POVERTY ALLEVIATION THROUGH ARTISANAL MINING OF SOLID MINERALS IN KEBBI STATE

SANI ABDULRAHMAN BALADEPARTMENT OF ACCOUNTINGFACULTY OF MANAGEMENT SCIENCESUSMANU DANFODIYO UNIVERSITY, SOKOTO

GOVERNMENT ACCOUNTING AND FINANCIAL REPORTINGBY1.0 INTRODUCTIONGovernment refers to the collection of public institutions established and given the authority to run the affairs of a country. It is a system of governance and includes the body of individuals who are authorized to administer the laws of the Nation.Government Accounting can be define as a process of recording, analyzing, summarizing, reporting, communicating and interpreting of financial information about Government in aggregate and in detail, reflecting all transactions involving receipts, transfer and disbursement of government funds and property.1.0 INTRODUCTION CONTD.Therefore, Government Accounting can be seen to mean all the financial documents and records of public institutions that relate to the collection of tax payers money, the analysis, and control of expenditure, administration of funds, management of government stores and all the financial responsibilities and duties of the relevant organs. Government accounting system is the way of accountability through which the established institutions of the public render stewardship on the revenue of the Nation and how it has been disbursed.Government accounting and financial reporting are very important component of the public sector in Nigeria.1.0 INTRODUCTION CONTD.This is because government accountings have the dual purpose of meeting internal management (Executive arm of government) requirement while providing the public with a window on government operations.Financial reporting in the government sector is mostly based on the cash-based accounting system. The quality of information provided in financial reports determines the usefulness and reliance of such reports to users. The characteristics by which quality can be measured are relevance, understandability and comparability.1.0 INTRODUCTION CONTD.Financial reporting in the Public sector is regulated by the International Public Sector Financial Reporting Standards (IPSASs) issued by the International Public Sector Accounting Standards Board (IPSASB) of International Federation of Accountants (IFAC). In Nigeria, there is no body responsible for issuing standards for public sector financial reporting. Hence, financial reporting in the public sector is regulated by the Constitution of the Federal Republic of Nigeria 1999 as amended, the Finance (Control and Management Act) of 1958, Audit Ordinance Act of 1956, and Financial Regulations issued from time to time by the Minister for Finance.This paper examines Government accounting and financial reporting-in Nigeria.2.0 Conceptual Clarification2.1 Government AccountingGovernment accounting includes the process of recording, analyzing, classifying, summarizing, communicating and interpreting financial information about Government in aggregate and in details, recording all transactions involving the receipt, transfer and disposition of public funds and property. The processes of Government Accounting can be examined as follows: (a) RecordingRecording involves the process of documenting the financial transactions and activities in the necessary books of accounts such as cash book, ledger and vote book.2.1 Government Accounting Contd.(b) AnalyzingAnalyzing involves the process of separating transactions according to their distinct nature and posting them under appropriate heads and sub-heads.(c) ClassifyingClassifying has to do with the grouping of the transactions into revenue and expense descriptions and bringing them under major classes as Revenue Head and Sub-heads, with their relevant code numbers of accounts.2.1 Government Accounting Contd.(d) SummarizingSummarizing concerns the bringing together of all the classes of accounts and preparing them into reports periodically as statutorily or organizationally required.(e) CommunicatingCommunicating is about making available financial reports on all the government financial activities from the necessary accounting summaries to various interested parties. The style of communication adopted should be un-ambiguous, lucid and devoid of jargons as much as possible.2.1 Government Accounting Contd.(f) InterpretingInterpreting ends the process by giving explanations on what has been reported in the various financial statements and reports, as regards the overall operations and performance of the relevant government organization(s). This is to enable the necessary parties and users to take relevant decisions based on their assessments of the reports.2.1.2 Financial ReportingFinancial reporting is one of the most important aspects of the accounting profession either in the government (public) or in the private sector.

It is the process through which information about organizational performance and financial position is presented to the users.

It is often believed to be precise and factual in its contents and, attested to by external person(s) (Auditor General in the case of public sector) confirming its validity.2.1.2 Financial Reporting Contd.Financial reporting is that process that creates stewardship assertions in the form of financial and non-financial statements reflecting the results of activities and transactions of an entity for a period of time.

Furthermore, financial reporting is to a large extent a studied assessment of the operational performance of an entity expressed in financial terms to reflect the economic exercise of fiduciary obligation.2.1.2 Financial Reporting Contd.Financial statements are a subset of financial reporting.

The process of supplying general-purpose financial information to people outside the organization is termed financial reporting.2.2 Nature and Objectives of Government Accounting Government Accounting exist mainly to achieve the following objectives:

To fulfill legal requirement. The law requires that government accounts are prepared and audited annually.

