ABSTRACT
The title of this
research work is, problems and prospects of local government finance/accounting
in Nigeria” with particular reference to Nsukka Local Government Area, Enugu
State. It has been identified that
accounting and financial reporting in the public sector particularly at the
local government level was not given adequate attention.
In the course of
carrying out this study, the following objectives among others were set which
included. The identification of major
causes of maladies in the financial system of the local government; to examine
the accounting department, to find out if it is manned by competent and
qualified personnel, to examine whether the sources of income to the local
government finances, to examine the various problems of the local government
finances and accounts and to examine the prospects of improving the available
sources of the local government finances.
To achieve the set
objectives, some hypotheses were formulated which comprised: an increase in
local government share of federation account from 20-25% would help local
governments in achieving at least 75% of their statutory responsibilities, the
employment of low caliber staff has a significant negative relationship with
the low efficiency and productivity of local governments, the Accounting system
of local government is not effective in operation and that another source of
tax revenue is not essential for Nigerian Local Governments.
Two broad research
methods were adopted in this study which were personal interviews and fully
designed and well-structured questionnaires.
For the purposes of analyzing the hypotheses, chi-square (x2)
technique was adopted.
As a result of
conscientious and of course painstaking study done, a lot of findings were made
which included inter-alia, there was an ample proof that the greater number of
local government’s employees are unqualified.
Other taxes to be collected by the local governments can improve its
financial base, the employment of low caliber staff has no significant negative
relationship with the low efficiency and productivity of the local government;
and increase, from 20 – 25% in the Federal Government Statutory Allocation of
federation account would not be enough to defray a reasonable proportion of
such responsibilities, embezzlement, receipt of huge kick-backs, contract
inflations, large scale salary, fraud, auditing and internal control problems
were discovered as some of the major accounting and financial problems of the
local governments.
As a result, the
following recommendations were proffered:
efforts to be intensified in the collection of revenue and continuously
seek new avenues for local taxations, emphasis to be placed on the recruitment
of qualified, experienced and well-trained personnel for the assessment,
collection and general administration of local taxes and rates, design a sound
system of budgetary control, installation of a system of internal control,
projects to be evaluated and implemented, proper feasibility study to be
carried out; and internal funding to be improved by its engagement in
commercial ventures.
TABLE OF CONTENTS
Title page
Proposal
Certification
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE: INTRODUCTION
1.1
An
Overview
1.2
Statement
of problem
1.3
Hypothesis
1.4
Objectives
of study
1.5
Significant
of study
1.6
Limitation
of study
1.7
Definition
of terms
CHAPTER TWO: LITERATURE REVIEW
2.1
Government
Accounting
2.2
Local
Government Accounting
2.3
Statutory
Base of Local Government Finance in Nigeria
2.4
Functions
of Local Government
2.5
Sources
of Local Government Revenue
2.6
Objectives
of Local Government
2.7
Local
Government Expenditure
2.8
Management
and Control of Local Government Finance
2.9
Problems
of Local Government
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
Methodology
3.2
Sources
of Data
3.3
Population
Definition
3.4
Statistical
Determination of Sample Size
3.5
Methods
of Data Presentation
3.6
Data
Analysis
3.7
Decision
Rule
3.8
Operation
Assumption
CHAPTER FOUR
4.0
Data
Presentation and Analysis
4.1 Questionnaire
Distribution and Response
4.2 Data Analysis
4.3 Test of
Hypothesis
4.4
Interpretation
of Results
CHAPTER FIVE
5.0
Research
Findings, Recommendations and Conclusion
5.1 Summary of
findings
5.2 Conclusion
5.3 Recommendation
Bibliography
References
CHAPTER ONE
1.1
AN OVERVIEW
In Nigeria, there are
three tiers of public sector administration – the Central (Federal) government,
State government; and Local governments.
This project is devoted to the examination of the local government’s
accounts, and the development of financial management with their
departments. It is therefore pertinent
at this point to mention that the local government is the third tier of
government in Nigeria.
Local government in
Nigeria derives their existence from the constitution of the Federal Republic
of Nigeria (promulgation) Decree No. 12 of 1989 and the civil service
(re-organisation) Decree No. 43 of 1989 as brought about a new awakening to
make the public sector virile dynamic, result and development oriented. At present with the creation of more 177
local governments, the total number of local governments in Nigeria has
therefore increased to ….. One would
then guess what effects will it have.
Even before that, like since 1979, there has been a significant rise in
local government expenditure in line with greater emphasis on grassroots
participation. For instance, in 1992
while complete political administrative and financial independence was granted
to the local government. From State
control, its responsibility was enlarged with effect from 1992, local
government has been directly responsible for primary health care. This is in addition to its statutory
functions.
Johnson (1992) said that,
though virtually all developed countries have a system of local government,
some systems involve considerable local autonomy while others involve
less. On a spectrum, the Nigeria systems
probably involve less, rather than more autonomy. Then the question and answers are important
as they reflect that type of financial and accounting framework required.
