CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
In recent times, there have been persistent calls by both the developed and developing nations for better transparency, accountability and disclosure of financial details amongst nations of the world in an effort to raise the degree of public confidence in the public sector's financial records to reflect the stakeholders' assumptions. The number of studies which concentrate on accrual based IPSAS has grown incredibly in the past couple of years. Many empirical researches have been carried out in the developed nations (see, for instance, Connolly & Hyndman, 2006; Christiaens et al., 2010; Christiaens et al., 2015; Dabbicco, 2015; Gomes, Fernandes, & Carvalho, 2015; Oulasvirta, 2014). These researches have tried to focus on the effect of IPSAS application, level of compliance and adoption, transparency and accountability. Nevertheless, the question of the sensitive elements of IPSAS that affect the financial positions in the public service continues to remain unanswered. A sudden increase in cross-border activities have resulted in an increase in global transactions amongst nations of the world which necessitated the need for enhanced collaboration and commerce throughout different geographical areas (Ijeoma & Oghogbomeh, 2014). There is currently focus on the need for increased transparency, uniformity and comparability in the set of accounting standards guiding the preparation of financial declarations for public entities (Trang, 2012 and IPSASB, 2013).
Many developing nations, especially in Sub-Saharan Africa, are identified by enormous corruption, poverty and high degree of opacity in the conduct of government business. Poor budget implementation and absence of accountability in the Nigerian public industry are recognized as contributory elements (Ibanuchuka & James, 2014 and Christiaens, Vanhee, Rossi & Aversano, 2013). In Nigeria, however operations of government organisation and accounts have been carried out within the general structure of the concepts of fund accounting, the significant issue is that financial reporting and public sector accounting is far from the concepts in absolute terms and stakeholders' expectation (Obazee, 2008, and Christiaens, Vanhee, Rossi & Aversano, 2013). Some scholars and researchers such as Izedonmi and Ibadin (2013) and Mukah, (2015), were able to establish both the long run and short run relationship between IPSAS and credibility and integrity of financial reporting however they did not try to explore into the extensive causal link that may exist amongst IPSAS, financial reporting and its economic advantages in terms of revenue generation, foreign direct investments, reliability of financial statement, war against corruption and so on.
International Public Sector Accounting Standards (IPSAS) is at present the centerpiece of international revolution in government accounting in reaction to calls for higher government financial accountability and transparency. The public sector makes up entities or companies that execute public policy with the provision of services and the redistribution of income and wealth, with both activities sustained primarily by mandatory tax/levies on other sectors. This consists of governments and all publicly owned, controlled and or publicly funded agencies, businesses, and other entities of government that deliver public programs, goods, or services. Public Sector Accounting is a system or procedure which gathers, records, classifies and sums up as reports the financial events existing in the public or government sector as financial declarations and analyzes as required by accountability and financial transparency to give information to information users associated to public institutions. It has an interest in the receipts, custody, disbursement and rendering of stewardship of public funds entrusted.
Evidences reveal that public funds in Nigeria are misappropriated and not well managed. For example, the Police Pension scandal, a fraud of over N40 billion pension scams of N5.6 billion including Oyo State Head of Service (Uwujaren W.; 2013), $1.6 million bullet proof BMW car in the Aviation Ministry (Alechenu, et al; 2013) the former Petroleum Minister, Alison Maduekwe money laundering saga, just to mention a few. Furthermore, the Federal, State and as well as the Local government levels are confronted with the challenges of transparency and accountability in their cash-based accounting and budgeting systems. Appah E, and Appiah KZA (2010), further supported this claim by revealing that cases of fraud is common in the Nigeria public sector and every section of the public service appear to be involved in one way or the other.
As a result, of increasing the demand for greater transparency and accountability in management of public finances, many governments all over the world have resolved to reform their government financial management systems and processes. It was in reaction to this obstacle that the International Federation of Accountant (IFAC) via International Public Sector Accounting Standard Board (IPSASB) developed International Public Sector Accounting Standard" (IPSAS) of public affairs in the nation (Bello; 2001).
The introduction of IPSAS formed a vital part of public sector reforms and is a centrepiece of the global revolution in government accounting and in reaction to calls for better government financial accountability and transparency (Carlin TM. (2005). IPSAS guarantees high standards which serve as a driver for the preparation of sound and transparent financial declarations. This consequently improves functional performance, accountability and efficient allocation of resources. For that reason, this study will examine the impact of international public sector accounting standard in Nigeria public service (a case study of Lagos State civil service).
