Public Sector Accounting and Administrative Practices in Nigeria (Vol 2)

Public Sector Accounting and
Administrative Practices in Nigeria
Volume 2
Public Sector Accounting and
Administrative Practices in Nigeria
Volume 2
by
G.I. Daniel
Safari Books Ltd.

Ibadan
Published by
Safari Books Ltd
Ile Ori Detu
1, Shell Close
Onireke
Ibadan.
Email: info@safaribooks.com.ng
Website: http://safaribooks.com.ng
© 2019, Daniel Goddey Iwebuke

First Published 2019
All rights reserved. This book is copyright and so no part of it

may be reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electrical, mechanical, electrostatic,
magnetic tape, photocopying, recording or otherwise, without the
prior written permission of the author.
ISBN: Paperback - 978-978-56613-3-0

Dedication
T his book is dedicated to His Excellency, Senator (Dr.) Ifeanyi

Okowa, Executive Governor of Delta State who made my post-
retirement engagement by the Delta State Board of Internal Revenue
possible. This privileged and invaluable opportunity provided the
enabling environment as well as the technical and material resources
to write this book. I am eternally grateful.
v
Table of Contents
Dedication................................................................................. v
List of Tables............................................................................. x
Acronyms................................................................................... xii
Foreword................................................................................... xvi
Preface...................................................................................... xxi
Acknowledgements.................................................................. xxviii
Chapter Twenty Two Accounting for Investment Property

—IPSAS 16 and Property, Plant and
Equipment — IPSAS 17................... 795
Chapter Twenty Three Accounting for Intangible Assets —
IPSAS 31........................................... 813
Chapter Twenty Four Accounting and Management of
Inventories under IPSAS 12.............. 827
Chapter Twenty Five Procurement in Public Sector
(Part 1)................................................ 856
Chapter Twenty Six Procurement in Public Sector
(Part 2) Award of Contract that
Requires Pre-Qualification................ 891
Chapter Twenty Seven Office of the Accountant-General of
the Federation (1).............................. 925
Chapter Twenty Eight Revised Treasury Cash Book in
Public Sector under IPSAS Accrual
Accounting Basis, E-Payment and
Bank Reconciliation............................. 971
vi
Chapter Twenty Nine Financial Reporting under IPSAS
Cash Basis of Accounting................... 1022
Chapter Thirty Financial Reporting under IPSAS
Accural-Basis of Accounting............ 1053
Chapter Thirty One Directorate of Inspectorate and
Treatment of Losses of Government
Fund................................................... 1071
Chapter Thirty Two Presidential Administrative
Instruments under The Presidential
System of Government Executive
Order, Presidential Proclamation
and Presidential Memoranda............ 1094
Chapter Thirty Three Reforms of Public Financial
Management in Nigeria.................... 1132
Chapter Thirty Four Types of Vouchers.............................. 1164
Chapter Thirty Five The Subsidiary Accounts: Deposit
Account, Advances, Remittances
and Imprest....................................... 1182
Chapter Thirty Six Office of the Auditor-General for the
Federation............................................. 1196
Chapter Thirty Seven Internal Audit...................................... 1145
Chapter Thirty Eight Pension and Gratuities in the Public
Service.............................................. 1260
Chapter Thirty Nine State and Local Government
Accounting....................................... 1311
Chapter Forty Accounting for Tertiary
Institutions........................................ 1378
Chapter Forty One Nigerian Foreign Service
Operation.......................................... 1434
References...................................................................................... 1477
Appendices ................................................................................ 1484
Index........................................................................................... 1503
vii
Volume 1 Table of Contents
Chapter One Overview of Public Service in Nigeria .. 1

Chapter Two An Overview of Key Organs and
Institution of the Public Sector .............. 46
Chapter Three Introduction to Public Sector
Accounting............................................. 89
Chapter Four Financial Responsibilities of Government
Officers...................................................... 134
Chapter Five Basis of Government Accounting,
Principles and Conventions..................... 152
Chapter Six Fund Accounting.................................... 175
Chapter Seven Fiscal Federalism and Sources of
Revenue....................................................... 200
Chapter Eight Sources of Federal Government Revenue
and Other Sources..................................... 239
Chapter Nine Authorisation and Government
Expenditure............................................ 263
Chapter Ten Government Revenue, Collection &

Control Mechanism.................................. 288
Chapter Eleven Role of the Legislature in the Control of
Public Fund............................................. 344
Chapter Twelve Fiscal Responsibilities Act, 2007............ 377
Chapter Thirteen Budget and Budgeting Control in Public
Sector......................................................... 404
viii
Chapter Fourteen Government Parastatals & Its Operating
Surplus......................................................... 477
Chapter Fifteen Implementation of IPSAS.......................... 508
Chapter Sixteen Key Provisions of IPSAS 1-10................ 533
Chapter Seventeen Key Provisions of IPSAS 11-20............. 564
Chapter Eighteen Key Provisions of IPSAS 21-30............ 626
Chapter Nineteen Key Provisions of IPSAS 31-42............ 681
Chapter Twenty Accounting for Revenue and
Receivables............................................ 739
Chapter Twenty-One Accounting for Expenditures and
Payables................................................. 761
Index....................................................... 772
ix
List of Tables
Page
National Chart of Accounts (NCOA) code 795-796

