1.1 Introduction
An accounting system refers to the set of processes and procedures used to record, classify, identify and summarize financial transactions within an organization. It serves as the framework for managing financial information and ensuring compliance with regulatory requirements. According to Obazee (2018), the accounting system in the public sector of Nigeria plays a crucial role in ensuring transparency, accountability, and efficiency in the management of public funds. As government entities handle significant financial resources, effective accounting practices are vital for monitoring expenditures, safeguarding assets, and reporting financial information accurately (Obazee, 2018). The importance of a robust accounting system in the public sector cannot be overstated, as it not only ensures fiscal discipline but also builds public confidence in government operations (Okezie & Okwuosa, 2019).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of terms.
1.2 Background of Study
Historically, accounting systems in the public sector in Nigeria can be traced back to the colonial era, when financial management practices were primarily driven by the British colonial administration. During this period, financial reporting was rudimentary and focused mainly on expenditure tracking, with little emphasis on accountability or transparency (Nwankwo, 2018). The adoption of Western accounting practices laid the foundation for subsequent developments in Nigeria’s public sector accounting.
Following Nigeria's independence in 1960, the government recognized the need for a more structured accounting system to enhance accountability and financial management. This led to the establishment of various financial regulations and institutions aimed at improving public sector accounting practices. The introduction of the Audit Ordinance in 1956, which established the office of the Auditor-General, was a significant step toward promoting accountability and oversight in government financial operations (Ogunleye, 2019).
In the 1970s, the Nigerian government began implementing reforms to modernize public sector accounting in response to the increasing complexity of government financial operations and the demand for better accountability. These reforms included the establishment of the Public Accounts Committee and the introduction of the financial regulations that mandated regular audits of government accounts (Adeyemi & Ogunmade, 2019). The late 1990s and early 2000s marked a pivotal moment in Nigeria's public sector accounting history, with the adoption of the International Public Sector Accounting Standards (IPSAS) aimed at improving the quality of financial reporting and enhancing transparency (Eze & Oladele, 2020). The adoption of IPSAS is part of broader public financial management reforms that seek to ensure that public funds are managed efficiently and effectively, thereby reducing corruption and enhancing accountability (Agbede, 2021). Despite these advancements, the public sector accounting system in Nigeria still faces significant challenges, including inadequate training for personnel, poor implementation of accounting standards, and persistent issues of financial mismanagement (Nwankwo & Oladimeji, 2020).
In recent years, the Nigerian government has made concerted efforts to implement reforms in public financial management, including the adoption of the International Public Sector Accounting Standards (IPSAS) to enhance the quality of financial reporting and improve transparency (Ogunbiyi, 2019). These reforms are intended to address the persistent issues of corruption and inefficiency that have plagued the public sector, leading to a demand for a more accountable and transparent accounting system (Idris & Ibrahim, 2020). Despite these efforts, the accounting system in Nigeria's public sector still faces significant challenges, such as inadequate training for accounting personnel, insufficient funding for public sector accounting operations, and a lack of compliance with established accounting standards (Akanbi & Adeoye, 2021).
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the accounting system in the public sector.
1.3 Statement of Problems
Investigation revealed that the appraisal of the accounting system in the public sector in Nigeria reveals several critical problems that hinder effective financial management and accountability. One major issue is the lack of adherence to established accounting standards and practices. Many public sector entities in Nigeria do not fully comply with the International Public Sector Accounting Standards (IPSAS), leading to inconsistencies in financial reporting and a lack of transparency (Eze & Oladele, 2020).
Additionally, the lack of public confidence in the financial management practices of government institutions is also a significant problem. Citizens often perceive the public sector accounting system as lacking transparency and accountability, which undermines trust in government and public institutions (Ogunleye, 2019).
Furthermore, the existing accounting systems in many public sector organizations are outdated and ineffective, leading to challenges in accurately capturing and reporting financial transactions. The reliance on manual accounting processes rather than automated systems results in errors, delays, and inefficiencies in financial reporting (Nwankwo & Oladimeji, 2020). This inadequacy highlights the urgent need for modernization and the adoption of technology in public sector accounting to enhance efficiency and accuracy. It is against the backdrop that this study seeks to address these problems by evaluating the accounting system in the public sector in Nigeria.
