CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

Since the colonial era, especially after independence in 1960, Nigerian public enterprises have witnessed a steady growth unit recently.  Its Olisa (1988) pet it. Beginning as a trickle in the period between this era of the second world war and Nigeria attainment of independence the creation of public corporations had risen to flood level since independence and his maintained a steady growth.  The rational behind the establishment of public enterprises in Nigeria are many.  Some of the reason include:  generating revenue, they would add to available rational capital for the support of development and welfare programme, making to be controlled by a  few individual, it possible for important profitable enterprises to be controlled by a few individual or group, organization certain critical activities national survival and economic stability and providing employment opportunities (Ademolukun 1983).  However, after a long period of growing, starts intervention in the Nigerian economy through public enterprises, the and of 1980’s onwards had witnessed a reversed which has sometimes been dramatic in public opinion and therefore public policy.

This has been brought by the persistent losses which state enterprises that have been running over fears. Consequently, there has been a willingness to look at alternative policy strategies for the achievement of economic development.  At the forefront of these strategies is the minimization privatization of public enterprises.

Public expenditure is the spending made by the government of a country on the collective needs and wants of her citizenries such as spending on; the provision of infrastructures, pension provision etc. Until the 19th century, Public expenditure was limited as Laissez faire philosophies which believed that money left in private could bring better returns. In the 20th Century John Maynard Keynes argued the role of Public Expenditure in determining levels of income and distribution in the economy. Since then government expenditures has shown an increasing trend. In the 17th and the 18th Century Public Expenditure was considered as wastage of money. Thinkers are of the view that Government should stay with their traditional functions of spending on defense and maintaining law and other (Ademolukun, 1983).

Public Expenditures are incurred through budget implementation. The macro-economic goals of the state budget are administered in specific and complex systems which were developed in the managerial information unit of the General Accounting department under the name of “Budget Implementation macro system” The role of accounting in the control of public expenditures relates mostly on setting of standards via budgeting and ensuring that the standard set are adhered to (The Public Service review commission, 1975).

According to Onyekwelu (2010) Accounting is defined as the process by which data relating to the economic activities of an organization are measured, recorded and communicated to interested parties for making informed decision. The earliest methods of accounting records were kept in physical quantities. These records came from Eastern early civilization which involved countries around the Mediterranean sea such as Mesopotamia, Egypt, Greece Italy etc. Money was recorded as soon as it was received. Money took the place of barter as a medium of exchange and unit of account. This practice has been closely related to economic development of countries. If the operation of Public enterprise grows in size and complexity, management and other stakeholders will like to be informed on the enterprise’s operation. Accounting is the only means via which such information which are financial in nature can be communicated to the stakeholders.

In Nigeria, public enterprises are engaged in a while spectrum of economic activities including agriculture, mining, construction, manufacturing, commerce and services.  The classification of public enterprises in Nigeria, had been made according to varieties of criteria by different authorities.  The public service review commission (1975) classified public sector into: Public utilities, Regulatory of service body, Financial institutions, Commercial and industrial enterprises. Nigeria being a mixed economy, individuals also own and operate private enterprises.  A firm classified as private enterprises when it is founded and managed by an individual and other group of individual.  These firms are expected to be registered in the local government within which they operate. The rationale for the establishment of private enterprises are numerous just like establishment of public enterprises. They include amongst other; Provision of employment opportunities, generating income for the owner of the enterprises.  Government interest in profit growth of the enterprises which determine the tax liabilities of the firms, improve the performance of the public sector through competition.  Moreover, the general public is concerned with the contribution which makes towards social upliftment which is exhibited to the environment in which the business is loaded and its willingness to contribute to the development of the environment.

The activities of the public enterprises have been on the increase in recent times which necessitated the introduction of the accounting practice to check and monitor the financial activities of these enterprises. 

According to Bimage (1985) accounting is defined as a process by which data relating to the economic activities of an organization are measured, recorded and communicated to interested parties for analysis and interpretation. The earliest method of accounting records were kept in physical quantities.  These records came from the Eastern (early) civilization which involved in the countries around the Mediterranean Sea such as Mesopotamia, Egypt, Crete, Italy etc.  Money was recorded as soon as money took the place of barter as a medium of exchange and unit of accounting practice has been closely related to the economic development of the country.  If the business organization grows in size and complexity, management and outsiders became more clearly differentiate from the outside groups which include owners of the firm (stock holder) creditors, government employer and the general public. The differentiation necessitated the need to have accounting department in the enterprises to give accurate financial of the management and to satisfy the outside demands or the general public who are already interested on whether the enterprises in growing or not. The role of accounting in public enterprises in Nigeria is primarily to ensure accurate accountability in these sectors and present the time and fair financial position of the enterprises.  The role is of utmost importance in any organization.  An organization can only grow or profit when the resources are well managed and effective observed over expenditure.  These resources can only be well managed if accounting department of the organization give an accurate financial information to know how, much the enterprises having.  It is only when this is done that the firm allocate its resources and knows what is to be done. The role of accounting seems to be more pronounced in the public enterprises.  In recent time there are cases of misappropriation of funds in the public enterprises and improper accountability.  These factors have led to a lot of public enterprises going into oblivion. If the government has reorganized the role of accounting, all these fables should not have arisen.  No enterprises can move forward without having a well-organized financial departments to give accurate financial; information about the firm. This is because if improper accounting records are not minimized or where possible eradicated these is bound to be cases of public enterprises failure.  Consequently, staff of such enterprises will forced out of their job.  This will result to economic and social; activities in the society.