Accounting entries 799-801, 851-852, 854
Applicable Accounts Code 806
Accounting Treatment 810,823-825
Sample of Assets Schedule 811
Applicable Accounting Codes, 821
Accounting Codes, 837
Table 25.1: Approved Threshold for all Ministries, Department
and Agencies 874
Table 25.2: Special Financial Limits and Thresholds,
Procurement Methods of Application and for
Expenditure related to the Nigerian National
Petroleum Corporation 875
Table 25.3: Procurement Methods and Thresholds of
Application 876
Table 27.1: Summary of Gross Revenue Allocation by FAAC
for the Month of November, 2016 shared in
December, 2016 939
Table 27.2: Distribution of Revenue Allocation to FGN by
FAAC for the Month of November, 2016 shared
in December, 2016 940
Table 27.3: FCT Abuja-Distribution Details of Revenue
Allocation to Local Government Councils by
FAAC for the Month of November,2016 Shared
in December, 2016 941
x
Table 27.4: Distribution of Revenue Allocation to State and
Local Government by FAAC for the Month of
November, 2016 Shared in December, 2016
Abia State 941
Table 27.5: Distribution to Local Government Councils of

Abia State 942
Table 27.5.15: Specimen of Federation Account Inflow and
Outflow for the Year 2016 944
Table 27.6: Import Duty Revenue for the year 2010 966
Statement No.2 Federal Government of Nigeria Cash Flow
Statement for the Year Ended 31st December, 2015 1032-1034
Statement No.3 Statement of Assets and Liabilities for the
Year Ended 31st December, 2015 Financial Year 1039-1404
Consolidated Revenue Fund Federal Government of the
Federation for the Year Ended 31st December, 2015 1043-1044
Statement No.4 Statement of Capital Development Fund for
the Year Ended 31st December 2015 1047
Federal Government of Nigeria Consolidated Statement of
Financial Position as at 31st December, 2016 1057-1058
Consolidated Statement of Financial Performance for the Year
Ended 31st December, 2016 1060
Consolidated Statement of Cash Flow for the Year Ended 31st
December 2016 1068
Statement of Changes in Net Assets/Equity for the Year Ended 31st
December, 2016 1062
Computation of Retirement Benefits Formula for Calculation of
Pensions and Gratuity in Respect of Retirement 1291-1292
Revenue Economic Code 1352
Economic Code 1356-1357, 1365-1366
xi
Acronyms
Acronyms Description
AGF Accountant-General of the Federation
AuGF Auditor General for the Federation
BOF Budget Office of the Federation
BPE Bureau for Public Enterprises
BPP Bureau of Public Procurement
CBN Central Bank of Nigeria
CIPFA Chartered Institute of Public Finance and
Accountancy
CIT Companies Income Tax
COA Charts of Accounts
CRF Consolidated Revenue Fund
DMO Debt Management Office
ECA Excess Crude Account
EFCC Economic & Financial Crimes Commission
EITI Extractive Industries Transparency Initiative
ETLS Ecowas Trade Liberalisation Scheme
FAAC Federal Account Allocation Committee
FCT Federal Capital Territory
xii
FG Federal Government
FGN Federal Government of Nigeria
FIRS Federal Inland Revenue Service
FOI Freedom of Information Act
FPO Federal Pay Office
FR Financial Regulations
FRA Fiscal Responsibility Act
GAAP Generally Acceptable Accounting Practice
GBE Government Business Enterprise
GDP Gross Domestic Product
GIFMIS Government Integrated Financial
Management Information System
GPFS General Purpose Financial Statements
IAASB International Auditing and Assurance
Standards Boards
IASB International Accounting Standards Board
IASC International Accounting Standards
Committee
ICAN Institute of Chartered Accountants of
Nigeria
ICPC Independent Corrupt Practices Commission
IFAC International Federation of Accountants
IFRS International Financial Reporting Standards
IMF International Monetary Fund
INEC Independent National Electoral Commission
IPPIS Integrated Personnel and Payroll Information
System
xiii
IPSASB International Public Sector Accounting
Standards Board
MDAs Ministries, Departments and Agencies
MDGs Millennium Development Goals
MOFI Ministry of Finance Incorporated
MTEF Medium-Term Expenditure Framework
MTFF Medium-Term Fiscal Framework
MTSS Medium-Term Sector Strategies
NASB Nigeria Accounting Standards Board
NASS National Assembly
NCOA National Chart of Accounts
NCS Nigeria Customs Service
NDDC Niger Delta Development Commission
NEITI Nigeria Extractive Industries Transparency
Initiative
NESS Nigeria Export Supervision Scheme
NJC National Judicial Council
NNPC Nigerian National Petroleum Corporation
NPC National Planning Commission
NSIA Nigeria Sovereign Investment Authority
OAGF Office of the Accountant-General of the
Federation
OECD Organisation for Economic Cooperation and
Development
OPEC Organisation of Petroleum Exporting
Countries
PAC Public Accounts Committee
PFM Public Financial Management
xiv
PPBS Planning Programming Budgeting System
PPF Property, Plant and Equipment
PPP Public Private Partnership
PTDF Petroleum Technology Development Fund
RPGs Recommended Practice Guidelines
TETFund Tertiary Education Trust Fund
TSA Treasury Single Account
UBEC Universal Basic Education Commission
VAT Value Added Tax
ZBB Zero Base Budgeting
xv
Foreword
T he traditional and ancient nation-state is a conglomerate of

