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AN EVALUATION OF ACCOUNTING PROCEDURES IN NIGERIAN PUBLIC ENTERPRISES

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ABSTRACT

The basic concern of this study is the evaluation of accounting procedures in Nigerian public enterprise.

Nigeria public enterprises are characterized with embezzlement, fraud, misappropriation, theft, negligence and non-observance of the existing polices. These were deemed to have been possible because they were there were no adequate and efficient accounting systems and procedures and were found, they were either not properly adherent or weak and effective.

Data were obtained using the primary and secondary methods of data collection. Primary data were collected through personal interviews with the accounting officers of the corporation through open-ended questionnaires while secondary source data were collected through journals and the observation of prepared annual reports of the corporation. The data collected were analyzed using percentages and chi-square.

The analysis of data revealed that accounting procedures employed by the corporation were observed to a large extent, that corporations have complied with almost all the principles governing governmental agencies. It can also be deduced that non-conformity with theoretical principles governing governmental agencies is not a problem faced by corporations.

In order to ensure the efficiency of accounting procedures in Nigerian public enterprises the following should be strictly adhered to:

  • Staffs must be motivated.
  • Qualified personnel should be employed.
  • Proper accounting standard should be adopted.
  • Effective administrative control should be put in place.
  • The accounting system should comply with statutory and legal requirement of the country.
  • Accounting department should be computerized.

TABLE OF CONTENTS

Title

Certification

Dedication

Acknowledgement

Abstract

Table of Contents

CHAPTER ONE

1.0     Introduction

1.1     Background to the Study

1.2     Statement of the Problems

1.3     Objectives of the Study

1.4     Significance of the Study

1.5     Research Questions/ Hypothesis

1.6     Research Methodology

1.7     Scope and Limitation of the Study

1.8     Definition of Terms

1.9     Organization of the Study

End of Chapter References

CHAPTER TWO

2.0     Literature Review

2.1     Framework of Accounting Procedures

2.2     Evolution of Governmental Accounting

2.3     The Concept of Governmental Accounting

2.4     Objectives of Governmental Accounting

2.5     Characteristics of Government Accounting System

2.6     Parties interested in Government Accounting Information

2.7     Comparison of Public and Private Sector Organization

2.8     Similarities of the Public and Private Owned Organizations

2.9     Theoretical Rules or Principle Guiding the Accounting

Procedure in Government’s Unit

End of chapters References.

CHAPTER THREE

3.0     Research Methodology

3.1     Research Focus

3.2     Research Instruments

3.3     Restatement of Research Questions and Hypothesis

3.4     Description of the Population and Sample of the Study

3.5     Sources of Data Collection

3.6     Description of Questionnaire

3.7     Methods of Data Analysis and Description of

Tools of Analysis

End of Chapter References

CHAPTER FOUR

4.0     Data Analysis, Interpretation and Discussion of Findings

4.1     Interpretation of Items

4.2     Analysis of Data

4.3     Analysis of Tables

4.4     Test of Hypothesis

End of Chapter References

CHAPTER FIVE

5.0     Summary, Conclusion, Recommendation and

Suggestions for Further Studies

5.1     Summary

5.2     Conclusion

5.3     Recommendations

5.4     Suggestions for Further Studies

End of chapter references

Bibliography

Appendix

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CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND TO THE STUDY.

Accounting can be traced back to the 15th century when the middle-east merchant became concerned about the profitability of their trading venture and they developed the very first structure of record keeping. This formed the foundation of the complex system that is in use today.

The underlying purpose of accounting therefore is to provide financial information about an economy on business entity. This is often referred to as information system. Accounting has been defined as the identification, selection and analysis measurement, prediction, processing, evaluation and communication of information to facilitate decision regarding activities and resources.

Accounting procedures are crucial to both private and public enterprises as they guide management in future control and decision making by recording, valuing and reporting even as they occur in the organization. In effect, accounting procedures could be analyzed thereby recording, classifying, summarizing and finally communicating information to its users.

In order to determine the accounting system applicable to an organization, there is need to classify the organization into private and public enterprise. Private enterprises are basically profit oriented. The accounting procedure is such that will give information on the profitability of the organization. For the public enterprise, the accounting operation is called ‘Government Accounting’: it discloses how the management of Nigerian public enterprise have carried out their stewardship and used public funds under their control.

Omolehinwa (2001) define government accounting as ‘the determination of how much money was received and sources of such receipts, how much money was spent and for what purpose and what remains after meeting the financial obligations. It is more concerned with information gathering that will enable government prepare receipts and payments accounts’.

Adebisi, (2005) thus define government accounting as ‘the process for collecting, recording, sorting and compiling in summarized and monetary form all information about public income expenditure and resources and communicating the same appropriate level of government or public for the purpose of stewardship accounting and efficient control of public funds and resources in line with the laid down rules and regulations’.

The accounting procedures, system, principle and practices used in the public corporation and government regulation, professional standards applicable to government owned corporation would be examined in this research work.