Sharpe (1980) noted that
the participatory value if not the liberty value, still remains as a valid one
for modern local government. Not perhaps
in the full glory of its early promoters, but as an important element in a
modern democracy nonetheless. But as a
co-ordinator of services in the field, as a reconciles of community opinion, as
a consumer assure group as an agent for responding to rising demand and finally
as a counterweight to incept syndicalism, local government seems to have come
into its own.
The following points were
listed in the local government’s favour by the Layfield Committee (2005).
(a)
It
provides democracy
(b)
It
acts as a counterweight to the uniformity inherent in government decision. It spreads political power.
(c)
It
embraces accountability because it brings those responsible for decision close
to their electors.
(d)
It
is efficient because services can be adjusted to local needs and preferences
and because responsibility can be more decentralized.
(e)
Central
government would be overloaded by more functions;
(f)
It
provides a vehicle for formulating new policies and pioneering ideas.
As a result of increase
in the responsibilities and the fantastic expenditure associated with them, it
is vital that the local governments extend their sources of revenue beyond the
present level. They would endeavour to
tap all the potential resources so as to see their revenue base fortified. Any improvement to this effect will be
welcomed as it would give the local government an added impetus in discharging
its statutory functions and socio-economic advancement to the local
inhabitants.
From the inception of
local governments, they have been relying substantially on grants from State
and Central governments and also statutory allocation from the federation
account in addition to a percentage of the internally generated funds of the
State.
As a matter of fact, the
internally generated revenue by the local governments was very abysmal. Now that it has been granted autonomy, it is
statutorily required to rely more on internally generated funds for the
performance of its functions. This being
the case, government grants and statutory allocation are only supplementary
sources of revenue to the local government.
Babangida (1992) for the local government to self-sustaining financially
without reducing the level and quality of its services to the people. It is essential that it exploits all
potential internal revenue sources which would supplement existing ones. This as well suggests that the existing ones
be adequately exploited and properly managed.
1.2
STATEMENT OF PROBLEM:
Finance and Accounting in
local governments is probably more complex, than in any other part of the
public sector. In Nigeria, the inability
of local governments to raise adequate funds and keep accurate accounts to
sponsor its expenditure and activate grassroots development has been discovered
as one of the major predicaments thwarting the frantic efforts of the local
governments. The purpose of this study,
therefore, is to assess the problems of finance and accounting in local
government so as to determine their prospects.
1.3
HYPOTHESIS:
Since this research work
is on the problems and prospects of local government finance and accounting in
Nigeria” the writer obtained facts chiefly through interviews and
questionnaires. Some hypotheses have
been formulated to enhance better results.
HYPOTHESIS I:
Ho: That an increase in federal government
statutory allocation of federation account from 20% - 25% would not help local
government in achieving at least 75% of their statutory responsibilities.
HI: That an increase in federal government
statutory allocation of federation account from 20% - 25% help local government
in achieving at least 75% of their statutory responsibilities.
HYPOTHESIS 2:
Ho: That the employment of low caliber staff has
no significant negative relationship with the low efficiency and productivity
of the local governments.
H1: That the employment of low caliber staff has
significant negative relationship with the low efficiency and productivity of
the local governments.
HYPOTHESIS 3:
Ho: That the Accounting system of local
government is not effective in operation.
H1: That the Accounting system of local
government is effective in operation.
HYPOTHESIS 4:
Ho: That another source of tax revenue is not
essential for Nigerian Local Governments.
H1: That another source of tax revenue is
essential for Nigerian Local Governments.
1.4 OBJECTIVE
OF STUDY:
Local governments like
any other organization encounter financial and of course accounting
problems. These problems here in no
small measure contributed to their poor performances. It is therefore, imperative to mention that
one of the major reasons for undertaking this work is the belief that for any
meaningful improvement to take place in Government Accounting and finance
control, the strands forming part of these systems must first be put together
in doing so, the inadequacies inherent in the areas of each system would be
pointed out and criticized or mentioned as probable areas for future
development.
In carrying out the
study, efforts should gear to:
1. Identify the major causes of these
maladies in the financial system of the local government.
2. Examine the accounting department to find
out if it is being manned by the desired competent and of course qualified
personnel;
3. Examine whether the sources of income to
the local governments is enough as to enable it discharge its constitutional,
statutory and/or otherwise obligations with ease.
4. Examine the various instruments of
management and control of the local government finances.
5. Examine the various problems of the local
government’s finances and accounts, and ascertain the financial autonomy of the
local governments.
6. Examine the prospects of improving
sources of the local government finances.
1.5 SIGNIFICANCE
OF STUDY:
Our local governments
have in these recent times been riddled with financial and accounting
problems. These undoubtedly have
stultified the unflinching efforts of most local governments to instill and of
course restore sanity in the system, hence the need for a study on the problems
and prospects of contemporary local government finance and accounting in Nigeria.