power struggle and competing interests in the midst of resource
inadequacies. But unlike the Hobbesian state where everything was
“nasty, brutish and short”, the modern nation-state, especially in a
democratic setting, is organised, ordered and geared towards the
building of a secured, economically prosperous and progressive
geographical entity governed by law and sovereignty of the people.
The Nigerian nation is a federating unit consisting of thirty-six
states, a federal capital territory and seven hundred and seventy-four
local government areas competing for limited resources.
As a result of its ordered procedures, the nation’s public policies,
at any point in time, are products of negotiated compromises (or
give and take) between elected persons in Parliament and those in
the Executive Arm on the one hand and between the society and
government (as a collective) on the other. Irrespective of how the
compromises are reached, the welfare of the people, according to
the 1999 Constitution of Nigeria should and must be paramount.
People’s welfare, in this sense, is defined as security of life and
property, access to the basic things of life (like potable water, health
care, food, shelter, education and transportation facilities), while
equal opportunities are ideally given to all citizens to pursue their
dreams. To achieve these objectives, nations develop their unique
administrative structure or Civil Service which serves as the think
tank and hub of the aforementioned super structure of governance.
With the instrumentality of the state, the government is empowered
to levy taxes to finance its welfare-oriented projects and pursue other
policies of state. The amount of taxes to be collected, how, when and
where they are to be collected as well as the modalities for revenue
xvi
allocations are defined by the laws of the land and implemented by
civil servants with diverse portfolios.
In ancient times and in palaces of kings, the public servants were
members of the royal households who served as law keepers,
accounting personnel, tax collectors, auditors and asset keepers.
In that setting, the king’s representatives were equated to the state.
With such titles as chancellor, chamberlains, stewards and butlers,
members of the royal households, who were mainly nobles, played
key roles in the governance of the kingdoms.
At the beginning of the 13th century, especially in the United
Kingdom, however, as the royal and state activities started to grow
in volume and complexities, a separation began to occur between
the purely domestic functions of the royal household and the official
functions connected with governing the state. Over time, many of
the household functions started to decline not only in importance
but also, in use. Accordingly, they were phased out. However, the
office of chancellor, which had always been concerned with matters
of state, survived to become the most important link between the
old court offices and modern ministries. Thus, the development
of the modern treasury or finance ministry can be traced back
to the chamberlain’s office in the Royal household which had
responsibilities for receiving and paying out moneys.
Indeed, from the middle of the 13th century, three institutions
emerged as the major bodies for handling the affairs of state: The
High Court (which evolved primarily from the chancellery), the
exchequer and the collegial royal council.
Apart from the Justice and Treasury Departments, which originated
from the old court offices, modern ministerial structures in Europe
developed out of the royal councils, which were powerful bodies
of nobles appointed by the monarchs. From the division of labour
within these bodies, the monarchs’ secretaries, initially given low
status within the council, emerged, perhaps, as the first professional
civil servants in Europe in the modern sense of the word. The point
must be made that the founding pedestal of quality, professionalism
and strength of character of the civil service accounted for the rapid
xvii
development of Europe. This heritage was bequeathed to Nigeria by
the colonial masters in the 1900s. This administrative inheritance,
which has been sustained and reformed over the years, considerably
assisted the colonial administration to achieve the mission of the
British empire in Nigeria. In the post-independence years, the
Public Service has remained the intellectual and administrative
power house of successive governments.
From hindsight and practical experience, it can therefore be inferred
that, the pace of development of a nation is a function not only of
the technical capacity of its bureaucracy or Public Service but also,
of the quality of its regulations, practices and ethos built over the
years by generations of public servants and the political leadership.
Simply put, strong institutions drive best practices which underlie
public policies and catalyse the process of inclusive economic
growth and development. The Nigerian Public Service is a clear
case study.
Today, it is not difficult to validate the fact that the Public Service
structure is the heartbeat of Nigeria’s government apparatus as it
controls the political and economic powers including the treasury. It
provides the foundation for policy articulation, approval, execution,
monitoring and control of resource disbursement in pursuit of the
common public goods and services. Its processes are documented
for information, guidance and direction such that actions are
decreasingly arbitrary and increasingly predictable and driven by
objectivity and the public interest. Its documented processes serve
to reassure the citizens in addition to rekindling their interests and
faith in government’s various policy initiatives. The processes
define not only what is to be done and not, as well as, the acceptable
norms of public service but also, they set the tone for governance
and the role to be played by each tier and agency of the government.
The resources at the disposal of government are not unlimited. Yet,
the interests to be served are legion. Accordingly, allocation of scarce
resources must be done in line with constitutional provisions and as
specified by the Fiscal Responsibility Act, 2007 and other relevant
legislations. To ensure this, Ministries, Departments and Agencies
(MDAs) were established and charged with defined responsibilities
xviii
which are in tandem with the pursuit of common good irrespective of
who is in charge of governance. These MDAs operate with defined
guidelines, set hierarchy of authorities and policy framework in
order to minimise or eliminate conflicts. Resources are allocated
based on priority of tasks and availability of funds while internal
and external mechanisms exist to check excesses, poor performance
and resource misallocation.
This book, Public Sector Accounting and Administrative Practices in
Nigeria, encapsulates the purpose, operational procedures, financial
regulations, and administrative policies, ethical and best practices
for Nigeria’s Public Service. It provides historical information into
the establishment, growth and development of the Public Service
over the years and insight into current practices as well as proffered
strategies for enhancing its value proposition to the nation and its
people. In a very detailed and informative manner, the almost one
thousand, five hundred and fifty-page book discussed issues of
accountability and transparency, fiscal federalism, fund accounting,
budgeting and control measures, government revenue collection
and control mechanisms, authorization procedures and how the on-
going public sector finance reforms including the transition from
IPSAS cash-based accounting system to IPSAS accrual-based
accounting, have significantly helped to support the anti-corruption
initiatives of government in addition to raising the revenue profile
of government. Its discussion of the presently existing forty-two
IPSAS Standards, Executive Orders and Proclamations and their
uses in a Presidential System of the Federal Republic of Nigeria, is
instructive.
I commend the author for creating time to put his thoughts together
on the dynamic, growing and expanding area of Public Sector
Accounting for the benefit of stakeholders. There is no doubt that he
has brought his thirty-five years wealth of experience in the Office
of the Auditor-General for the Federation to bear on the thrusts and
contents of this book. It is a must read for career public servants
and a veritable tool to carry out orientation for newly recruited civil
servants. Students taking professional examinations in Public Sector
Accounting will find the simple, free flowing language of the text as
xix
well as the sequential arrangement of topics, very inviting. In addition,
researchers, journalists, members of the Public Accounts Committee
at Federal and State Assemblies and Political Commentators will
find the book useful, especially during discussions relating to Public
Sector on Televisions and other media. The author research approach
in bringing into light his wealth of experience and professional
knowledge into the writing of this book is highly commendable.
Indeed, it is a job well done.
Dr. James Kayode Naiyeju, JP, OON

