• Thu. Mar 28th, 2024

Achieving accountability and trust in public finance management, By Innocent Okwuosa

It is…recommended that both the federal and state governments, including their Ministries, Departments and Agencies (MDAs) embrace accountability leveraging on both PEFA and ICAN Accountability Index. States should endeavour to implement accrual-based IPSAS and employ chartered accountants to help drive proper implementation.

During a recent annual accountants’ conference organised by the Institute of Chartered Accountants of Nigeria (ICAN) in November, 2021, the guest speaker, Mr Adesina of the African Development Bank (AfDB) captured the notion of “trust” correctly when he stated that:

Leadership is an investiture of trust… Trust is a powerful, evocative, and multifaceted word. At the level of federal, state, and local governance, trust implies confidence and faith in, and reliance on government, by the people. It is an assurance that what leaders and government officials promise, they will, of a certainty, deliver. When leaders waiver, or do not deliver on promises and legitimate expectations, trust is broken.

It is through accountability that leadership can demonstrate to citizens and business partners that they do what they promise and can therefore be trusted. Citizens and businesses partners repose trust and confidence in any government that subjects itself to accountability.

The concept of accountability is therefore about how leaders show that they have delivered on their promises and the legitimate expectations of citizens. In layman’s language, Joannides (2012) tells us that accountability can be understood as a requirement to give an account of oneself and of one’s activities.

Accountability aids public finance management (PFM) and begets trust in it. The centrality of good PFM for global development has been acknowledged. In accord with widespread international agreement on the importance of PFM, the Public Expenditure and Financial Accountability (PEFA) programme was initiated in 2001 by seven international development partners.

Lack of accountability and transparency in public finance management has stunted the growth and development in every sector of the economy of Nigeria. Multilateral agencies look up to accountability and transparency as yardsticks for dealing with government. To address this problem, the Institute of Chartered Accountants of Nigeria (ICAN) introduced the ICAN Accountability Index (AI).

Since 2001, the PEFA has become the most widely acknowledged standard for PFM assessments. PEFA 2016 is the latest framework and has seven pillars, which are as follows: (a) budget reliability, (b) transparency of public finance, (c) management of assets and liabilities, (d) policy based fiscal strategy and budgeting, (e) predictability and control in budget execution, (f) accounting and reporting, and (g) external scrutiny and audit. The seven pillars have 31 indicators used in scoring and assessments.

The poor performance of Nigeria in the PFM is evidenced by the assessment carried out in 2019 for fiscal years 2015, 206 and 2017, by the World bank using the PEFA 2016 framework. The country scored D in 22 out of the 31 indicators assessed, five indicators scored C and four, B, with no indicator scoring an A.

Lack of accountability and transparency in public finance management has stunted the growth and development in every sector of the economy of Nigeria. Multilateral agencies look up to accountability and transparency as yardsticks for dealing with government. To address this problem, the Institute of Chartered Accountants of Nigeria (ICAN) introduced the ICAN Accountability Index (AI).

The ICAN AI mirrors PEFA but is adapted to suit the local environment and as such has five pillars that are as follows: (a) Policy-based Fiscal Strategy and Budgeting, (b) Budget Credibility, (c) Management of Assets and Debts, (d) Control in Budget Execution, Accounting and Reporting, and (e) External Audit and Legislative Scrutiny.

In a meeting between the World Bank representative in Nigeria and the Institute of Chartered Accountants of Nigeria on the ICAN Accountability Index in 2021, it was made clear that the world bank will support states in Nigeria that score high in public finance accountability and transparency.

The assessment for 2017 and 2018 fiscal years were quite comprehensive and Kaduna State came first for both years. States that were at the bottom of the index may blame their performances on the non-provision of data/information required by the assessors. However multilateral agencies that partner with states…will see non-provision of data/information as the lack of accountability in public finance management.

Prior to the commencement of the ICAN AI, in 2018 for the 2017 fiscal year, the International Federation of Accountants (IFAC) and the World Bank, through the Department for International Development (DfID) endorsed the ICAN AI and IFAC partly provided the initial funds for its execution. Awareness was created among relevant stakeholders in the public sector, which included meeting with the then honourable minister of Finance, the Federation Accounts Allocation Committee (FAAC) and States’ accountants-general. In addition, the president of the Institute formally wrote to the 36 State governors informing them of the commencement of the assessment.

The assessment for 2017 and 2018 fiscal years were quite comprehensive and Kaduna State came first for both years. States that were at the bottom of the index may blame their performances on the non-provision of data/information required by the assessors. However multilateral agencies that partner with states, like the World Bank, International Monetary Fund, and AfDB will see non-provision of data/information as the lack of accountability in public finance management. If such information was there, why was it not provided, especially given that most of such information are expected to be on the websites of States. It must be noted that why Kaduna performed well is that it has implemented the accrual-based International Public Sector Accounting Standard (IPSAS) and is about the only state that has done that conscientiously.

Many within the accountancy field in Nigeria knew that Kaduna State, through its accountability and transparency initiatives, has demonstrated to international business partners and multilateral funding organisations that it can be trusted. Kaduna State has also done very well in the World Bank’s State Financial Transparency, Accountability and Sustainability (SFTAS) initiative, in which one of the Disbursement Linked Indicators is accountability. On account of the accountability indicator, the Kaduna State government comes top of states in Nigeria, collecting billions of naira from the World Bank.

By leveraging on the ICAN AI, a state governor can demonstrate to citizens and business partners that he has done what he has promised and can therefore be trusted. 

It is therefore recommended that both the federal and state governments, including their Ministries, Departments and Agencies (MDAs) embrace accountability leveraging on both PEFA and ICAN Accountability Index. States should endeavour to implement accrual-based IPSAS and employ chartered accountants to help drive proper implementation.

Innocent Okwuosa is a visiting associate professor of Accounting at Caleb University, Imota, Lagos and the first deputy vice president of the Institute of Chartered Accountants of Nigeria. He consults with Entop Consulting Ltd.

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