Thursday, 15 June 2017

Impact The Adoption Of IPSAS Accountability And Financial Management Of Public Sector.

CHAPTER ONE:
INTRODUCTION
1.1 
Background Of The Study

Government exists to serve the needs of the citizens and ensure those needs are provided efficiently and effectively. It accomplishes these goals by providing clear processes and structures for all aspects of executive management (decision-making, strategic alignment, managerial control, supervision and accountability). Governance in both private and public arena has been a hot topic and now hotter due to various recent financial scandals. 


Citizens and regulators are calling for higher levels of transparency and accountability in all areas of business especially in public service. In a recent study, the World Bank found a significant relationship between good governance and high level of performance (Word Bank 1997). This generated the issue of using appropriate accounting method and today, many countries government are adopting accrual basis of accounting (IPSAS) to improve governance and control which is a common practice in the private sector. 

Accountability is made possible when there is an established clear link between expenditures and performance. Accrual accounting helps agencies focus on outcomes and results rather than budgets and spending. 

Accountability is a concept in ethics and governance with several meanings and it is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving. It stands out as a cherished goal of every civilized and well constituted government all over the world. 

Accountability is increasingly being used in political discourse and policy documents because it conveys an image of transparency and trustworthiness (Bovens, 2006) and its evocative powers make it indescribable. Government is entrusted with public funds and other resources, and must adhere to the highest ethical standards, honesty, integrity, propriety and objectivity to ensure optimum utilization. These goals can be achieved only through a combination of individual professionalism, personal standards and a rigorous control framework. Openness and transparency help instill public confidence and trust, and are increasingly considered basic operating requirements for any government. 

The Nigerian society is filled with stories of wrong practices such as stories of ghost workers on the pay roll of Ministries, Extra-ministerial Departments and Parastatals, frauds, embezzlements and setting ablaze of offices housing sensitive documents and corruption are found everywhere in the country (Okwoli, 2004). According to Bello (2001), huge amount of Naira is lost through one financial malpractice or the other in Nigeria, which to say the least, drains the nation’s meagre resources through fraudulent means with far-reaching and attendant consequences on the development or even socio-economic or political programmes of the nation. 

Billions of Naira is lost in the public sector every year through fraudulent means. This represents only the amount that is ferreted out and made public. Indeed much more substantial or huge sums are lost in undetected frauds or those that are for one reason or the other hushed up. Appah and Appiah (2010) argues that cases of fraud is prevalent in the Nigerian public sector that every segment of the public service, could seem to be involved in one way or the other in some of these nasty acts. 


IPSASB is an independent standard-setting body working under the auspices of the IFAC. The main activity of the institution is to publish the International Public Sector Accounting Standards (IPSAS) (Christiaens and Van den Berghe, 2006; IFAC, 2008). The IPSASB has currently published 31 standards on modernizing financial information systems. The Board is still working out new and updating existing standards. Each standard is the result of an intense and rigorous due process. The IPSASB chose to use the IAS/IFRS standards as a basis for developing the IPSASs. It is “an effort to be consistent, where possible, with the existing international guidance, as well as avoiding the need to ‘reinvent the wheel’ for the public sector” (IFAC PSC, 2000). 

The IPSASB is clearly convinced that the ultimate objective of financial reporting is the same for the public and private sector. Therefore each IAS/IFRS is reviewed and adapted to develop the IPSASs. For specific public sector topics, with no private counterpart (such as non-exchange revenues), new standards are written (Christiaens and Van den Berghe, 2006; IFAC 2008). 

As the IPSASB has no formal power, the adoption of the IPSAS in local and central governments is completely voluntary. Benito et al. (2007) have demonstrated that the IPSAS are an important stimulus for the harmonization of financial information systems in the public sector.  


1.2    Statement of the Problem

There are perceived weak accountability of government fund by public servants in Nigeria which has not only increased the height of corruption but also resulted in enormous waste of national resources and decay of economic infrastructure within the economy. 

Other problems include poor planning and implementation of national budget experienced in all facets of Nigeria public sector, lack of transparency leading to mistrust and other negative consequences, weak accounting infrastructure which may not support accountability of government funds and finally, all the above problems have created room for diverse economic disorder and resulted in  backwardness.


However, this study will be basically concerned with the impact of IPSAS on accountability and public sector financial management in Nigeria.


1.3    Justification for the Study

Literature is developing on the issue of accountability and financial management in the public sectors in Nigeria, along with the pronouncement and persuasion by the International Public Sector Accounting Standards Board (IPSASB) under the auspices of the International Federation of Accountant (IFAC) for all countries to adopt IPSAS in their public sector. 

Most researchers in this area have examined the benefits, challenges and the reformation which the adoption will bring to the governmental financial information system (Ijeoma. N.B and Oghoghomeh (2014); Johan Christiaens (2009)). J. Christiaens et al (2013) further examine the effect of IPSAS on reforming government financial reporting. However, the researcher is not aware of any study in the country that has investigated the impact of IPSAS on accountability and public sector financial management. This gap in the literature will be the focus of his study.


1.4   Objectives of the Study

The general objective of this study is to examine the impact the adoption of IPSAS will have on the accountability and financial management of public sector.


The specific objectives include;

(i)     to assess the adequacy of the accountability framework that exists in the Nigerian public sector.

(ii)    to examine the provisions of IPSAS for public sector financial reporting.

(iii)   to study prospect and challenges of IPSAS adoption in Nigeria.

(iv)   to make recommendations based on the findings.


1.5 Research Question

Clearly, this study at the same time provides answers to the following questions;

             i.  What impact has the adoption IPSAS have on the accountability and financial management of public sector?

               ii.   How adequate are the accountability framework that exists in the Nigerian public sector?

             iii.   What are the provisions of IPSAS for public sector financial reporting?

             iv.   What are the prospect and challenges of IPSAS adoption in Nigeria?

        1.6   Research Hypotheses

The following hypotheses were tested in the course of the study:


HYPOTHESIS ONE

Ho: Accountability framework does not exists in the Nigerian public sector

H1: Accountability framework exists in the Nigerian public sector.


HYPOTHESIS TWO

Ho: The adoption of IPSAS will not improve accountability and transparency of public sector financial management in Nigeria.

H1: The adoption of IPSAS will improve accountability and transparency of public sector financial management in Nigeria.


1.7 Scope of the Study

The scope of this research work focused on the impact of IPSAS on accountability and public sector financial management in Nigeria. This study was limited to the public sector of the Nigeria economy. The study was limited to the Kwara State Ministry of Finance (offices of the Accountant General and Auditor General) between 2013-2014

1.8 Definitions of Terms

i. Transparency: this is operating in such a way that it is easy for others to see what actions are performed.

ii. Accountability: this is answerability, blameworthiness, liability and the expectation of accounts-giving.

iii. Impact: this is the force exerted by a new idea, concept, technology, or ideology.

iv. Envisage: to contemplate or conceive of as a possibility or a desirable future event.

 v. Facet: a component of a personality trait.

 vi. Meagre: deficient in quantity, fullness, or extent; scanty.

vii. Propriety:  is the quality of being appropriate, suitable or following the proper conduct.

viii. Recidivism: this is the act of a person repeating an undesirable behavior after he/she has either experienced negative consequences of that behaviour.

 ix.Fiscal policy: this is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.

 x. Budget: this is a quantitative expression of a plan for a defined period of time. 

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