PhD (Fin. Mgt), FCA, FCTI, FCIArb, FIMC, FCIFIP
Former Accountant-General of the Federation &
Chairman of FIRS
29th August, 2019.
xx
Preface
T here is now a general global awareness about the need to pay

greater attention to the development of Government Accounting
and Financial Control. The reason is not farfetched. The government,
in many nations, constitutes the largest single sector and by
extension, the driver of the economy. It defines the direction and
rate of economic growth and development. What the government
does or fails to do has serious implications on the nation and welfare
of the citizens.
However, despite this, there are no adequate and up-to-date text-
books on Public Sector Accounting and this makes the subject very
difficult. This dearth of public sector accounting literature is not
peculiar to Nigeria. It is a worldwide phenomenon. This book was
written both to fill this observed gap as well as enrich the literature on
public sector accounting and administrative procedures in Nigeria.
As expected, the Public Sector anchors public sector accounting and
finance. Therefore, this book deliberately starts with an overview of
the Public Service to address the dearth of information on the part of
majority of public servants who are regularly engaged and deployed
to their respective duty posts without any formal orientation and
induction into the service. As a result of this lack of orientation and
induction, many of this class of public servants are not familiar with
the core values of the service and the high expectation of the society
from them. They have to “learn by doing and observing the conduct”
of senior colleagues whereas such an approach to learning would
have served to confirm what they were taught during induction
sessions.
xxi
The propriety of orientation and induction ceremonies was justified
by President Muhammadu Buhari, GCFR when he had a 3-day
retreat for newly appointed cabinet members between August 18-
20, 2019 not only to apprise them of the workings of government
but also to share his vision for a better Nigeria.
As government strives to bring in more professionals into the Civil
Service, it is important for newly engaged professional accountants/
auditors to understand the environment in which they desire to
operate and make a lifelong career. It is particularly important for
these professionals to know the difference between the objectives
of the Private Sector and those of the Public Sector. This book
would open their eyes to the potential, the possibilities and age-
long practices of the Civil Service. It also provides other readers
a rich insight into the evolution and impressive antecedents of the
Service such that they can leverage the knowledge to enhance their
productivity. In addition, the historical background of Public Service
in other jurisdictions and how they have progressively improved
their governance structures over the years, are discussed.
Other stakeholders like journalists, public commentators/analysts
and lawyers would enhance their knowledge of the workings,
regulations and ethos of the Public Sector. This book provides a pot-
pourri of information on such thorny issues as Fiscal Federalism,
Revenue Allocation, Federation Account, Budget and Budget
Padding, Fund Accounting, Warrants, Procurement, Employment
and Disengagement of public servants and other critical issues
relating to Public Sector Accounting.
The ability of an organisation to achieve its goals is significantly
influenced by its organisational structure and the quality of its
human capital. To achieve its purpose, there are key organs and
institutions of government charged with diverse responsibilities
while the associated financial responsibilities of government officers
are expressly stated. Knowledge of these organs, institutions and
their mandates are crucial if a public servant is desirous of making a
successful career. It will also enhance the advice that the bureaucracy
frequently gives to politicians who are appointed as ministers.
xxii
In addition to discussing the basis of government accounting,
principles and conventions, the book also gives an insight into the
sources of revenue which accrue to the Federal Republic of Nigeria
and those that accrue to the federal government. All sources were
explained especially those from NNPC and the possible impact of
the Petroleum Industry Bill (PIB) on the agreements currently being
operated by joint ventures partners. All the funds were listed and the
operational guidelines of each were made available.
In the face of the dwindling federation revenue and the statutory
allocations to the three tiers of government, the need to raise
internally generated revenues as well as set performance targets for
MDAs have become inevitable. The book makes recommendations
on these issues against the backdrop of the importance of revenue
generation and collection to the three tiers of government.
To ensure accountability and transparency in governance, the
powers of the Minister of Finance and Commissioner of Finance to
authorize expenditure in government were extensively discussed.
The book noted that, even after the approval of the budget by the
parliament and the president, the minister of finance still has the
power to withhold any item of expenditure he wants to exercise
special control on. This is to ensure value for money.
The role of the Legislature in the control of public fund during
the appropriation processes was discussed. With the constant
misunderstanding between the Executive and Legislature on budget,
laws regarding the budget processes were discussed and suggestions
made to the effect that the Legislature, as an entity, should always
present its budget proposal for incorporation into the Appropriation
Bill, just like any other arm of government. The law made it clear
that only the president has the responsibility to present budget
and create expenditure heads. The main role of the Legislature is
appropriation and not to create expenditure head.
In addition to this important role of the Legislature, it has oversight
functions over budget implementation, project execution as well
as fraud prevention in line with existing laws, extant regulations
and international best practices. If these mandates are scrupulously
xxiii
pursued, issues of abandoned projects, inadequate infrastructure and
rising cases of fraud and sharp practices will be frontally addressed
and reduced.
The provisions of the Fiscal Responsibility Act, 2007 regarding the
budget processes were discussed and the role of Fiscal Responsibility
Commission was highlighted. The book recommends a budget cycle
that will ensure that the fiscal year and budget implementation are