The study leaves no stone
unturned in examining the problems confronting the existing revenue sources of
the local governments and appraises talent revenue resources which could be
used to fortify the overall revenue base of the local governments.
This study therefore
points out significantly that improved local government finance and accounting
system in the cornerstone to the much desired economic growth and
development. It potentially serves as a
guide to policy making in designing a better strategy for the rural development
in Nigeria. The study also forms a
source of reference in other related topics and to researchers in similar
topics.
1.6
LIMITATIONS OF STUDY:
As has been earlier
mentioned, finance and accounting in local governments is fraught with
complexities. It is then not possible to
provide a fully comprehensive coverage of all facts of the subject in this kind
of study, local government finance and accounting has developed in a
distinctive fashion and as such has evolved a terminology that may be
unfamiliar even to those with experiences of finance and accounting in either
the public or private sector.
This study restricts
itself to the evaluation of the various revenue sources and expenditure
patterns of the local governments, examination of the problems associated with
them and the prospects for enhancing them.
Since it is not possible for a research project of this kind to delve
into a study of the entire local governments in Nigeria individually, this
research work is confined to information gathered from Nsukka Local Government.
The student researcher of
this work is of desired intention to carry out an elaborate and comprehensive
study of the problems and prospects of the local government in Nigeria, but has
to obey impenetrate limitations encountered during the research. At the local government under study necessary
statistical data could not be obtained in a particular location and
bureaucratic tendencies seemed to be a rule rather than an exception.
Moreso, majority of the
local government staffers are illiterate people and could not give written
information without assistance from enlightened fellows. Yet some respondents are reluctant to comply
with piece of information needed from them.
In the final analysis,
this research work was also limited to the data gathered from the finance and
accounting department of the local government.
As such, it should be interested to note that treasury department was
the major source of information used in analyzing the study.
1.7
DEFINITION OF TERMS:
LOCAL GOVERNMENT
Local government is the
third tier of government. According to
Shehu (1976), it is that level of government which is organized as close as
possible to the people at the grassroots and vested with statutory powers to
perform certain functions both inherent and ascribed confining its activities
and authority within particular district or neighbourhood and subject to the
control of the central government.
FINANCE:
Finance refers to the
raising of funds, controlling and using them in the running of an organization,
be it private, corporation or government (Ume, 1980).
ACCOUNTING:
Accounting is defined by
Douglas (1976) as “a discipline concerned with the recording, analysis, and
forecasting of income and wealth of business and other entities.
FUNDS:
The National committee on
Government Accounting (USA) defined a fund as “an independent fiscal and
accounting entity with a self-balancing set of accounts recording cash and/or
other resources together with all related liabilities, obligations, reserves
and equities which are segregated for the purpose of carrying on specific
activities or attaining certain objectives in accordance with special
regulations, restrictions or limitations”.
REVENUE:
Revenue refers to all
those monies, each and otherwise received by way of statutory allocation,
grants, subvention from higher levels of government, taxes, rates, licenses,
fees, royalties, loans and charges which enable the government to meet its day
to day expenses and its capital expenditure programmes.
EXPENDITURE:
Expenditure refers to all
those activities/services performed/rendered by the government with available
resources (Egonwa, 1985).
CAPITAL EXPENDITURE:
This consists of
expenditure the benefit of which is not fully consumed in one period, but
spread over several periods. It includes
assets acquired for the purpose of earning income, or increasing the earning
capacity of the business. For example,
land and buildings, plant and machinery, maintaining of roads and other
projects of capital nature.
BUDGET:
A budget is a plan
expressed in quantitative and usually monetary terms, covering a specified
period of time usually a year.
ESTIMATE:
An estimate is a proposed
budget which is yet to be approved. It
is a statement of planned revenue and expenditure of the government for the
coming year. This like budget is
normally expressed in monetary units.
REVENUE ESTIMATE:
As the name implies, it
is the part of the estimate in which is stated the expected revenue from
overall sources of the government for the coming fiscal year.
RECURRENT EXPENDITURE ESTIMATE:
This is an aspect of the
estimate that stipulates in detailed shape, expected recurrent expenditure of
the government of the following fiscal year.
CAPITAL EXPENDITURE ESTIMATE:
This specifies the
expected capital expenditure project of the government for the coming fiscal
year.
REVENUE ABSTRACT:
This is a record which
shows at a glance in a concise meaner all revenue receipts heed by all, and
subhead by subhead that accrues to the local government in a given financial
year.
EXPENDITURE ABSTRACT:
This is a summary of all
expenditures incurred by the local government categorized according to vote
heads during a particular fiscal year.
STATUTORY FUNCTIONS:
These are functions that
the local government is legally binding to carry out. An edge outside it may amount to an ultra
vires and will therefore be rendered null and void and of no effect.
INTERNAL REVENUE:
This is the aspect of
revenue that the local government can generate within its area of jurisdiction.
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