A synopsis of Model Financial Memoranda for FG, States, LGAs
By Ben Ngwakwe, Gombe
This second edition of the Model Financial Memoranda is the out-work of the seven man committee which was setup on July 31, 1990 to review the Financial memoranda for Local governments in the federation while the document aims at blocking loopholes which could filter away the meager resources and ensure that public funds are deployed for meaningful development in the country.
Incidentally, it will be recalled that in September 1999 another committee was set up by the Accountant- General of the Federation in conjunction with the Auditor- General for the Federation to review the structure,format, content and relevance of the Federal Government Accounts but the final report of the committee was never available for consideration before the present committee was set up due to logistics reasons, according the the Model Financial Memoranda for Federal,States and Local Governments,third edition..
Investigation revealed that the recommendation of the six statements, the need to review the 2nd edition of Financial Memoranda for Local Governments became very imperative while the institute of Chartered Accountants of Nigeria ( ICAN) Abuja district society was mandated to carry out the review and accommodate the recommendations.
The professional body District Society has completed their assignments which gave birth to the 3rd Edition of the Model Financial Memoranda that was reproduced in 2009.
Also, 9-man committee headed by Mrs. J.O. Williams was to handle the 3rd Edition that contains 502 pages; which among them is our own distinguished Senator who was the former Governor of Gombe State, Senator Ibrahim Hassan Dankwambo as a member.
Purpose, no doubt, is ” part of efforts to encourage probity, transparency, accountability and timelessness in the presentation of Government Accounts, the Federal,States and Local Governments respectively.
With this development, there was a resolution of Federation Account Allocation Committee meeting of 15th June,2001, and Ad-hoc committee was constituted to carry out the review and standardisation of the accounts of Federal,states and Local Governments with 8 terms of reference.
This analysis will focus on the Local Governments being the subject of analysis and interpretation of the Model Financial Memoranda for Local Government third edition.
The Model Financial Memoranda for Local Government (Third Edition, 2009) is the one single document that traditionally provides the support and guidance in the administration of local government finances among other things, the principal aims of the revised financial memorandum are to:
Define the precise duties and responsibilities of the organs, functionaries and officials in regard to stores and financial management.
In this regard, the Model Financial Memoranda have prescribed certain effective financial organisational arrangements of local government and the procedure in respect of collection and accounting for expenditure.
Among such arrangements are:
a. The care, custody and control of local government revenue.
b. The collection and receipt of revenue and other monies.
c. The control of receipt and other revenue earning books, and
d. The control of expenditure.
Eventually, the Financial Memorandum has spelt out the internal control measures as a means by which superior authority (internal or external to the organization).checks to see that public funds (revenue, fund and property) are not stolen, embezzled or lost. The management of local government‟s financial resources is a responsibility, which is shared between different categories of local government functionaries and political office holders.
Concerns with enhancing managerial efficiency and effectiveness and also good financial reporting, sound management and effective organizational arrangement has led to the institution of various statutory and administrative measures in the past years not to perform optimally.
Among such measures include, the Civil Service Reform of 1988 (as applied) in the local government administration, chapter one 2009:13 of the revised Model Financial Memoranda (FM). All these are attempts to strengthen the financial control and institute of enduring culture of accountability in Local Governments .
Also, financial management has remained consistently one of the major constraints undermining the performance of Local Governments in the highly cherished goal of taking government and development closer to the grassroots. Several reform programmes have been undertaken by different governments of Nigeria on how to improve the standard of living of the people at the grassroots. But the overall performance of local government still leaves much to be desired.
The problem faced by our Local Government Councils appears to be
multidimensional. It translates into question of non-adhering with provision and section of Financial Memoranda for Local Government Accounting System which stated the accounting principles to be followed by all Local Governments in Nigeria.
On the other hand, which according to J.A. Ejisan(2008) the system of accounting used by all local governments in Nigeria is based on the principle of double entry book-keeping. This system requires that every debit entry should be matched by a corresponding credit entry of similar amount and credit entry should be matched by a corresponding debit entry of similar amount. This principle is entrenched in the Financial Memoranda governing the financial operations of Local Government Treasuries in Nigeria.
Another crucial dimension to the problem which forms the
basis of this analysis is to assess the extent to which local governments significantly comply with accounting system as stated in the Financial Memoranda (FM). The justification of this dimension to the investigation stems from the fact that, the accounting pattern exhibited in local government goes along way to determine the usefulness of the level of record keeping and effectiveness of the production of financial report, efficient management system and effective organizational arrangement.