in tandem and commence on January 1 each year. There are some
templates which the Commission is expected to give to the Budget
Office for proper reporting which have not been provided. Samples
of these templates are included in this book.
With the adoption of IPSAS Accrual as the basis for financial
reporting in the Public Sector, all MDAs are required to prepare
their accounts on accrual basis. This implies that payables and
receivables, among others, should be items in their financial
statements with applicable notes. Unfortunately, revenue receivables
were not included in the accounts so far published implying that cash
basis was used for revenue, contrary to the requirement of IPSAS
Accrual. Since MDAs are expected to pay operational surplus to
the Consolidated Revenue Fund, this has been an issue between
the agencies and Fiscal Responsibility Commission. In view of the
non-compliance, a template was produced by Fiscal Responsibility
Commission which defines allowable and non-allowable expenses.
For easy implementation, it was agreed that 25% of the revenue
generated will be taken as operating surplus, especially with the
implementation of the Treasury Single Account (TSA).
The extent of implementation of IPSAS, both under cash and
accrual basis, by the three tiers of government, since its adoption
by the government, was also discussed in this book. All the IPSASs
issued to date were summarized while the criteria for recognition,
measurement and disclosures were highlighted. However, IPSASs
relating to Revenue, Expenditure, Payable, Receivable, Intangible
Asset, Property, Plant and Equipment and Inventories were
discussed in greater detail because of their importance. The issues
of Impairment of receivable and non-current asset and the treatment
xxiv
of impairment loss were also covered. Some sections were devoted
to the treatment of Donations, Grants and Aids as revenue to the
entity and service-in kind.
Procurement in the Public Sector was divided into two parts because
of its importance. For instance, 75% of the government budget
passes through procurement processes. Some hidden provisions, like
the need to conduct soil test before embarking on any construction,
was brought to the fore. This should be part of the procurement
processes. If this requirement is enforced, cases of failed roads
and collapsed buildings will be curbed. Similarly, the method of
selection of various types of jobs in Public Sector was discussed
in detail. It is shocking to find abandoned projects and poor quality
jobs all around the country supervised by both in-house consultants
and engaged consultants. They are clearly evidence of economic
waste.
The Office of Accountant-General of the Federation is the Treasurer
of the Federal Government and so, the office anchors all the on-
going reforms in the Public Sector. The office is represented in most
of the committees responsible for revenue collections and ensuring
that they are accurately paid into the Federation’s Account. In
addition, all MDAs including the NNPC, are expected to send their
audited financial statements to the office for review and comments.
It is believed that the submission of financial statements by all the
MDAs to the Office of the Accountant-General of the Federation is
to enable the office carry out its oversight function. All functions
of the Office of the Accountant-General (including its various
departments) were discussed to provide a basis for stakeholders’
evaluation of its performance. In summary, suggestions and the
way forward were proffered in order to reinforce accountability and
transparency of Public Financial Management in Nigeria.
Similarly, the role of the Office of the Auditor-General for
the Federation was discussed and the need for the financial
independence of the office to ensure its effectiveness was suggested.
The appointment of Auditor-General for the Federation as stipulated
in the extant laws and the international best practice was explained.
xxv
It was stressed that the office is not an administrative office that
anyone can be asked to take on; it is strictly a professional and
career office. Therefore, for effective performance of the office, the
appointment should be from within the agency.
Under the subsidiary account, deposit account such as surety, bond,
forfeited account or account under investigation and how they should
be presented as deposit account were explained. They are different
from bank deposit and very important in government account. In
addition, the offices and areas where deposit accounts are expected
include the Police, EFCC, ICPC, Prison department and Judiciary.
These were highlighted and discussed.
The reforms on Public Financial Management such as TSA, GIFMIS,
IPPIS, E-Payment and others were discussed in detail. Lapses of the
previous method of revenue collections were highlighted and appeal
was made to states that are yet to key into the reform to do so.
Pension and gratuities, especially the contributory pension scheme
was discussed. The differences between the contributory and non-
contributory schemes were highlighted. For instance, pensioners’
benefit under contributory cannot be ascertained unlike non-
contributory that has template for the calculation of the benefits.
However, all the lapses of the contributory scheme were highlighted
which are disadvantageous to the contributors. Chapter 38 is a
chapter to be read by all pensioners and those that are still in service.
Also, the welfare of the Public Service was discussed as provided
by extant regulation.
Accounting for tertiary institutions with particular reference to
receivables and donations was discussed. This is because most of
the donations made to many institutions were not reflected in their
financial statements thereby making the accounts unreliable. The
Foreign Service was extensively treated for the benefits of newly
engaged personnel posted to foreign embassies/High Commission
as attachés. This will enhance their knowledge and effectiveness.
Therefore, I recommend chapters 40 & 41 for those who are to be
posted on foreign assignment, especially from the Offices of the
Auditor-General and Accountant-General of the Federation.
xxvi
I dare say that this book is a must read for those who desire to be
leaders in public sector governance. As former U.S.A President
Harry S. Truman said, “not all readers are leaders, but all leaders
are readers.” He further said “I love reading books because it’s
enjoyable and it plays a critical role in helping me become a better
leader.” Knowledge enhances the power of leadership.
Goddey Iwebuke Daniel Esq., BSc, FCA
September, 2019
xxvii
Acknowledgments
I would like to acknowledge the Almighty God for the wisdom

