The federal government is targeting the proposed implementation of the International Public Sector Accounting Standards (IPSAS) to revamp the accounting and reporting of governments’ financial transactions.
The implementation of IPSAS is expected to commence in 2016.
IPSAS are a set of accounting standards issued by the IPSAS Board for use by public sector entities around the world in the preparation of financial statements. These standards are based on International Financial Reporting Standards (IFRS). The Financial Reporting Council of Nigeria (FRC) is expected to drive the implementation process.
“It is expected that the implementation of IPSAS Accrual Accounting will commence from 2016. This will mark a turning point in accounting and reporting of government financial transactions. The adoption of Accrual-Basis of Accounting in an IPSAS environment will facilitate a complete, true and fair view of financial transactions and promote transparency and accountability in financial reporting by public sector entities,” a senior government official said.
Government accounting is the process of recording, analysing, classifying, summarising, reporting and communicating financial information about government transactions involving the receipt, transfer and disposition of public funds and property.
In order to improve the public financial management system, the Office of the Accountant-General of the Federation (OAGF) had introduced reforms such as Government Integrated Financial Management Information System (GIFIMS), Treasury Single Account (TSA) and Integrated Personnel and Payroll Information System (IPPIS).
The objectives of GIFMIS are to improve the federal government’s economic and financial management systems and processes; and to firmly establish a reform process of the federal civil service to improve professionalism in governance. It aims at improving the acquisition, allocation, utilisation and conservation of public financial resources for enhanced, accountable, transparent and cost effective public service delivery.
On the other hand, the TSA was introduced because for long, government’s ability to finance its budget had been greatly hampered by an inefficient, wasteful and chaotic banking arrangement. This was characterised by billions of idle cash being warehoused in thousands of bank accounts operated by some ministries, departments and agencies (MDAs) while government borrows to finance other MDAs. Also, because of the inability of government to know its cash balance as well as the non-remittance of revenue collected by MDAs and their agent banks into government coffers.
The FGN cash management policy was built on the following thrust: to ensure that sufficient cash is available as and when needed to meet commitments to make payments; to control aggregate cash flows within fiscal, monetary and legal limits; to improve the management of government’s domestic borrowing programme; enhancing operating efficiency through the provision of high quality services at minimal costs; investment of excess or idle cash; and ensure greater accountability for public expenditure.
With the approval of the former Minister of Finance, the OAGF commenced the implementation of the TSA with effect from 1st January, 2012 addressing e-payment side of the reform. The TSA is domiciled at the Central Bank of Nigeria (CBN) and serves as the common bank account of all participating MDAs for receipts and payments using the GIFMIS e-payment functionality. This had greatly reduced the ways and means level of government before the pressured mounted by the dwindling revenue.
As a result of the full implementation of the TSA, the CBN had early this year, directed banks to close all revenue accounts belonging to MDAs as mandated under the revenue electronic collection (e-collection) scheme.
It had explained that the federal government’s independent revenue e-collection initiative will automate revenue collections of MDAs directly into the Federal Government’s Consolidated Revenue Fund (CRF)
account at the CBN through the Remita e-collection platform and other electronic payment channels.