This is because accounting in a general sense may be considered as a process in which the transaction and events in an operating entity are recorded for the purpose of accumulating and providing financial information essential to the good conduct of the activities of such an entity.
It is imperative to note that, the accounting system at stated in the FM is expected to enhance the proper and effective control and utilization of local governments‟ funds.
This is due to the fact that, the FM is one document which guide and control the financial activities of the Local Governments,just as it is stated in the introductory note to the F.M.
“The Financial Memoranda have been issued by the
government and contains, instruction, which shall be
observed and complied by all Local Governments for
the better control and management of financial
business of Local Governments in the States”.
From the above note, it can be deduced that the application of the provisions of the Financial Management operations are mandatory and as such, accounting which forms a vital aspects of financial management needs to be assessed, in order to determine the extent of compliance.
The major concern of this study is to assess whether the problem faced by the Local Government in the issue of accountability can be attributed to non- compliance with the guidelines for financial accounting and control as stated in the Financial Management and what variables could be the causes for the non-compliance, so that appropriate recommendation can be made.
Presently, there have been reported cases of poor accounting system and mismanagement of public funds by the functionaries entrusted with such responsibilities in local governments in most of the states due to the non-compliance with accounting procedure stated in the Financial Memorandum to the extreme loss of direction and accounting could hardly be carried out or rendering and form of accountability or control almost impossible and attributed to the following problems.
For example, (the report of the Auditor- General of Local Government for 23 Local Governments 2004- 2008:780) in one of states in the North; .State the poor accounting system and financial reporting, poor sound of management system and poor organizational arrangement.
This refers to the function of account system which requires the production of adequate and timely financial information. In this regard local government accounting system and financial reporting of LGs have been financial information produced are neither adequate nor rendered in time to serve desired purpose. It is claimed that the accounting system of local government does not provide full adequate reporting of all financially quantifiable resources of local government and such does not fully cover the operational criteria described in Chapter 5 and 32 of the Model Financial
Memoranda by providing the full financial position of local government as well as result of operation.
Another peculiar problem mentioned in the report which is seriously faced by the Local governments in the state is poor management system. This is referred to as function of budgeting the budgetary cycle and calls for procedures and methods which help tract public funds to various levels of responsibility e.g. departments, units and divisions of local government programmes or projects. Generally, budget determines the structure of local government accounts. All the Local governments of
774 are faced with problems of:
1. Proper planning i.e. programming
2.. Budgeting .
3. Budgeting execution accounting and control
4.Audit and review Financial Memoranda provides an effective organizational arrangement for which local government to follow; but it became a problem for local government to adopt a function of control which requires a clear control in terms of check and balance built in the system and capacity to direct and coordinate matter through the use of central agencies such as the treasury and budgetary department of local government.
This particular prerequisite is seriously lacking in many facets of financial administration in local governments in Nigeria due to lack of adherence to model financial institutional arrangement in Financial Memoranda.
Chapter 1, which provides for effective financial institutional arrangement. These accounting system of local governments in 774 are not effective and most times are ill organized. This analysis therefore, looked into the preparation of accounts of local government and the adequacy/effectiveness of accounting practice and personnel.
The investigation would also look to see whether the generally accepted accounting principle (G.A.A.P) are adopted by these local governments and how such principle can enhance the effective and efficient and preparation of sound accounting and financial reporting.
Arising from the preliminary discovery of the these problems, the key questions now are;
To what extent do the guidelines for accounting procedures as contained in
the Financial Memoranda (FM) enhance effective control of finances in local
government?
ii.
Are the stated accounting principles in the Financial Memoranda (FM) for
reconciliation between the main books of account and subsidiary books of
accounts strictly observed/adhered to?
iii.
Is the accounting procedures of local government capable of bringing about
efficient fund management?
Based on these findings, the primary objective is to assess the perception of stakeholders as regards to strictly adherence to the accounting procedures of the local governments as stated in the Financial Memoranda.
Other objectives include:
To examine the pattern of the local government accounting procedure by
assessing the impact of financial record keeping in local government.
ii.
To assess the extent of compliance with Financial Memoranda (FM)
provisions on accounting procedures and practices of local governmentsi in the country?.
iii. To identify numerous challenges and problems of local government
accounting system in Nigeria.
To make policy recommendation for the improvement of the principles and
procedures of local government accounting.
In conclusion; The ideas of establishing various committees are good but the implementation of the committees are big problems because some LGs do not compliance with accounting procedure and Financial Memoranda (FM) provision for effective control of finance in local government.
Secondly, for 774 local governments in the country to be very effective in keeping accounting records and production of financial statement, there must be a significant compliance with the provision of the Financial Memoranda of accounting of third edition.
