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.
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