1.2 Statement of the Problem
The preparation and presentation of financial statement at each level of government have pose series of issues around the world. Throughout the years, government accounting was anchored on cash basis of accounting while private sector accounting was predicated on accrual basis. Whereas the accrual basis has been working flawlessly well in the private sector, the continued application of the cash basis in the public sector seems to have tossed up a number of difficulties connecting to under-utilization of scarce resources, high level of susceptibility to manipulation, lack of proper accountability and transparency, insufficient disclosure requirement because of that the cash basis of accounting does not provide a reasonable view of financial transaction. IPSAS adoption is costly in all material respect, so costly that some professionals have contended that its much-advertised advantages do not validate the cost of the application primarily accounting or financial reporting places emphasis on accountability and transparency. Revolution is not just accorded to government functional activities; instead revolution also exists in Government Accounting. Thus, IPSAS i.e., international public sector accounting standard is a new revolution in government Accounting.
1.3 Objectives of the Study
This study has both main and specific objectives. The main objective of this study is to investigate the impact of international public sector accounting standard in Nigeria public service by using Lagos State civil service as a case study. The specific objectives therefore include;
i) To establish the relationship that exists between IPSAS and financial position management in Lagos State Civil Service.
ii) To understand the extent to which IPSAS implementation has impacted the comparability of financial statements within the public sector in Lagos State Civil Service.
iii) To investigate the extent to which IPSAS implementation has impacted the cases of corruption among public officers in Lagos State Civil Service.
1.4 Research Questions
The followings are considered to be the research questions for this study:
i) What is the relationship that exists between IPSAS and financial position management in Lagos State Civil Service?
ii) To what extent has IPSAS implementation impacted the comparability of financial statements within the public sector in Lagos State Civil Service?
iii) To what extent has IPSAS implementation impacted the cases of corruption among public officers in Lagos State Civil Service?
1.5 Research Hypotheses
The followings are considered to be the research hypotheses for this study:
i) There is no significant relationship between IPSAS and financial position management in Lagos State Civil Service.
ii) There is a significant relationship between IPSAS implementation and the comparability of financial statements within the public sector in Lagos State Civil Service.
iii) There is a significant relationship between IPSAS implementation and the cases of corruption among public officers in Lagos State Civil Service.
1.6 Significance of the Study
The findings of this study will be incredibly useful to state governments in Nigeria who will see the need of adopting and fully implementing International Public Sector Accounting Standards, as the economic implications of doing so would be revealed. The importance of full disclosure deriving from the implementation of IPSAS will also be emphasized to preparers and users of public sector accounting information, as it affects accountability, transparency, and credibility of accounting information.
This study would also be useful to international lending organizations such as the IFC, IMF, and World Bank in their lending policies as it would provide insight into the contextual aspects associated with the implementation of IPSAS in Lagos State Civil Service.
Additionally, this study would also highlight the importance of IPSAS adoption to state legislatures in Nigeria, because understanding the full disclosure requirement, which is one of the IPSAS standards, would help lawmakers perform their oversight functions.
In conclusion, the findings of this study are likely to contribute to the body of knowledge and inspire future scholars to do similar research on the implementation of International Public Sector Accounting Standards (IPSAS) in Lagos State Civil Service.
1.7 Scope of the Study
The scope of this study focuses on the assessment of IPSASs and traditional accounting system on the quality of information delivery in Nigeria. The study focuses on the users and preparers of financial statements of public sector entities in Lagos State Civil Service particularly those who have knowledge of accounting such as Accountants, Auditors, Bankers/or Financiers, Financial Analysts, Creditors, Civil Service Union and the general public.
1.8 Limitations of the Study
The most significant constraints for this project are financial constraints and access to primary and secondary resources. Access to secondary resources such as papers, journals, articles, among others, would be a major challenge at the outset of this study, because the right information for the research have to be sourced and scrutinized in order to use the best available materials, while another challenge would be converging the materials for the work and conducting a thorough review. The researcher would also be faced with retrieving questionnaires in due time and some respondents might not provide necessary responses to the questionnaires.
1.9 Definition of Terms
The followings were the terms used when carrying out this study:
Accountability: This refers to a situation where an individual or company is responsible for the outcomes of a particular activity.
Financial Expertise means the ability to analyse and interpret a full set of financial statements, including the notes attached thereto, in accordance with Canadian generally accepted accounting principles.
Budget: This refers to a plan prepared and approved prior for a specific time to show income, expenditure, and the capital to be employed.
Financial Disclosure refers to the system whereby one or more categories of public officials in a given country are required by law to disclose information about their assets and/or business activities. IPSAS Implementation: It refers to the implementation of a series of accounting principles established by the IPSAS Committee in preparing of financial statements for use by government organizations around the world.