1.2 STATEMENT OF THE PROBLEM

Effah (2011) disclosed that; a foundation concept underlying the definition of accounting control is that accounting control structure provides only reasonable assurance that agency objectives will be achieved. Limitations are inherent in all financial control systems. These results from poor judgement in decision-making, human error, management’s ability to override controls, collusion to circumvent control, and consideration of costs and benefits relative to financial control. No matter how financial control operates, some events and conditions are beyond management’s control (Lannoye 1999). No system of controls can be an absolute guarantee against the risk of wrongdoing or honest error. Any system that attempted to reach that goal, especially in a complex organization, would impose costs far out of proportion to the risks and create rigidities for the organization. Thus the proper goal of the control system should be to provide reasonable assurance that improprieties will not occur or that if they occur, they will be revealed and will be reported to the appropriate authorities (Pridgen, 2007).

According to Azubike (2007), internal audit is the process of continuous review of the financial transaction in order to ensure that they are working as the management intends. All regulations, instruction, and accounting systems or procedures and rules set should be controlled to ensure that they are working as prescribed. He added that it assures management of adequacy and appropriateness of the system of internal controls by testing their operations. To him the Auditor of the government accounts should ensure that the internal controls are functioning properly and attention should be paid on: Internal Checks (segregation of duties), procedures and rules, internal audit. Internal audit measures, analyses and evaluates the efficiency and effectiveness of other controls established by management in order to ensure smooth administration, control cost minimization, and ensure capacity utilization and maximum benefit derivation (Unegbu & Obi, 2007).

It is from the above premised and the gaps exist in the literature that the present study intends to investigate into the role of accounting in the control of government expenditure in the 7up bottling company.

1. AIM AND OBJECTIVES OF THE STUDY

The aim of the study is to investigate the effective role of accounting in the control of government expenditure in the 7up bottling company.

Specifically, the study sought to:

1. Ascertain whether adequate government budgeting can regulate public expenditures and improve the productivity of public expenditures in the 7up bottling company.
2. Ascertain whether an effective and efficient accounting system in public institutions can ensure accountability and transparency in the execution of public expenditures in the 7up bottling company.
3. Evaluate the impact of standard costing on the control of public expenditures and also on the productivity of public expenditures when adopted by public institution administrators in the 7up bottling company.
4. Examine the role of auditors in the internal control and checks for proper functioning in the 7up bottling company.

1. RESEARCH QUESTIONS

Arising from the research objectives, the following research questions will be addressed in the study:

1. Does adequate government budgeting regulate public expenditures and improve the productivity of public expenditures in the 7up bottling company?
2. Does an effective and efficient accounting system in public institutions ensure accountability and transparency in the execution of public expenditures in the 7up bottling company?
3. Does standard costing on the control of public expenditures and also on the productivity of public expenditures when adopted by public institution administrators in the 7up bottling company?
4. What is the role of auditors in the internal control and checks for proper functioning in the 7up bottling company?

1. STATEMENT OF THE HYPOTHESIS

H0 there is no significant effect of accounting control on government expenditure

H1 there is significant effect of accounting control on government expenditure

1. SIGNIFICANCE OF THE STUDY

This research work which focuses on the impact or role of accounting in the control of public expenditure in Nigeria will be of great importance to federal, state and local governments who are basically responsible for incurring public expenditure.

This is because this research work will awaken their consciousness on the enormous role accounting plays on the control of public expenditures.

This research will also be of great importance to administrators of public institutions who before now may be ignorant of the roles accounting plays in ensuring transparency and accountability in the execution of public expenditures.

This study will also help to serve as literature to individual or corporate bodies into want to carry on further research on the role of accounting in the public sector in Nigeria.

1. SCOPE OF THE STUDY

The study focuses mainly on the investigation into the role of accounting in the control of government expenditure, specifically; the interest of the study will be restricted to the 7up bottling company Lagos, due to time and finance constraints. Thus, the investigation of the study will conducted within 7up bottling company and the focus of the study will be on members’ staff of the company.

1. LIMITATION OF THE STUDY

TIME CONSTRAINTS: One the challenges experienced by the researcher is the issue of time; the research will simultaneously engage in departmental activities like seminars and attendance to lectures. But the researcher was able to meet up with the deadline for the submission of the project.

FINANCIAL CONSTRAINTS: Every research work needs funding; however lack of adequate funds might affect the speed of the researcher in getting materials for completion of the project.

1. DEFINITION OF TERMS

Budget: a financial statement indicating income and expenditure for a period of a year.

Control: is any activity or action taken to ensure that Procedure are directed towards the achievement of set objective.

Public: Ordinary people in society in general.

Resources: supply of something that one can use to increase wealth.

Regulations: An official rule made by a government or some order authority.

Sector: A part of an area of activity especially of a country’s economy.

Management: Its function, it is centered on the running and controlling of the organization, the way the directors perform their function to attain a successful operation.

Accounting: In this context, an accountants records, classify and summaries all public expenditure in the Central Bank of Nigeria in a significant manner and in terms of monetary events and transaction which are in part at least financial character and to interpreter the result thereof.

Financial Statement: An accountant makes an accounting report issued by a business to describe its financial affairs and results of the operations.

Public Expenditure: Okwo (2011:40) defined it as the spending made by the government of a country on the collective needs and wants of her citizenry. It normally leads to the provision of infrastructures.