INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS (IPSAS) ADOPTION AND QUALITY OF FINANCIAL REPORTING IN THE NIGERIAN PUBLIC SECTOR

1.1 Introduction

IPSAS ensures high standards which accelerates the provision of credible financial statements. This enhances functional performance and efficient distribution of resources. Ademola et al., (2017) noted that IPSAS adoption ensures excellent financial operations by increasing the level of accountability and transparency. Also, it reveals financial misappropriations quickly within the public sector however big such institution is. This is possible because IPSAS provides a self-regulated internal control system. The adoption of IPSAS is spreading fast globally.

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, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

International Public Sector Accounting Standards (IPSAS) are currently at the center of a global transition in government accounting, according to Heald (2003), in response to demands for greater government financial responsibility and transparency. The public sector consists of agencies or organizations that carry out public policy by providing services and redistributing income and capital, with both operations primarily funded by compulsory taxes or levies on other industries. Governments, as well as all publicly owned, regulated, and/or publicly supported agencies, corporations, and other government bodies that provide public programs, products, or services, are included (Kara, 2012). Government interventions in the private sector in the aftermath of the global financial crisis, on the other hand, have raised many governments' exposures and debt levels. As a result, decision-making becomes more difficult, especially if the definition of "sustainable" is elusive. The knowledge that poor public sector accounting, auditing, and financial management can and will contribute to economic crises is not out of perspective.

In 2010, the Federal Executive Council of Nigeria approved the adoption of the International public Sector Accounting Standards (IPSAS) and business-style accounting throughout the public sector. The roadmap for the adoption of IPSAS is in phases as follows; full adoption of IPSAS cash basis in 2014 and full adoption of IPSAS accrual basis with effect from 2016. The international Public sector Accounting Standards govern the accounting by public sector entities, with the exception of Government Business Enterprises. The Public sector comprises entities or organizations that implement public policy through the provision of services and the redistribution of income and wealth, with both activities supported mainly by compulsory tax or levies on other sectors as noted by Kara (2012). Public sector accounting is a system or process which gathers, records, classifies and summarizes as reports the financial events existing in the public or government sector as financial statements and interprets as required by accountability and financial transparency to provide information to users associated to public institutions.

Nigeria, a leading African nation with the population of over 186 millionpeople(UN, April 20, 2016) and a foremost Organization of the Petroleum Exporting Countries (OPEC) member, with a public sector dominated economy, has identified the need to consider the value proposition of the IPSAS and implement it in order to remain relevant (Ijeoma & Oghoghomeh, 2014). However, government interventions following the global financial crisis in the private sector have increased many governments’ exposures and debt levels. Hence, decision-making is getting harder, especially if the view of what is “sustainable” is difficult to see. The focus on the private sector is huge when failure occurs and therefore accounting, audit, and reporting standards are set at a high level and rigorously enforced (Ijeoma & Oghoghomeh, 2014). Timely, clear, and open annual financial statements play a significant role in the accountability of governments to their citizens and their elected representatives. These financial statements are prepared on a cash basis or some variation of an accrual basis of accounting. The benefits of achieving consistent and comparable financial information across jurisdictions are very important and International Public Sector Accounting Standards (IPSAS) have been established by the IPSAS Board to assist in that endeavor.

In modern democratic governance, the basic objectives used in assessing the performance of public sector organizations are financial objective, public objective and growth objective. While the financial objective is concerned with the ability of the government to meet the needs and aspirations of taxpayers, public objective focuses on meeting the demands of the citizenry (i.e. those within and outside the tax bracket), and the growth objective is tailored towards improvement in economic performance and international relations (Okoye & Oghaghomeh, 2011). The need for unified standards made the IPSAS Board to develop IPSAS for public sector financial reporting. While the commercial entities world over are moving towards IFRS, governments are harmonizing with IPSAS.

Therefore, in Bauchi State Government where the research was carried out, the activities that was conducted is to know the International public sector Accounting Standards (IPSAS) Adoption and Quality of Financial Reporting in the Nigerian Public Sector.

