Intro To Psaf Flashcards
Discuss government, public sector, public sector accounting
Government- a body that control, direct and monitor all the economic activities and ensure orderliness in a country
Public sector- all organizations which are not controlled and owned by private sector but established, run and financed by the government on behalf of the public.
PSA- is the process of recording, analyzing, collecting, summarizing, communicating and interpreting the information of government transactions which involves receipt, disbursement and custody of government resources in compliance with established rules and regulations in order to enhance efficient utilization of government resources.
Purpose/ objectives/ uses of public’s sector accounting
1 . To demonstrate proprietary or transactions
2. To enable appraisal of activities
3. For controlling purposes
4. To serves as a tool for planning
5. To ensure accountability of stakeholders
6. To provide a basis for decision making
7. Identifying source of financing a capital project
8 highlighting various sources of revenue and the expenditure to be incurred
Legal framework for preparing government accounts
- the constitution of the federal republic of nigeria
- the audit act 1956
- the finance act (management and control)1958
- Treasury circular
- Public procurement Act 2007
- Financial regulation (Accounting manual)
- the fiscal responsibility act 2007
- financial circular
- appropriation Act
- official gazette
- public service rule
- money laundering act 1995
- economic, financial crimes and commission act 2002 (EFCC)
- the independent corrupt practices and other related offences (ICPC) commission act 2000
Explain the users of government accounting information
Internal users- are the users of government information that are within the unit where the government financial statements are being prepared. The following are various internal users of government information.
- The executives
( president of FRN, governors of states and chairmen of LGC)
- Federal ministers and state commissioners
- Top administrators of Government departments
( permanent secretaries and directors)
- Management teams
( General managers and chief executives of parastatals such as CBN, SEC, NPA)
- subordinates who oil the wheel of administration
- the organized labour unions in public service
External users- these are users of government accounting information that are not within the units where the government financial statements are being prepared and they still make use of it. The following are the various external users of government accounting information:
- governments apart from the one rendering the report
- national Assembly
- members of the general public
- foreign countries
- foreign financial institutions ( International Monetary Fund, world bank)
Creditors and debtors both local and foreign
Rating agencies
Political parties and civil Liberty organizations
What are the basis of accounting for transactions in the public sector
1 cash basis ( income/ revenue is recorded as received and not when earned while expenses/ expenditure is recorded when paid and not when incurred)
2 accrual basis (opposite of cash basis)
3 modified cash basis ( books of accounting should be left opened for a maximum period of three months after the end of the year, so as to record substantial amount of income and expenditures relating to the year just concluded
4) modified accrual basis ( income/ revenue is recorded when received and not when earned while expenses/ expenditure is recorded when incurred and not when paid
5) commitment basis (expenditure should be recognized when it has been evidenced and anticipated with a contract or purchase order)
What are the merits and demerits of cash basis?
Merits
1 it is easy to understand
2 it allows for comparison between actual and budgeted information
3 it is factual
4. It permits delegation of works
5. It saves time
6. It makes identification of the person that authorized payment easy and the person that received money
Demerits
1. It is not detailed enough and cannot be used for decision making
2. It does not depict the clear picture for the period under report
3. It does not recognize debtors and creditors
4. it does not make allowance for depreciation since asset are written off in the year of purchase
5 it favors one accounting period of the others
What are the merits and demerits of accrual basis?
Merits
1. It is detailed enough and can be used for decision making
2. It depicts the clear picture for the period
3. It recognizes debtors and creditors
4 it makes allowance for depreciation since assets are not written in the year of purchase
5 it does not favor one accounting period of the others
Demerits
1. It is not easy to understand
2. It does not allow for comparison between actual and budgeted information
3. It is not factual
4. It does not permit delegation of works
5. It does not save time
What are the merits and demerits of commitment basis?
Merits
1. A separate payment tabulation is available when required
2. It takes a realistic view of financial transactions
3. It aligns with matching concept
4. It reveals an accurate picture of the state of financial affairs at the end of the period
5. It is used for both economic and investment decision making, since all parameters for performance appraisals are available
Demerits
1. The system involves extra work
2. Balances which ought to have elapsed in the vote book at the end of the year may be spent by issuing local purchase orders to exhaust the votes
3. At the end of the year, all commitments that are the subject of unfulfilled orders will have to be written back to reflect the exact picture of the transactions which took place during the year.
