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Problems and Prospects of Local Government Finance Accounting in Nigeria

Local Government Finance looks at the financial status of local government accounting system and its effective financial management, transparency and accountability of local council and the strict compliance to the ethics of public finance and value for money.

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What is finance?

Finance is funds, this time public funds. It entails resources generation, resources management and effective allocation of monies for the execution of government programs. Same is applicable to private business organization.

The meaning of Accounting

The meaning of accounting is the up-to-date book keeping. It is a process whereby relevant information about money transaction is collected, study, and recorded, as well as the projections of resources of the organization, it could be public or private.

In local government finance accounting budget, there are two recognized expenditure, namely, capital expenditure and current expenditure. We shall discuss the two expenditure in this article.

Read Also: 9 Functions of Local Government in Nigeria

Capital expenditure

Capital expenditure is a typical expenditure where expenses are made for enduring assets whose durability is beyond the budgeted year and are provided, for example, the school class room block, library etc.

The State grant is what is used to finance these projects, and if there is balance, then local government will continue with the funding of these projects from the council treasury.

This local government funds are development levies, gotten either from loans or internally generated revenue. The Chief Executive at local government level with his lieutenants prepares the budget, and submits same to the elected local government legislative members.

In it the council boss spelt out the programmes of capital projects proposed by the local council for the year and possibly the year ahead.

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These capital programs may include expenditure on assets such as acquisition of fixed assets, infrastructure projects just to mention but the two, and in the annual financial statement of the local government finance accounting contains the details of capital account income and expenditure with the balance.

Current expenditure

A local government council annual budget is current expenditure. Call it revenue expenditure, and you are right. It is the expenditure for the day-to-day running of the local authority. For example, staff salaries, office maintenance, retied worker pensions, and operational costs as the case may be.

The annual budget, once few incidental things are probably done, possibly between the executive and the legislature at the local government level, the budget would be adopted when it might have passed, say two or three readings at the legislative chambers and then the subsequent passage of the budget into law.

Law, however, has defined the functions of the legislature in respect to budget processes. Unlike the Local Government Act 2001, as amended by the Local Government Reform Act 2014.

This Act has spelt out the position of the legislature in budget process. The budget is prepared and from the executive with clear cut input from the Ministries, Departments, and Agencies.

While preparing the budget, the local council boss concerned is duty bound to ensuring that he determined its own spending priorities in line with the economic reality and the available resources.

The legislature at local government level is empowered by law to exert responsibility such as allowing for the defense of the budget, deliberate as the budget pass through some reading and subsequent passage of the budget into law, and must hold the executive accountable for all expenditure by the local government at that level.

Problems of local government finance accounting in Nigeria

Local government, the third tier of government finance accounting is faced with quite some challenges.

Finance and accounting in local governments can be said to be more complex, given its statutory functions and the sources at which it generates its revenue.

This problem in Nigeria, that is, the problem of inability of local governments to generate adequate monies and keep accurate and proper accounts so as to sponsor its expenditure with a view to activate developmental program has remained one of the major challenges affecting the  effective and efficient running of the local governments.

The purpose of this article was also to assess the problems of finance and accounting in local government in order to determine its prospects.

Lack of adequate resources

Local government areas do faced financial and accounting problems. These problems however, have in no small measure contributed to the ineffective and poor performances in local government level.

Let me also mention here that the necessity of this article is to point out that, for any meaningful development to happen in government, accounting and finance control should be effective, and accurate.

The necessary logistics need to be first put in place. With this in place, the local government will receive a boost in local government administration.

Prospects of local government finance accounting in Nigeria

Someone may be asking as to the extent has been the influence of local government finance accounting system to the growth and smooth running of administration of the local government.

No doubt, there have been some improvements in local government expenses over the years with concentration to local community development. This was evident even before 1992, when financial independence was given to local government administration. From this time, its statutory function increases.

A development that was described as laudable. Hence, a reflex of the kind of financial and accounting practices anticipated in a modern democratic society.

 Conclusion and Suggestion

The third tier of government plays a significant role in the administration of the local communities, and at the local government level is where the people at the grassroots are experiencing government.

The local government administrators are duty bound to bring government closer to the people. In view of this fact, it is the constitution right for the local government system to be empowered to carry out all of its constitutional powers in making life at the rural communities worthwhile.

For this and many good happening at the local government, the local government financial autonomy should be sustained.

Moreso, the idea of joint account between states and the local government should be discouraged because the practice has indeed deprived the local government of enough funds to cater for the needs of the rural dwellers.

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Joseph Athanasius

Joseph Athanasius is a Content Developer at InfoGuideNIgeria.com. InfoGuide Nigeria is a team of Resource Persons and Consultants led by Ifiokobong Ibanga. Page maintained by Ifiokobong Ibanga. If you need a personal assistance on this topic, kindly contact us.

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