and grace which He gave me to write this book. Very specially,
I would like to appreciate His Excellency, Executive Governor of
Delta State, Senator (Dr.) Ifeanyi Okowa who provided the enabling
environment for me to write and publish this book. I dare say that
without his support and encouragement, this effort would have failed
to yield the desired results. Your Excellency, I say big thank you.
I would not forget the effort of Mr. Koleade Oshisami, the first
indigenous author on Public Sector Accounting in Nigeria, my
senior professional colleague and my Oga whose foundation, I built
on in 1999 with the first edition of my book which then became the
second indigenous textbook on Public Sector Accounting in Nigeria.
Very many individuals and professional bodies have contributed
to the success of this publication. In particular, The Institute of
Chartered Accountants of Nigeria (ICAN), International Federation
of Accountants (IFAC), International Public Sector Accounting
Standard Board (IPSASB), International Organisations of Supreme
Audit Institutions (INTOSAI) whose numerous resources enriched
this publication.
I am highly indebted to Former Chairman of Federal Inland
Revenue Service and Accountant-General of the Federation, Mr.
J.K. Naiyeju, FCA, who graciously wrote the Foreword to the book.
I am eternally grateful sir.
Let me also put on record my special appreciation to Alhaji Idris
Ahmed, the Accountant-General of the Federation who gave me
a blank cheque to enter his office to see him whenever I wanted
information. Sir, you are rare public servant. Your choice could not
have been otherwise. I say big thank you.
xxviii
I also acknowledge the scholarly and brilliant efforts of Messrs.
Abel Aig. Asein, FCCA, FCA, former Deputy Registrar (Technical
Services) of the Institute of Chartered Accountants of Nigeria and
now Executive Secretary, Association of Accountancy Bodies in
West Africa (ABWA) as well as Adedeji Osonuga, FCA, retired
Director, Office of the Auditor-General for the Federation. They
both diligently did most of the editing and made useful suggestions
which are reflected in this book. Infact, without these two scholars,
the achievement of the work plan for the publication of the book
would have been forlorn. Despite the challenge of power supply
and their own tight schedules, they busied themselves reviewing,
editing and enriching the huge manuscripts both day and night with
emerging issues and updates. They kept strict tab on the deadlines
without compromising quality. Gentlemen, I truly appreciate the
sacrifices.
I sincerely acknowledge the efforts and contributions of all staff of the
Office of Accountant-General of the Federation for all the materials
provided especially the Consolidated Account Department headed
by Mr. Nongo who gave me the opportunity to serve as a consultant
to the sub-committee of FAAC on IPSAS. That assignment gave
me the insight into IPSASs. As a teacher, the knowledge gained
enhanced my lectures and research efforts which made the writing
of this book easier. I will not forget my brother, Mr. Sikiru Shaibu
who often answered my calls in the early hours of the morning,
especially between 12midnight and 2.00am without complaints to
clarify thorny technical issues.
I sincerely thank all the staff of the Office of Accountant-General
for their individual and collective contributions. If I start to mention
names, it will be a full textbook on its own. However, the following
staff did special assignment during the writing of the manuscript:
Emmanuel Shagaya, Olaifa, Haruna Usman, Taofeek Alao Adediran
(a.k.a Alafin), Ogunrombi Rasaki, Micheal Mekela Aiyejina, and
Mrs. Okolie Rita O. I appreciate you all.
I also acknowledge the contributions of my brothers, Gbenga
Samson Ogunnubi, Tajudeen Adesoye and Michael Isiku of Office
xxix
of the Auditor-General for the Federation. I will not forget Mr.
Lateef A Odekunle PhD, ACTI, FCA, former University Bursar,
now Director, Human Resource Development Centre, University of
Lagos for his contributions to Chapter 40, Accounting for Tertiary
Institutions.
I am also grateful to my Secretary in the Delta State Board of
Internal Revenue Warri Mrs. Edirin Govina, (a.k.a Iya 1) Etineruba
Oghenekevwe, the computer guru and Emuobosa Akpan (a.k.a Iya
2) for the wonderful contributions on the manuscript.
I will always be grateful to Chief Mike Edegware, Board Secretary
to the Delta State Board of Internal Revenue for his moral support
and advice on how to source for finance, I really appreciate him.
I also thank the management and staff of Safari Books Limited,
Ibadan, especially Olayemi Onakunle, for their contributions on the
manuscript.
I will not forget my darling wife and children as they stood by me
and their understanding during the time of writing when everywhere
in my house became a study and workstation.
Finally, to God be all the glory. Despite all hindrances both in
persons and in kind, the book has become reality.
All told, I accept full responsibility for any inadvertent error(s) that
may be observed.
Goddey Iwebuke Daniel Esq., BSc, FCA

September, 2019
xxx
Chapter Twenty Two
Accounting for Investment Property — IPSAS 16 and

Property, Plant and Equipment — IPSAS 17
Learning Outcomes
At the end of this chapter, the readers are expected to:
i. explain what constitutes Capital Expenditure and its analysis
into Income Generating and Non- Generating Assets;
ii. discuss an overview of Investment Property and Property,
Plants and Equipment and demonstrate the criteria for;
a. recognition;
b. measurement; and
c. disclosure requirements.
iii. identify the books of account to be maintained and reports to
be generated.
22.0 Capital Expenditure

This is the acquisition of non-current assets or an improvement in
their performance/earning capacity. These non-current assets would
normally have life spans exceeding one accounting period.
With the adoption of accrual-basis of accounting from 2016, the
capital expenditure shall no longer be expensed but capitalised
as non-current asset of the government in core ministries and
government agencies. Although most government departments and
agencies claim to have adopted accrual-basis of accounting, they
still indulge in the writing off their non-current assets in the year
of purchase. This is inappropriate and in fact, wrong. It is only the
depreciation/amortisation charges and impairment loss, if any, of
the asset for the concerned period that would be expensed. Capital
expenditures are always statement of financial position items, which
are treated under Property, Plants and Equipment (PPE).
785
786 Public Sector Accounting and Administrative Practices in Nigeria
The capital expenditure should be analysed to determine if the

capital expenditure will generate income to the entity or is for
the entity’s usage. Once there is an indication that the asset will
generate income, it is referred to as Investment Property and IPSAS
16 provides details on its objectives and how to apply them.
22.1 Definition of Some Key Terms

