin, through relevant to the study.
- Bureaucracy: Government establishment are well known for maintaining utmost screening as regards their operations, more so, where it is a study that concerns their financial operation the researcher found it difficult to obtain material relating to the study (that is literature) and some officials who have been very elusive and uncooperative. More so the bureaucracy and protocol the research went through to obtain material and an appointment has been very discouraging.
Due to all this constrains, the researcher cannot say for certain whether the study has covered very rutty gritty of the sample ministry as regards its accounting systems and procedures, but one thing is certain, enough materials have been gathered to help express an opinion as to the operative of the sample ministry.
Apart from the above listed limitations witnessed by this researcher is time constraint. This is a major limiting factor as the time between approval of the study and the deadline for submission was very short. The researcher relied heavily on the good will of the research supervisor because he understands my plight. Again lack of sufficient funds to conduct an extensive study was another handicap.
This was part of the reason why I had to limit my work to fewer staffs than was earlier planned.
1.6 DEFINITION OF TERMS
Every field, discipline or profession has its terminology. Therefore, government accounting can never be an exception. In order to ensure easy understanding by the users of this work in relation to government accounting which are extensively applicable in public sector and or which have different meaning from private sector interpretation and usage are here by define below:
(1) Accounting Entity: Clearly defined economic unit which
(a) Engages in identifiable economic activities
(b) Controls economic resources (for which accounting records are maintained and periodic financial statement is prepared.
(c) is distinct from the personal dealings of its owners or employees. To ensure that the fundamental accounting equation always refers to the same distinct entity the boundaries of the unit, once established, must not be managed arbitrarily also called reporting entity.
Accounting entity is in the accounting and auditing, banking, commerce and finance and corporate, commercial and general law subjects.
Accounting entity appears in the definition of the following terms; accounting change, reporting entity, combination, fund and accounting policies. |
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