1.2     STATEMENT OF THE PROBLEM

Majority of the people believe that the accounting procedures in public enterprises in Nigeria are characterized with fraud, embezzlement, inaccuracy, lateness in preparation and most cases they don’t use to prepare statement of account for years.

The civil service reform 1988 emphasized on the importance of each ministry becoming a self-accounting unit so that the accounting officer would truly be responsible and accountable for men, material and     resources to the national or state assembly. What obtain in the public sector at the moment does not seem to satisfy the conditions of self- accounting required of every ministry.

Often times, the impact of the public accounts committee (PAC) of the national assembly is not felt as the auditor general’s report on the accounts on the central or state government are not considered by the selected committees on financial matters. For example, during the civilian administration of 1979 to 1983, the Lagos state government house of assembly did not consider it appropriate to pass the auditor general repot on the state’s statement of accounts to the selected committee for examination of the points raised by the auditor general which would have shown the non-compliance of the various ministry/extra ministerial department with the budgetary appropriation and the financial control requirements.

Lastly, it is also believed that measuring the resources put into profit making public organization is easier than measuring those resources that are not at achieving the intended objective.

1.3     OBJECTIVES OF THE STUDY

The accounting procedures in any organization are prepared as prescribed by certain rules and principles. The purpose of this study is to:

Know to what extent government agencies conform to the financial regulation procedures in the preparation of its final account. These were allowed by establishing theoretical principles of government accounting and comparing it with what holds in the corporation.

Determine the problems inherent in the accounting system of the corporations.

Determine the difference between the principles governing the accounting procedures of the government owned establishments and the profit making organizations.

Determine whether the published accounts of the corporation show a true and fair view of the financial statements.

Determine the problems inherent in the accounting procedures of the corporations.

Determine whether there is deviation from accounting procedures of the corporation and policies that are put in place to discover such deviations.

Determine whether the accounting system obtained in the organization is in concordance with the norms and value system that is obtained all over the world.

Offer suggestions as to how to improve on the accounting procedure of the corporations.

1.4     SIGNIFICANCE OF THE STUDY.

At the end the research study, it is hoped that the study will;

Assist management in making rational decisions in the operations and in the use of accounting systems that are universally accepted and effective.

Be of benefit to various conflicting interest because the concept of fairness should be balanced so that the accounting reports should be prepared not to favor any group or segment of the society.

Create room for improvement and growth in the system especially of improved revenue allocation and efficient cost control application.

Be of immense help to other Nigerian public enterprises as the research will reveal the weakness, strength, opportunities and threat that will make them to review their financial growth.

Comparisons were made to post and present trends so that deficiencies will be highlighted in the interest of the growing society. The study will equally reveal whether the international accounting standards (IAS) and the Nigerian statements of accounting standards (SAS) are duly complied with in the preparation of financial statements.

1.5     RESEARCH QUESTIONS/HYPOTHESIS.

Over the years, doubts have been raised over the accuracy of the accounting procedure of the state owned corporations. Some of the questions being raised are;

  1. Do they comply with the basis of accounting standards? i.e. Cash accrual and Commitment basis?
  2. Do they qualify staffs that can easily and accurately prepare the actual profit?
  3. Does the system in place permit effective administrative control?
  4. Does the system of accounting comply with the statutory and other legal requirements of the country?
  5. Does their financial statement represent the true and fair view of the corporation?
  6. Is the remuneration commensurate with the qualification of staff so as not to encourage pilferage and laziness?

Hypothesis

In order to make this research a result oriented one, the following hypothesis are developed;

Poor staffing is not responsible for the inadequacy of the accounting procedure of the corporation.

Lack of in service training does not affect the adequacy of the accounting procedure of the corporation.

Unfavorable /poor condition of service does not affect the adequacy of accounting system of the corporation.

1.6     RESEARCH METHODOLOGY

The research survey shall be largely focused on ‘POWER HOLDING COMPANY OF NIGERIA’. Data will be gathered using the primary and secondary methods of data collection.

Primary data will be gathered through personal interview with the accounting officers of the corporation through open-ended questionnaires, which were administered to employees of the corporation. More so, secondary data will be sourced through journals and the observation of the prepared annual reports of the corporation.

1.7     SCOPE AND LIMITATION OF THE STUDY

There are several types of governments owned establishments (public enterprise). For example: Nigerian railway corporation, Nigerian television authority, Nigeria airways corporation of Nigeria, Lagos state development and property corporation and Power holding company of Nigeria.

However, based on the material at hand only one of the above organizations ‘Power Holding Company of Nigeria’ (PHCN) will be considered as basis for judgment and assessment of other related government owned organization accounting procedures.

Moreover, in considering the accounting procedures of this corporation, it could have been important to talk generally about the managerial and financial aspect. Hence, only the financial aspects were reviewed with the data readily available.

1.8   DEFINITION OF TERMS.

There are some technical terms used in public accounting system.