4 there is over expenditure under commitment basis in the expectation that government may finally release funds to settle the legal obligations
What are the differences and similarities between public and private sectors
Differences
1. Objective
Public - provide adequate welfare services
Private- maximize profits
2. Accounting basis
Public- operate on Ipsas on cash or accrual basis. On fund accounting
Private- IFRS. Proprietary approach is adopted for their funding
3. Income/ revenue
Public- taxes, fines, rates, penalty and revenue from petroleum and others
Private- sales of goods and rendering of services to their customers and clients.
4. Treatment of cost of assets
Public- cost of purchase written off in the purchase year
Private- cost of acquisition will be spread over the economic useful life of the assets.
5. Accountability
Public- accountable to citizens
Private- accountable to shareholders
6 Efficiency
Public - evaluated based on quality of services
Private - evaluated based on profitability
7 Formation
Public - acts of legislatures
Private - CAMA through CAC
Similarities
1. Financial statements
2. Double entry principles
3. Budgeting
4. Controlling/ Auditing
5. Compliance with rules and regulations
What are the uniqueness or features of public sector?
- Government operates in a non-competitive environment
- Government debt capacity
- High level of Accountability
- Government goals of providing welfare services
- Nature of government fixed asset
- Taxes
Discuss concept of public accountability
Accountability is an obligation to answer for the execution of one’s assigned responsibilities. It is the requirement to provide explanation about the stewardship of public money and how this money has been used.
Two distinct components
1. Rendering of accounts
It is by rendering accounts that the information about the behavior of a public organization can be obtained. Which mean without rendering of accounts there can be no accountability
2. Holding to accounts
This involves exercise of judgement and power over public officials. Public accountability can be achieved only if those who receive the accounts have power and ability to take actions on the basis of those accounts.
The principal means by which government department discharge its accountability responsibility is through public reporting which leads us to the concept of fiscal transparency.
Discuss fiscal transparency and the imf code of good practices and fiscal transparency
This is the aspect of accountability which requires government to carry out all aspects of budgeting responsibilities with openness, trust basic values and ethical standards so that it will have nothing to hide from public.
IMF code of good practices and fiscal transparency :
1 clarity of roles and responsibilities (policy and management roles should be clearly stated and publicly disclosed
2 open budget process (clear procedure for budget execution and monitoring and reporting. Should be guided by well designed macroeconomic and fiscal policy objectives)
3 public availability of information ( access to past current and projected fiscal activity or major fiscal risks)
4 assurances of integrity. Fiscal data should meet accepted data quality standards, fiscal data in reports should be internally consistent and reconciled with relevant data from other sources, ethical standards of behavior for public servants should be clear and made public)
What other conditions asides rendering of account and holding of account that facilitate the promotion of public accountability?
- Existence of democratic institutions that allow for changes in leadership through free and fair election
- The existence of leadership that genuinely believes in and committed to the notion of public accountability
- The presence of active investigative media that will help to keep leadership on their toes
4 where the populace believe in the political manifesto and the political manifesto is upheld as promised.
5 urgently addressing poverty through poverty reduction targeted govt expenditure
What are the measures put in place to enhance public accountability?
- The fiscal responsibility Act 2007
- The public procurement Act 2007
- The freedom of information Act 2011
- Nigeria Code of Conduct Bureau
- Independent Corrupt Practices and Other Related Offences Commission
6 Economic and Financial Crimes Commission
7 Office of the Auditor General for rhe federation, states and local government
8 Nigeria Extractive Industries Transparency Initiative (NEITI) Act 2007
Why there are no effective public accountability in Nigeria
- Nigeria is still ranked lowly in corruption perception index. (The 2010 transparency international corruption perception index shows that Nigeria is ranked 134 out or 138 countries surveyed scoring 2.4 out of 10.
- Nigeria is still rated lowly for Budget Transparency International Budget partnership. (The 2010 budget index scored Nigeria 18 out of 100 compared to Ghana and Liberia with 54 and 60 points respectively.
- There only exist special accounts with off-shoot from the federation account
- Non provision of penalties for breaches of fiscal responsibility act
- Non establishment of National Council on Public Procurement.