1.4 Aim and Objectives of Study
The aim of the study is to critically appraise the accounting system in the public sector in Nigeria. The specific objectives of the study are as follows:
- To evaluate the extent of compliance with International Public Sector Accounting Standards (IPSAS) among public sector entities in Nigeria.
- To identify the major challenges faced by public sector organizations in implementing effective accounting systems.
- To assess the impact of corruption and mismanagement of public funds on the overall efficiency of the public sector accounting system.
- To analyze the role of auditing and oversight mechanisms in enhancing accountability in public sector financial management.
- To recommend strategies for improving the accounting system in the public sector to promote transparency, accountability, and effective governance in Nigeria.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- To what extent do public sector entities in Nigeria comply with International Public Sector Accounting Standards (IPSAS)?
- What are the major challenges faced by public sector organizations in implementing effective accounting systems?
- How does corruption and mismanagement of public funds impact the efficiency of the public sector accounting system?
- What is the role of auditing and oversight mechanisms in enhancing accountability in public sector financial management?
- What strategies can be recommended to improve the accounting system in the public sector for promoting transparency and accountability in Nigeria?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between the implementation of International Public Sector Accounting Standards (IPSAS) and the efficiency of the accounting system in the public sector in Nigeria.
- H1: There is a significant relationship between the implementation of International Public Sector Accounting Standards (IPSAS) and the efficiency of the accounting system in the public sector in Nigeria.
Hypothesis Two
- H0: Corruption and mismanagement of public funds negatively impact the effectiveness of the accounting system in the public sector in Nigeria.
- H1: Corruption and mismanagement of public funds positively impact the effectiveness of the accounting system in the public sector in Nigeria.
1.7 Significance of Study
The findings of this research will contribute to the body of knowledge on public financial management and accounting practices, serving as a reference for future research in this area. Additionally, educators and students in accounting and public administration will benefit from a deeper understanding of the implications of accounting systems on governance and transparency.
Furthermore, the research will promote awareness of the importance of adherence to International Public Sector Accounting Standards (IPSAS) and the role of accountability in enhancing public trust in government institutions.
Finally, the study will serve as a catalyst for positive changes in public sector accounting practices, ultimately leading to improved service delivery and resource management.
1.8 Scope of Study
The scope of the research is focused on the appraisal of accounting system in the public sector in Nigeria.
1.9 Limitations of the study
During the course of this study, many things militated against its completion, some of which are:
- Delays in Response from Respondents: Some participants were not readily available or responsive, resulting in gaps in the data collection phase. This factor slowed down the progress of the study and may have impacted the overall representation of perspectives in the findings.
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
In the context of this study on the appraisal of the accounting system in the public sector in Nigeria, several key terms are defined to ensure clarity and understanding.
Accounting System: An accounting system refers to the set of processes and procedures used to identify, record, classify, and summarize financial transactions within an organization. It serves as the framework for managing financial information and ensuring compliance with regulatory requirements. According to Adebayo and Ojo (2020), an effective accounting system is crucial for transparent financial reporting and accountability in public sector institutions.
Public Sector: The public sector encompasses government-owned entities and organizations that operate at various levels, including federal, state, and local governments. These entities provide services to the public and are funded primarily through taxation and government revenues. As noted by Afolabi (2021), the public sector plays a significant role in the economic development of a country by facilitating infrastructure development and social services.
Financial Reporting: Financial reporting involves the preparation and dissemination of financial statements that provide information about an organization’s financial position, performance, and cash flows. This process is essential for stakeholders to assess the financial health and accountability of public sector entities (Okafor, 2020).
Accountability: Accountability in the public sector refers to the obligation of government entities to justify their actions and decisions to stakeholders, including citizens, regulatory bodies, and other governmental organizations. This concept is integral to maintaining public trust and ensuring that resources are used effectively (Udoayang, 2021).
Regulatory Framework: A regulatory framework comprises the laws, policies, and guidelines that govern the operations of accounting systems within the public sector. This framework is designed to promote transparency, consistency, and compliance in financial reporting practices (Igbinovia, 2020).