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1.3 Statement of Problems

The development of any accounting system requires consideration of the fundamental purpose of that system. The nature of government accounting has the purpose of determining how much money was received and its sources, how much was spent and for what purposes and the financial obligations accrued (Ijeoma & Oghoghomeh, 2014).

Profit is not the major focus, unlike the private sector, which has profit as the prime focus and determines the profit of the business over a given period. Hence, many factors influence government accounting such as the role of government in the different fields like the armed forces, health and education and the policies set by government to achieve its aspirations and goals. In Nigeria, government accounting processes have been conducted within the general framework of the principles of fund accounting but the application of these principles to financial reporting has been a major challenge. Government is significantly different from a business, and the purpose of governmental accounting differs significantly. This raised many questions relative to the quality and relevance of the reports prepared and published by public organizations especially the Federal Ministries, Departments and Agencies.

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1.4 Aim and Objectives of the Study

The aim of the study is to examine the International public sector Accounting Standards (IPSAS) Adoption and Quality of Financial Reporting in the Nigerian Public Sector using Bauchi State Government as a Case Study. In achieving this aim, the following specific objectives were laid out as follows:

1. To examine the implications of adoption of IPSAS on the quality and reliability of IPSAS-based financial reporting with a view to establish the relevance of IPSAS to the financial reporting of public sector organizations in Nigeria and Federal Secretariat Bauchi in particular.
2. To ascertain the extent to which IPSAS’s adoption can help in managing corruption and mismanagement in the Federal Secretariat, Bauchi.
3. To ascertain the contribution of adoption/application of IPSAS in enhancing comparability (Internal &external) of financial statements of public sector organizations in Nigeria.

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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:

• Will the implementation of IPSAS improve the quality of financial reporting in the public sector?
• Will the adoption and implementation of the standard help in curbing corruption and mismanagement in the public sector?
• Will the implementation and adoption of IPSAS improve the performance of government enterprises?
• Is there any association between IPSAS adoption and financial reporting quality in Nigeria?
• What are the salient factors affecting IPSAS implementation in Nigeria?
• What is the relationship between IPSAS adoption, comparability and international best practice in Nigeria?

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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: The adoption and implementation of IPSAS will not help in curbing corruption and mismanagement in the public sector organizations in Nigeria.
• H1: The adoption and implementation of IPSAS will help in curbing corruption and mismanagement in the public sector organizations in Nigeria.

Hypothesis Two

• H0: The adoption and implementation of IPSAS does not have the potential to improve the performance of public enterprises.
• H1: The adoption and implementation of IPSAS have the potential to improve the performance of public enterprises.

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1.7 Significance of Study

This research work will be of immense significance to the staff of Federal Secretariat Bauchi. It will go a long way in enlightening them on the concept of international public sector accounting standard (IPSAS) as well as it’s application in financial statement. This research work will as well be of benefit to students and researchers because it will widen their scope from the information contained in this research work. And lastly, it will be of help to the ministries, departments agencies in their financial control system and also it will help them in improving revenue generations and minimizes expenditures since public sector is differentiate able from private sector.

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1.8 Scope of Study

The study focuses on the International public sector Accounting Standards (IPSAS) Adoption and Quality of Financial Reporting in the Nigerian Public Sector using Bauchi State Government as a Case Study.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. 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.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Research material: availability of research material is a major setback to the scope of the study.
4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
5. 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).

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1.10 Definition of Terms

IPSAS: International Public Sector Accounting Standard.

IPSASB: International Public Sector Accounting Standard Board.

Impact: This is the measure of tangible and intangible effects of one thing’s or entity’s action or influence upon another.

Adoption: This is the choosing and making that to be one’s own even when it is not originally for him.

Quality: A measure of excellence or a state of being free from defects, deficiencies and significant variations.

Public Sector: The part of the National economy providing basics goods and services that are either not, or cannot be provided by Public Sector.

Cash Basis: A basis of accounting under which income is recorded when cash is received and expenses are recorded when cash is paid.

Accruals Basis: A basis of accounting under which revenue is recognized or recorded when earned and expenses are recognized when incurred.

IFRS: International Financial reporting Standards

MDA’s: Ministries Departments and Agencies