For proper understanding of this chapter, there is need to explain
some key terms especially: assets, costs, fair value, carrying value
and impairment. Their treatment depends on the understanding of
each item and whether it is to be debited or credited.
22.1.1 Assets
These are resources controlled by the entity as a result of past events
and from which future economic benefits or service potential are
expected to flow to the entity.
Note: Whatever is regarded as an asset must be controlled by the
entity without any permission from any other quarters. For example,
any vehicle parked in the premises of the Ministry of Agriculture
may not be regarded as an asset of the ministry until it is cleared
that the entity has control over the vehicle. In the same vein, union
dues deducted from staff salary even though the amount is in the
bank account of the agency, cannot be regarded as an asset of the
agency. Understanding the meaning of an asset is very important.
22.1.2 Property, Plants and Equipment

These are tangible assets that are held by the entity for use in the
production or supply of goods or services, for rental to others or for
administrative purposes and are expected to be used for more than
one reporting period.
787 Accounting for Investment Property — IPSAS 16 & Property, Plant & Equipment ...
22.1.3 Cost
This is the amount of cash or cash equivalents paid or the fair value
of the other consideration given to acquire an asset at the time of its
acquisition or construction.
22.1.4 Fair Value

This is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date.
22.1.5 Carrying Amount/Value

This is the amount at which an asset is recognised after deducting
any accumulated depreciation or impairment losses.
22.1.6 Impairment
This is the loss of value of an asset, not as a result of usage, of which
the carrying amount is less than the recoverable value of the asset.
22.1.7 An impairment Loss of a Cash-generating Asset

This is the amount by which the carrying amount of an asset exceeds
its recoverable amount.
Note: When the loss of value of the asset is as a result of usage, we
talk of depreciation, but whenever it is not as a result of usage, it is
termed impairment.
22.1.8 Depreciable Amount

Depreciable amount is the cost of an asset or other amount substituted
for cost, less its residual value. Depreciation is the systematic
allocation of the depreciable amount of an asset over its estimated
useful life.
22.1.9 Entity-specific Value

This is the present value of the cash flows an entity expects to get
from the continuing use of an asset and from its disposal at the end
of its useful life or expects to incur when settling a liability.
22.1.10 Recoverable Amount

This is the higher of a cash-generating asset’s fair value less costs to
sell and its value in use.
22.1.11 Recoverable Service Amount

This is the higher of a non cash-generating asset’s fair value less
costs to sell and its value in use.
22.1.12 Residual Value of an Asset

This is the estimated amount that an entity would currently obtain
from disposal of the asset after deducting the estimated costs of
disposal, if the asset were already of the age and in the condition
expected at the end of its useful life.
22.1.13 Componentisation of Asset

Componentisation is the separation of an asset into its significant
components. Each part of an item of PPE with a cost that is significant
in relation to the total cost of the item and has a different useful life
will need to be componentised separately.
Example
a. An aircraft and its engines may need to be treated as separate
depreciable assets.
b. The building and air conditioning system/lifts may need to
be treated as separate depreciable assets.
22.1.14 Useful Life

This refers to:
a. the period over which an asset is expected to be available for
use by an entity; or
b. the number of production or similar units expected to be
obtained from the asset by an entity.
22.1.15 Service Concession Asset

This is an asset used to provide public services in a service
concession arrangement that is provided by the operator in which
the operator constructs, develops or acquires from a third party; or it
is an existing asset of the operator. It may also be an asset provided
by the grantor, which is an existing asset of the grantor; or is an
upgrade to an existing asset of the grantor.
22.2 Property, Plants and Equipment and Its Applicable

Standard — IPSAS 17
These are tangible assets that are held by the entity for use in the
production or supply of goods or services, for rental to others, or for
administrative purposes. They are to be used during more than one
reporting period. In other words, it refers to a group of assets of a
similar nature or function in an entity’s operations that is shown as a
single item for the purpose of disclosure in the financial statements.
Examples include:
a. Land;
b. Operational buildings;
c. Roads;
d. Machinery;
e. Electricity transmission networks;
f. Ships and Aircraft;
g. Specialist military equipment;
h. Motor vehicles;
i. Furniture and fixtures;
j. Office equipment; and
k. Oil rigs.
22.3 Cost of Property, Plants and Equipment comprises the

following:
a. Its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discount and rebates.
b. Any cost directly attributable to bringing the assets to the
location and condition necessary for it to be capable of
operating in the manner intended by the management of the
entity.
c. The initial estimate of costs of dismantling and removing the
item and restoring the site on which it is located, the obligation
for which an entity incurs either when the item is acquired or
as a consequence of having used the item during a particular
period for purposes other than to produce inventories during
that period.
22.4 Criteria for Recognition of Property, Plants and Equipment

Property, Plants and Equipment shall be recognised as an asset if:
i. the entity has control over the asset;
ii. it is probable that future economic benefits or service potential
associated with the item will flow to the entity; and
iii. the cost or fair value of the item can be measured reliably.
However, specialist military equipment will normally meet the
definition of PPE and must, therefore, be recognised as an asset
in accordance with the provision of the Standard. Similarly, major
spare parts and stand-by equipment qualify as PPE when an entity
expects to use them for more than one period. Infrastructure assets
meet the definition of PPE such as road networks, sewer systems,
water and power supply systems, and communication networks.
22.5 Other Assets