To perform the stewardship function. The ruling government is the steward of the resources and finances of the Nation. Government has to give account of how these finances are used.

To enable Government to plan well the future activities and programs of the Nation. 2.2 Nature and Objectives of Government Accounting Contd.To provide a process of controlling the use of the financial and other resources.

To provide the means by which actual performance may be compared with the target set.

To evaluate the economy, efficiency and effectiveness with which governance is carried out.2.3 Legal Basis of Government Accounting In NigeriaPublic sector accounting in Nigeria is governed by:The constitution of the federal republic of Nigeria 1999

Tue finance (control and management) Act 1958 as amended and now referred to as CAP F 26 LFN 2004

The annual Appropriation Acts as provided by section 59 of the 1999 constitution.

The public procurement Act 2007 as amended

The fiscal responsibility Act 20072.3 Legal Basis of Government Accounting In Nigeria Contd.The Nigerian sovereign investment Authority Act 2011

The treasury/ Finance circulars

The treasury Accounting manual

International Public sector Accounting standards Board (IPSASB).

Standardized reporting format approved by the Federation Accounts Allocation Committee in 2002 to be operational with effect from 2004 financial year.2.4 The Benefits of Financial ReportingFinancial reporting is a building block of any economy. This is because it creates confidence among the citizens been govern (in the case of Government) and confidence among investors and shareholders in the case of private sector. Financial reporting allows the public at large to confidently and objectively assess government performance, thus influencing their behavior and decisions.When good and sound financial reporting are observed in both private and Government sector, the country stand to gain the following:2.4 The Benefits of Financial Reporting Contd.Enhancement of local and foreign Direct and portfolio Investment as investors are better able to evaluate corporate prospects, government prospects and make informed decisions resulting in access to capital at lower costs.Facilitating integration into global financial and capital marketsImprovement of public sector fiscal discipline and enhancement of value for money; and generation of employment opportunities.High quality financial reporting will also contribute to national public finance by improving the assessment and collection of taxes on corporate profits.2.5 Final Accounts and Financial Statements in public sector of NigeriaFinal accounts are drawn up in order to convey financial report and position of who government at a particular period in time to those that have the right to be informed.The purpose of preparing and presenting financial report in the form of final accounts is to set out the monies received and Spent during the year under suitable Heads and description and to Show the State, of affairs of various funds held at the financial year end.Without the final accounts no audit could be completed and therefore, users of accounting information would lack the assurance concerning the legitimacy of government transaction.2.5 Final Accounts and Financial Statements in public sector of Nigeria Contd.The Accountant General of the federation prepares and publishes the various Statements on behalf of the federal Government not later than six months following the end of financial year as provided by section 49 of the Fiscal Responsibility Act.

Section 85(2) of the Constitution of the Federation Republic of Nigeria 1999, provides that the Public accounts of the Federation and of all Offices and Courts of the federation shall be audited and reported on by the Auditor-General who shall submit his report to the National Assembly.2.5 Final Accounts and Financial Statements in public sector of Nigeria Contd.In the past, the federal Government has been using about 11 Statements to presents financial report. But as from 2002 the federal Accounts allocation committee agreed to have uniform financial statements for the three tiers of government.

The main components of the financial statements now in use to presents financial statement are:

Cash flow statement

Statements of Assets and Liabilities2.5 Final Accounts and Financial Statements in public sector of Nigeria Contd.Statement of consolidated Revenue Fund

Statement of capital Development Fund

These four Statements are to be supported with: Claim of responsibility for the financial Statement by the Accountant General, statement of opinion of the Auditor General and also notes to the financial statements to Shed more light on government financial Statement.2.6 Bases of Government Accounting In NigeriaThese refer to how the transaction of government are recognized and recorded in the accounting books. In Nigeria cash basis is adopted in recording government transactions.Cash BasisThe cash basis of accounting embraces the movement of cash as the basis of recognizing income and expenses. Once money is received, income is recognized, whether the goods or services have been supplied or not. On the other hand, an expense is recognized as having been made once payment is made, whether benefit has been received or not.2.6 Bases of Government Accounting In Nigeria Contd.In other words, income is recognized as it is received in the form of cash and expenditure is recognized as money is paid. No difference is shown in the treatment of capital and revenue expenditure.Fixed assets are not treated as capital expenditure items. They are written off as revenue expenditure in the years of purchase.Main Characteristics of Cash Basis of Accounting:It is very simple to develop an accounting system based on the mere recording of cash receipts and payments.2.6 Bases of Government Accounting In Nigeria Contd.Financial statements generated with this technique are not complicated; they are very understandable and the accounting does not require the making of estimates for depreciation or doubtful debts, or adjustments for accruals and prepayments. It facilitates fiscal stewardship in that in public sector where the concept of cash limit is used in budgeting the use of resources, compliance can be determined easily. The concept does not make for proper measurement of performance.2.6 Bases of Government Accounting In Nigeria Contd.It is not easy to measure the physical work produced and the assets consumed in doing that within a period of time. The technique does not recognize the time when resources are used.Performance under this approach is poorly measured since recognition is given to the use of limited cash in any service delivery.The cash basis stresses the economy of a service very much, and does not consider the efficiency and effectiveness in service delivery.2.6 Bases of Government Accounting In Nigeria Contd.In accounting for the existing resources of government, only cash and near cash items are shown on the balance sheet.

