IMPACT AND PROSPECTS OF MANAGEMENT ACCOUNTING SYSTEM; AN APPLICATION OF THE REVISED FINANCIAL MEMORANDA

CHAPTER ONE

INTRODUCTION

Background of the Study

Financial memoranda is a document with codified set for roles and regulations which provide detailed guidance and instrument on the financial accounting and stores procedures to be followed in the administration of financial affairs and material management of each local government in Nigeria.  The financial memoranda in use in the country today have a long standing history and tradition.  Since the inception of native authorities / administration in Nigeria government have always provided detailed guidelines to regulate the financial operations of these authorities up to the local government reforms of 1976 each state issues its own financial memoranda for use by its constituent native authorities / local governments.

       The 1976, local government reforms however state the need for uniform set of rules and regulations to guide the conduct of financial affairs in the new local government systems.  Thus, the federal government appointed a committee of experts in 1977 to review the various financial memoranda use in federation.  This committee submitted its report in May, 1978 with a draft financial memorandum designed to replaced the three separate volumes inherited from the three regional government.  The draft harmonized financial memoranda was issued as model financial memoranda to each state subject to minor amendments, mainly to reflect local peculiarities.

       The 1979 model financial memoranda which was given enabling jurisdiction effect by the state government was in use up to 1990 when major development in the structure of the country’ local government system occasioned in large part by the application of the 1988 civil service reforms to local government service, and the extension of the logic of the presidential system of government to local government necessitated a review of the model, financial memoranda. 

Consequently, a committee was appointed in July 1990.  The committee report currently constitutes the reviewed model financial memoranda.  The revised financial memoranda officially issued in December 1991 by the (then) Vice President of the republic of Nigeria, Adimiral A. A. Aikhomo who in his forward to the revised edition among other things, expressed the hope that the provisions of the model financial memoranda would be faithfully implemental (emphasis mine) in such a way as to foster natural culture of public probity and accountability beginning from the grassroots.

Management is essentially concerned with planning and control of the resources of an organization with a view to the attachment of set objectives.

Planning is concerned with a determination of goals and the formulation of a decision model for selecting means of achieving these goals. Control on the other hand is the regulations of the activities within an organization so that they are in accord with expectations established in policies plans and target.  Crucial of the planning and control decision of management is information good decision are based on information that is timely, relevant, properly, presented, problem soling and forward looking.

       Management accounting is concerned with the application of accounting and statistical techniques to the specific purpose of providing and interpreting information designed to assist management in its function of promoting maximum efficiency.  The techniques applied for the analysis are both statistical and accounting in nature budgeting and budgetary control in the local government estimates and project of cost analysis. It is in the light of the above stated realism that the federal government decided to harmonize the financial memoranda of the them regional memoranda, applicable to all local governments in the country.

       It is now 20years sense the revised edition came into being.  Signals and information across the country however reveals that the implementation of the provisions of the memoranda is far from satisfactory. The main objective of this research is to appraise the impact and prospect of the revised financial memoranda as a management accounting tool in the local government accounting system.  Determine the factors that have continued to constrain the effectiveness of the revised financial memoranda and finding ways and means to address these constraints. O overall the overriding objective is to strength financial management practice and making local government more responsive, responsible and accountable to the aspiration of the people.

Statement Of Problem

The essence of local government accounting is to provide information. Its objective is to serve management by providing the information its objective is to serve management by providing the information through recording, measuring and analyzing data which emanate from the financial transaction of the local government.

       The accounting system thus, measures and reports on the performance of a local government the extent to which its organizational goals have been met, its financial position and the performance of its principal officers. It also generates an essential part of the management making.

       The accounting functions of a local government constitute a sub- system within its management information system. The main function is the systematic according of financial transactions for purpose of providing financial information that well facilitate effective and efficient management of a local government.

       In the light of the foraging, the following problems are inherent in the system:-

a)    lack of adequate accounting information for use by management for the purpose of planning, control and decision making.

b)    Non –availability of detailed information on accountability for public funds, especially on collection of revenue, disbursement of funds and the discharge of the functions of the local government by its principal officers.

c)    Non-Production /publication of monthly and annual financial accounts summarized the operations of a local government for a time period and its financial position at the and of the period.

d).   Lack of continuity in policies programmes and objectives due to political instability, the constant, posting of principal functionaries militate against management by objectives.  It is against this background that the researcher is against this background that the researcher is seeking to find out the impact and prospect of management accounting system.  An application of this financial memoranda.

Objectives of the Study

The 1976 local government reforms which gave birth to the first edition of the model financial memoranda was open and frank acknowledgement that a responsible and response government at the grass root level is an indispensible prerequisite to a stable and lasting government at the national level.  These consideration motivated the federal government to seek ways and means and means of establishing and reforming the government at the grass root level.  This process necessarily entailed a significant decentralization of certain functions of eth state government to local government and the allocations of funds from the federation accounts to local governments in order to harness local resources for rapid development at the local level.

       A close look at the 21 local governments Anambra State of today reveals that the intensive of the federal government is far from reality in consideration of the huge financial allocation made to local government one can easily concluded that non performance of local government is due to mismanagement.

       The question now arises of what help is that financial memoranda to the local governments.

       The objective of the researcher is:-

a.    To ascertain if the local government is to apply the provisions of the financial memoranda and to what extent.

b.  To find out problem they do encountered their bid to apply the provisions of the financial memoranda.

c.    To find out what contributions do the application of the financial memoranda play towards the harnessing and better management of resources.

d.    To find out if there is need to improve the management accounting tool of local government, the provisions of the financial memoranda.

e.    To ascertain if lack of development project an rural communities is as a result of inadequate management accounting tools.

Scope of the Study

The impact and prospect of the revised financial memoranda as management accounting tool in local government accounting system is a verse topic.  Given the limitation in time and resource constraint, this little researcher will not just be enough. To say that all that is required has been exhausted for the researcher only focused attention on Oyi and Ihiala local government of Anambra State Nigeria in analyzing the developmental efforts, the resource availability and the application of the relevant laws rules regulations guiding the use of public funds.

Significance of the Study

These studies will be of immense benefit to the local government and people of Oyi local government as it will and in crying the tremendous merits in apply the revised financial memoranda.

       It will also be very useful to all academician, lecturers and students who which to undertake a research on this topic or other related topic.

       This study will and in the effective allocation of local government revenue from the federal government to all the 774 local government of the federal republic of Nigeria.

       Finally, it will and all local government administrations to effective usage of the revised financial memoranda towards making proper use of finance.  As a result, this study will go in a long way and effective use of local government finance geared towards grass root development, the study will be of immense importance to the ministry off finance and importance to the ministry of finance and all financial stakeholder and other public sector accountant.

       In all, thus study is a major plus to public sector accounting.

Research Question

The research questions which this study answers are as follows:

1.             Do Oyi local government need to revised application of the financial memoranda.
2.            Can local government effectively apply the provision of the financial memoranda units accounting system.
3.          How does the local government to their revised financial memoranda during economic depression.
4.          How would you rate Oyi local government accounting system  before now.
5.           Do you think its is capable of revolution the Oyi local government accounting system.
6.   What effect do you think the application fo the revised financial memoranda will have on the accounting system of Oyi local government.
7.   Do you known abut the revised financial memorandum.
8.  Can the local government be responsible and accountable to the aspiration of the perble.
9.  Can you identify any short comings associated with the application of the revised financial memoranda. Do you really think that there is any need fro the revised financial memoranda.