ACCOUNTING OFFICERS: This is the title of the position held by the Minister (central) and Commissioner (state) as the head of central or state government department. He is responsible for the general supervision of the account of the ministry. He is expected to observe and fully comply with the checks and balances spelt out in the existing guidelines and financial regulations. More so, he is to account for funds allocated to his ministry.

APPROPRIATION ACT: This is an act authorizing the spending of the total amount provided in the expenditure estimates and appropriating it according to the head of the ministry.

BALANCE SHEET: A balance sheet is a representation at a particular point in time of assets, liability and owners’ equity (Government sub ventures to government agencies).

COUNTERFOIL RECEIPT: A receipt with a serial number issued from a book of official receipts.

CONTRIBUTION MARGIN: Income or revenue less related variable costs.

CASH BUDGET: A budget or cash receipts, payments and periodical balances.

FINANCIAL YEAR: Period of twelve months adopted by the government as its accounting year-end. e.g. from 1999 January to December that same year.

FUND FLOW STATEMENT: This is also called the statement of changes in financial account or statement of non-profit making organization that shows the surplus or deficit of funds arising from its funds operations in an accounting period. The counterpart of this statement for a trading organization is the profit and loss account.

INCOME STATEMENT: An indicator of how well a concern has done for a period of time showing the income (or revenue earned), the expenditure (or expense incurred) and the resulting surplus of income over expenditure (or net income from abroad)

IMPREST: An advance of cash made to an office that requires making payments on the public service.

PERSONAL EMOLUMENT: All items forming part of the emoluments of public officers includes; basic salary, entertainment and housing allowance, allowances in lieu of quarters, fuel and light, clothing allowances are paid in many fees and percentage of commissions.

TENDER: A written offer to supply goods and carry out work at a certain price.

TREASURY: A place where the records of public funds of the nation or state are kept. A term freely used to denote the accountant generals’ department.

TRIAL BALANCE: A balance of the account in a ledger extracted to prove the arithmetic accuracy of the ledger posting.

1.9   ORGANIZATION OF THE STUDY.

Electricity development in Nigeria started towards the end of the 19th century when the first generating plant was installed in the city of Lagos in 1898 by the then colonial government under the jurisdiction of public works department. Later, the electricity undertakings were set up by the native and municipal authority in different parts of the country.

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 authority under the public works department.

The electricity corporation of Nigeria usually referred to as ECN thus became the statutory body responsible for generating, transmission, distribution and sale of electricity to all customers in Nigeria.

Niger Dams Authority was charged with the responsibility of construction and maintenance of dams and other works on the river in Nigeria and elsewhere. Its’ functions includes generating electricity by means of water power, improving navigation and promoting fisheries and irrigation.

Based on the prevalent buck passing between Electricity Corporation of Nigeria (ECN) and Niger dams authority (NDA) on intermittent power failure in the country, the federal government decided to fuse the two organization into a single body to streamline their services for greater efficiency.

In the year 1970, precisely a year after the above decision was taken, the federal government appointed a Canadian firm of consultants; Shawmont limited to look into the details of the merger.

The report was submitted in 1971. By decree no 24of 27th June 1974 (which became effective from 1st April 1992). The electricity corporation of Nigeria (ECN) and Niger Dams Authority were merged by the federal government to become the electricity power authority (NEPA).

The monopoly of NEPA has been broken by an amendment in 1998 to the decree establishing it by opening up the industry to private participation.

In January 1973, NEPA became operational when a general manager was appointed with the mandate to generate, transmit and distribute electricity to all parts of the federation and charge customers minimally for their consumption.

The Nigerian electricity power authority (NEPA) has since become the fastest and biggest growing electricity company in Africa and indeed the developing world with a customer population of about five million. It has eight power stations made up of three hydro-electric and five thermal from a modest beginning. Total installed capacity is approximately 6,000mv.

On 11th march 2005, the power holding company of Nigeria was given birth to by signing into law electricity power sector reform bill by President Olusegun Obasanjo. The name of the initial holding company was incorporated on the 31st may 2005 became power holding company of Nigeria (PHCN).

The bill seeks to provide for information of companies to take over the functions, assets, liabilities and staffs of the national electricity power authority, develop competitive electricity markets establishing the Nigerian electric regulatory commission, provide for the licensing and regulation of the generation, transmission, distribution and supply of electricity, enforce such matters as performance, standards, consumer rights and obligation, provide for matters connected with or incidental to the foregoing.

 

 

END OF CHAPTER REFERENCES

Adams, A. R. (2002) “Public Sector Accounting and Finance Corporate” Publishers Venture, Lagos.

 

Adebisi, I. (2005) “Public Sector Accounting and Finance” Revised Edition Rojah Dynamic Publication, Ilorin.

 

Olaoye F.O. (2008) “Concepts and Practice of Public Sector Accounting in Nigeria” Asheda Publishers, Ibadan.

 

Omolehinwa E. (2001) Government Budgeting in Nigeria Pumark Nigeria Limited, Lagos

 

International Accounting standard

National Electric Power Authority (1999)

NEPA In Brief, Government press.

 

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