Improving Nigeria’s public sector accounting standards By Peter Onwubuariri

Minister of state for Finance Yerima Ngama
Minister of state for Finance Yerima Ngama

IPSAS can help fight corruption if utilised appropriately.

The Federal Executive Council in July 2010 approved the adoption of the International Financial Reporting Standards, IFRS, and International Public Sector Accounting Standards, IPSAS, for the private and public sectors.

The adoption is aimed at improving the country’s accounting and financial reporting system in consonance with global standards.

Consequently, the Federation Account Allocation Committee, FAAC, in June 2011 set up a sub-committee to work out a roadmap for the adoption of IPSAS in the three tiers of government.

The FAAC sub-committee in 2012 devoted time and resources to organise sensitisation workshops on IPSAS for stakeholders in all the six-geo political zones of the country.

The Minister of State for Finance, Yerima Ngama, who spoke at one of the workshops, told participants that the implementation of IPSAS would promote a peer-review mechanism of financial reports among the three tiers of government.

“Indeed, the adoption of IPSAS will no doubt serve as foundation for better accounting reporting system in Nigeria,” he said.

“Several governments are adopting IPSAS as the financial reporting standard because of its inherent qualities of promoting transparency and accountability,” Mr. Ngama said.

The Accountant-General of the Federation, Jonah Otunla, whose office is spearheading the adoption of IPSAS, stressed that the accounting system would engender economic and political benefits for the country.

On the economic side, Mr. Ngama expatiated that the adoption of IPSAS would provide the basis for the establishment of a harmonised budgetary system for the three tiers of governments from 2013.

He stressed that the era of IPSAS would also enhance the country’s eligibility to access economic benefits from donor agencies, private sector financial institutions and official financial institutions such as the World Bank.

Messrs. Ngama and Otunla are among several government officials who hold the view that IPSAS will facilitate quality service delivery as a result of its emphasis on accountability and transparency.

Challenges to IPSAS

However, other stakeholders believe that the tools and strategies needed to fully implement IPSAS in the three tiers of government are still problematic.

A former Chairman of the Ikeja District of the Institute of Chartered Accountants of Nigeria, ICAN, Joshua Okeowo, is one of those advocating the extension of the deadline given to public organisations for the adoption of IPSAS.

“IPSAS is a good development and an international best practice which has been embraced in most developed countries. There is nothing wrong with Nigeria taking queue in making sure that public entities in the country fully adopt IPSAS.

“However, there is need for Federal Government to extend the deadline for the commencement date beyond the effective date of January, 2013,” Mr. Okeowo said.

The Lead Consultant to the FAAC sub-committee on IPSAS, Thomas Nkoyo, pointed out that the Nigeria constitution did not specify the accounting standards that should be used for preparation of financial statements.

He said that IPSAS implementation in Nigeria would require an amendment of the constitution.

Such views were reinforced at the 42nd Annual Accountants’ Conference of ICAN held in November in Abuja.

ICAN endorsed the adoption of IPSAS but urged the government to put in place an enabling legislative framework that would aid the smooth onset of its implementation.

The accountants also solicited the engagement of “professionals to drive the process.”

An accountant, Paul Adebimpe, noted that since IPSAS was Information and Communications Technology (ICT)-driven, the need for a massive deployment of ICT in the rural areas was, therefore, desirable.

“This project called IPSAS needs a lot of computers, so every business of government has to be automated.

“I know that in some parts of the country, they are still writing with long hand at the moment; so, we have to bring in a lot of computers,” he said.

Mr. Adebimpe said if this is not done, the IPSAS implementation would not be successful.

“Some states have not computerised their accounting system and there is also the challenge of inadequate staff to handle the IPSAS project.

“So, there is the need for training and retraining of staff for the new project and if this is not properly carried out, we are going to fail,’’ he emphasised.

IPSAS to fight corruption

The Kogi State Commissioner for Local Government and Chieftaincy Affairs, Ndamodu Ali, said that stakeholders at the local levels should be adequately mobilised to participate in the IPSAS project.

“There is no serious financial recording or reporting in all the 774 local government areas of the country.

“Corruption can easily be traced to the local governments because there is no proper accounting system and the local government chairmen must be made to be accountable for all the expenditures in their councils.

“Accountants at the local councils are aiding corruption. Therefore, there is the need for a public sensitisation on the new project which obligates operators to make full disclosure of financial transactions,’’ Mr. Ali said.

The Secretary of the FAAC sub-committee on IPSAS, James Nongo, said that the fight against corruption remained a major “risk factor” in IPSAS implementation.

“Fighting corruption is not easy and since IPSAS will ensure an accounting reporting system that will checkmate corruption and fraud, we should not expect the buy-in of all the stakeholders.

“The committee has sought the support of political office holders to actualise the dream of IPSAS,’’ he said.

Mr. Nongo stressed that the committee was mindful of the challenge of infrastructure and ICT in the local government areas.

He noted that there was a proposal before the FAAC committee for the grouping of local governments into zones so as to enable them to process their financial documents via concerted arrangements.

“For example, local governments located in the same geo-political zones can have a central point ICT centre for them to post their transactions to a central pool,’’ he added.

Mr. Nongo said that the proposal would, however, need the approval of all the operators of IPSAS, including the federal, states and local governments.

Financial experts say that for a successful implementation of the IPSAS programme, the Federal Government should take into consideration the views of all the stakeholders.

“That would ensure entrenchment of an enduring process,’’ some of them added.