Monday, 6 May 2013

IPSAS: Towards A Better Accounting System In Nigeria

The Federal Executive Council in 2010 approved that Nigeria adopts a universal accounting system, International Public Sector Sector Accounting Standards’ (IPSAS), by 2013. Catherine Agbo writes that efforts are being made towards the adoption of the system, which is guaranteed to bring about transparency and accountability in governance.

Probity, transparency and accountability are no doubt some of the qualities that qualify governance or a government as responsible and responsive.

Thus, the ability of a government or a system of government to govern the people in such manner is always commendable. The display of these virtues by any leadership indeed helps to rekindle sustainable confidence from the citizenry.

In more advanced climes, issues of governance are done with utmost transparency and probity, which gives room for citizens to be actively involved in policy and decision making of their countries.

Citizens participation in such governments avails them an avenue to ask questions, which makes provisions for checks and balances in governance.

Nigeria’s quest to reposition its economy as one of the top 20 economies of the world by the year 2020 as encapsulated in vision 20:2020 has given rise to various policies and reforms of government, all targeted at preparing a fertile ground for the actualisation of the vision.

Accountability in all government business and transactions is no doubt a prerequisite for the successful attainment of this vision.

To achieve this, the government recently took a decision to commence gradual compliance with all general purpose financial statements of Ministries, Departments and Agencies (MDAs) to the provision of an acceptable global accounting system, the International Public Sector Accounting Standards (IPSAS).

By this, the three tiers of government, namely; federal, state and local governments would as from January 2013, be required to adopt and put these global standards to use in all accounting procedures.

But what is IPSAS and how relevant is it?
IPSAS is a set of accounting standards issued by its board for use by public sector entities around the world in the preparation of financial statements. This standard is based on International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

Interestingly, a sound government accounting standard such as IPSAS is a critical part of a nation’s institutional infrastructure. It has now become a recognised benchmark for evaluating and improving government accounting in most developing countries like Nigeria.

It is also a key element within the United Nations System. Since 2006, UN system organisations have made headway in aligning themselves with IPSAS requirements. Indeed, there are over 50 countries around the world that have and are in the process of adopting these standards. They include Algeria, Albania, Afghanistan, Argentina, Azerbaijan, Bangladesh, Barbados, Cambodia, Cayman Islands, China, Cyprus, East and Southern Africa, France, India, Jamaica, Morocco, Norway, Zambia, Pakistan and Uganda.

The United States of America, United Kingdom, Australia, New Zealand and Canada are among other countries that are already applying full accrual accounting standards broadly consistent with IPSAS requirement.

How Prepared is Nigeria towards adopting IPSAS?
To ensure a seamless process, the office of the Accountant General of the Federation (OAGF) has already carried out sensitisation workshop with critical stakeholders in the six geo-political zones of the country.

This is to educate the stakeholders and prepare them to buy into the project, as it has been established that the IPSAS system is critical not only to ensuring transparency and accountability in government but would also assist in achieving the transformation agenda of President Goodluck Jonathan.

While declaring the first sensitisation workshop for stakeholders comprising, commissioners of finance, states Accountants Generals, members of the State Houses of Assembly in the finance and appropriation committees and State Auditors General as well as other relevant stakeholders from the North- West Zone in Kaduna, the Accountant General of the Federation (AGF), Mr. Jonah Otunla explained that considering the role which the new system would play in assisting the country achieve speedy economic growth, the Federal Executive Council (FEC) had approved at its meeting of July 28, 2010 that Nigeria adopts the provisions of the International Financial Reporting Standards (IFRS) and IPSAS for the private and public sectors respectively.

“The Federation Account Allocation Committee (FAAC) at its meeting held on 13th June, 2011 set up a sub-committee to provide a roadmap for the adoption of IPSAS in the three tiers of government in Nigeria. This interactive workshop in Kaduna which is for the North-West zone is expected to be held in all the six geo-political zones of the country,” the AGF said.

According to him, the FAAC sub-committee has its terms of reference to include, ensuring that officers involved in finance and accounts functions understand the core requirement of IPSAS and ensure adequate coverage of all stakeholders in the distribution of the document and tackling gaps noted in the financial statements of the three tiers in order to ensure that they are bridged.

It is also expected to identify infrastructure needs and make recommendations to government for appropriate implementation by all tiers of government.

Membership of the sub-committee he explained, include the Accountant General of Borno State representing the North-East, Accountant General of Sokoto for the North-West; Accountant General of Kwara representing the North-Central; Accountant General of Enugu representing the South-East; Accountant General of Ogun representing the South-West and Accountant General of Akwa Ibom for the South-South. The membership also includes the chairman, forum of Auditors-General for Local Government Councils of Nigeria, representative of the Financial Reporting Council of Nigeria and the Consolidated Accounts Department of the AGF.

To ensure a clear understanding of the adoption process, members of the IPSAS FAAC sub-committee have embarked on visitation to some countries with significant success to bring home what best can be done to achieve a smooth implementation.

A team of experts from Ernst & Young, a renowned global accounting firm based in Germany has also trained principal accounting officers from the 36 states of the Federation on critical aspects of the standards.

At the moment, an acceptable uniform chart of accounts to all stakeholders has also been developed and is expected to be released soon by the FAAC sub-committee in line with its mandate.

How Relevant is IPSAS to Nigeria?
Otunla, explained that the adoption of IPSAS by the three tiers of government would undeniably lead to better informed assessment of resource allocation decisions made by the government as well as improve transparency and accountability in the system.

In his view, the desire of government is to incorporate the system as an integral element of reforms directed at promoting social and economic development.

Otunla lamented that it had been observed that in many states of the federation, balance sheet audits, when performed, still routinely reveal major discrepancies, saying the situation is largely blamed on the fact that the operation of government business and accounts has been within the general framework of the principles of fund accounting, with financial reporting structure being far from the principles in absolute terms.

He further said compliance with relevant standards in fact was at best still incidental, which explains why pundits insist that limited financial reporting and disclosures made by most entities in the country could sadly be responsible for some perception that Nigeria is a risky environment for the inflow of Foreign Direct Investments (FDI), adding that in such instances as research indicates, investors are not provided with sufficient economic information that will enable them to understand the risk profiles of entities in order to make informed judgments and decisions.

Where are we now?
The sub-committee has made appreciable progesss through seminars and sensitisation workshops for relevant stakeholders. It is now left for government and all relevant stakeholders to keep faith with the implementation process through all round support in order to enable Nigeria joins the rest of the world in ensuring transparency and probity in governance, especially as the current corruption rankings of the country are at an all time low.

Source: Leadership

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