Financial reporting critical in the utilisation of public funds — Minister

The Minister of Industry, Trade and Investment, Adeniyi Adebayo, says that sound and accurate financial reporting is critical in ensuring the appropriate utilisation of government funds.

Adebayo said this on Tuesday in Abuja at a two-day learning and development programme organised by the Financial Reporting Council of Nigeria (FRC) in conjunction with the Office of the Accountant General of the Federation

The event had its theme as “Public Sector Financial Reporting: Issues and Challenges’’.

He added that it was essential in increasing public confidence in government and attracting investment into Public-Private Partnerships.

Adebayo, however, expressed worry that poor knowledge and application of accounting standards posed major challenges against accurate and sound financial reporting.

According to him, there are two main global accounting standards that govern financial reporting: the International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS).

“A major challenge in financial reporting by public sector entities is poor knowledge of and application of these accounting standards.

“For a public sector entity to keep proper accounts, full professional knowledge of these standards is a basic requirement.

“This programme is therefore essential for government agencies

“I have been informed that the FRC has carried out a review of some of the financial statements filed with them by a number of public sector entities and a lot has been revealed.

“It has been observed that there is a lack of proper understanding of the requirements for credible financial reporting in the public sector.

“Some public sector entities still use the Statement of Accounting Standards (SAS) issued by the defunct Nigerian Accounting Standards Board (NASB) as their reporting framework while others use a number of other formats.

“This lack of uniformity hinders credible financial reporting and makes comparability difficult,’’ the minister said.

He urged public sector entities to use the learning and development programme to improve their knowledge and skills and apply the knowledge in their respective ministries, departments and agencies.

In his welcome address, the Executive Secretary, FRC, Mr Shuaibu Ahmed, said that the importance of financial reporting quality in the national economy could not be overemphasised

Ahmed said credible financial reports were no doubt germane as they not only support efficient decision making by those charged with governance; but also boost the perception index of the country.

“By extension, it enhances Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs) as veritable tools and catalysts for the nation’s economic growth,’’ he said.

Ahmed, however, warned that FRC would continue to impose fines and penalties against entities that failed to file their annual financial statements.

“So far between the end of 2020 and 2021 to date, a total of 115 public sector entities comprising of government parastatals, government agencies, and government business entities have filed their annual financial statements with the FRC.

“This is very significant progress. For those who have not filed, we have begun imposing fines and penalties on them in line with the provisions of the FRC Act and its extant rules.

“Public sector entities are expected to provide financial information that is not only timely but is accurate and useful for decision making and most importantly germane to evaluating government performance as a bastion of public accountability and stewardship.

“Let me stress the importance of timely preparation, audit and filing of AFS and also warn against unnecessary delay in this respect.

“A situation where critical institutions of government, some of the apex regulatory bodies, are two to three years behind in releasing their audited FSs should not and will no longer be tolerated.

“I want to therefore call on the National Assembly to make it a rule that the budget proposals of public sector entities in default of filing their AFS of the previous year would not be considered and approved for the coming year,’’ Ahmed said.

On his part, Rep.  Oluwole Oke, Chairman, House of Representatives Committee on Public Accounts, said that public sector entities were the most reluctant to comply with regulatory standards.

“But I have learnt that a combination of compulsion, persuasion, encouragement, occasional sanction and teaching/learning is more effective if applied in the right proportion and circumstances,’’ the lawmaker said.