No fixed assets such as buildings and vehicles are shown. 2.7Differences between Government Accounting and Private Sector AccountingIn Government Accounting, tangible and fixed assets as buildings and motor vehicles are not shown in the Statement of Assets and liabilities. They are written off immediately in the year of purchase.Private Sector Accounting reflects fixed assets in the balance sheet, displaying the historical cost, accumulated depreciation and written down value of each. Government Accounting does not record stocks, debtors in the balance sheet (Statement of Assets and liabilities), unlike Private Sector Accounting which displays those items such as sales, cost of goods sold and carriage outward expenses (in the trading and profit and loss accounts). 2.7Differences between Government Accounting and Private Sector Accounting Contd.Private Sector Accounting is peculiar to commercial undertakings which have the maximization of profit as their main objective. Government Accounting focuses on the provision of adequate welfare to the people with probity, accountability, legal and wise spending in mind. Government Accounting adopts cash basis of accounting, as against accrual basis of Private Sector Accounting. Government Accounting mostly uses the budgetary approach, recording and classifying items of revenue and expenditure under various heads and sub-heads.2.7Differences between Government Accounting and Private Sector Accounting Contd.Although Private Sector Accounting equally does budgeting and budgetary control, revenue and expenditure matters are, recorded by their natural description, such as stationary and discount allowed etc.

Government Accounting operates predominantly fund accounting method in collating its data and information.

Private Sector Accounting uses the proprietary (or ownership) style which discloses the nature and sources of the enterprises finance or capital structure, such as ordinary share capital or capital structure, such as ordinary share capital and preference share capital.2.7Differences between Government Accounting and Private Sector Accounting Contd.The legal basis of Government Accounting is the Nations Constitution and Act of Parliament, unlike Private Sector Accounting which draws its existence and strength from Companies Acts.2. 8 Existing Gap in Federal Government Financial ReportingThe word bank in collaboration with the office of the Accountant General of the federation conducted a study to identify the mandatory requirements of International Public Sector Accounting Standards (IPSAS) which are not satisfied in the current Federal Government Accounting System. The 2010 report identified the following gaps:

No records in the Consolidated Account Showing external assistance such as aids and grants.No complete disclosure of financial activities of controlling entities like NNPC, CBN and NPA.

Unrealized gains losses due to foreign exchange are not reported.

No accounts of undrawn assistance

Inadequate disclosures of cash out of control for example under litigation.2. 8 Existing Gap in Federal Government Financial Reporting Contd.3.0Summary, Conclusions and RecommendationsFrom our discussion above, government accounting was discussed as a process which involved the documentation of financial records.The process involves the recording, analyzing, classifying and summarizing, communicating and interpreting governments financial transactions. Moreover, the concept of financial reporting was also looked at.We were able to see to importance of Government Accounting and the role played by financial reporting in providing Useful information to both internal and external users of the information to permit informed judgment.3.0Summary, Conclusions and Recommendations Contd.However, despite the importance of Government accounting and the role of financial reporting in Nigeria, there are still some gaps that need to be bridge for Government Accounting and financial reporting to serve the purpose for which they are meant for. Such gaps include those that were identified by the World Bank study group of 2010 and the inherent deficiencies in the cash basis of accounting currently in used by the government in Nigeria.3.0Summary, Conclusions and Recommendations Contd.Hence, the gaps identified by the World Bank study Group in collaboration with the office of the accountant general of the federation should be incorporated into the revised financial reporting that came into effect in year 2004.

This would go a long way at paving the way for Nigeria to fully adopt the Standards of IPSASB. It would also add to the credibility and meaning of financial report been presented.3.0Summary, Conclusions and Recommendations Contd.Similarly, to do away with the problems associated with cash basis of accounting; modified cash basis should be adopted. The modified cash accounting technique is appropriated where the accounting books of the government institutions are not closed at the end of a year, but are open for some period into the beginning of the following year.Receipts made during the current year which relate to the past period are recorded and accounted for as revenue of the previous period.