22.5.1 Asset under Construction
An asset under construction is an asset which an entity is currently
‘constructing’ and is not yet being used for its final intended purpose.
Asset under construction are not depreciated during the period of
construction. When the asset is ready for use, it will need to be

reclassified to commence depreciation.
22.5.2 Heritage Asset

Heritage assets are assets because of their cultural, environmental
or historical significance. Examples include historical buildings and
monuments; archaeological sites; conservation areas and nature
reserves; and works of art.
22.6 The Life Cycle of PPE from the Time of Acquisition

i. Procurement
This is the acquisition of assets at the best possible total
cost of ownership, in the right quality and quantity, at the
right time, in the right place and from the right source. It
is generally through the due process by a contract. Implied
in procurement is the selection of items being procured
through setting of service levels and planning for asset
solutions.
ii. Receiving
This includes the written acknowledgement that delivery
has been made. It must pass through the store where store
charge will be made.
iii. Deployment
This is to put the assets received into use or action. This
includes placing an asset where it will be operated and
bringing it into operation.
iv. Service
This is the use of the asset for delivery of service.
v. Maintenance
This refers to those activities required to conserve as nearly,
and as long as possible, the original condition of an asset
while compensating for normal wear and tear.
vi. Obsolescence/Impairment
This is the loss in the utility of an asset due to the
development of improved or superior equipment, but not
due to physical deterioration or usage.
vii. Disposal
This is the act of getting rid of assets and it includes sale,
trade-in, loss, destruction, theft or write-off.
viii. Initial Measurement
An item of PPE that qualifies for recognition as an asset
shall be measured at its cost or fair value as at the date
of acquisition where it is acquired through non-exchange
transaction.
ix. Subsequent Measurement
An entity shall choose either the cost model or the
revaluation model as its accounting policy and shall apply
that policy to an entire class of PPE.
x. Cost Model
After recognition as an asset, an item of PPE shall be
carried at its cost, less any accumulated depreciation and
any accumulated impairment losses.
xi. Revaluation Model
After recognition as an asset, an item of PPE whose
fair value can be measured reliably shall be carried at a
revalued amount, being its fair value at the date of the
revaluation, less any subsequent accumulated depreciation,
and subsequent accumulated impairment losses.
xii. Heritage Asset
If cost is available, it shall be measured at cost. If it is
impractical to determine the cost, it shall be measured at
nominal cost.
22.7 Disclosure
22.7.1 Property, Plants and Equipment
This shall be disclosed on the face of the financial statement
(Statement of Financial Position) in the GPFS in line with IPSAS 1
(Note: while some are disclosed in the note to the GPFS, others are
stated in the accounting policies of the entity).
i. In addition, an entity shall disclose in the notes to the GPFS

the following:
• the measurement basis used;
• the depreciation method used, if any;
• the gross carrying amount;
• the accumulated depreciation at the end of the period,
if any; and
• a reconciliation of the carrying amount at the
beginning and end of the reporting period showing
certain components thereof:
 additions;
 disposals;
 acquisitions through entity combinations;
 increases or decreases resulting from revaluations;
 impairment losses recognised in surplus;
 impairment losses reversed in surplus or deficit;
 depreciation;
 the net exchange differences arising on the
translation of the financial statements from the
functional currency into a different presentation
currency, including the translation of a foreign
operation into the presentation currency of the
reporting entity;
 other changes.
a. In accordance with IPSAS 3, an entity shall disclose the

nature and effect of a change in an accounting estimate that
has an effect in the current period or is expected to have an
effect in subsequent periods. For PPE, such disclosure may

arise from changes in estimates with respect to:
• residual values;
• the estimated costs of dismantling, removing, or
restoring;
• items of PPE;
• useful live; and
• depreciation methods.
b. If a class of PPE is stated at revalued amounts, the following
shall be disclosed:
• the effective date of the revaluation;
• whether an independent valuer was involved;
• the methods and significant assumptions applied in
estimating the assets’ fair values;
• the extent to which the assets’ fair values were
determined directly by reference to observable prices in
an active market or recent market transactions at arm’s
length terms, or were estimated using other valuation
techniques;
• the revaluation surplus, indicating the change for the
period;
• the sum of all revaluation surpluses for individual item
of PPE within that class; and
• the sum of all revaluation deficits for individual item of
PPE within that class.
c. In accordance with IPSAS 21 and IPSAS 26, an entity
discloses information on impaired PPE.
The following information are relevant and therefore be
disclosed in the notes:
i. the carrying amount of temporarily idle PPE;
ii. the gross carrying amount of any fully depreciated PPE
that is still in use;
iii. the carrying amount of PPE retired from active use and
held for disposal; and
iv. when the cost model is used, the fair value of PPE when
this is materially different from the carrying amount.
22.8 National Chart of Accounts

It is important to put on record that each item of PPE has its own
NCOA code and the full discussion on Chart of Accounts will be
done in a subsequent chapter. However, the major code should be
noted.
NCOA
Code Description
3201 Property, Plants and Equipment (PPE)
320101 Land and Building
320102 Infrastructure
320103 Plant and Machinery
320104 Transportation Equipment
320105 Office Equipment
320106 Furniture and Fittings

NCOA
Code Description
4201 Accumulated Provision for Depreciation – PPE
420101 Accum. Prov. for Dep. Land and Building
420102 Accum. Prov. for Dep. Infrastructure
420103 Accum. Prov. for Dep. Plant and Machinery
420104 Accum. Prov. for Dep. Transportation Equipment
420105 Accum. Prov. for Dep. Office Equipment
420106 Accum. Prov. for Dep. Furniture and Fittings
NCOA
Code Description
4301 Accumulated Provision for Impairment
430101 Accum. Prov. for Impairment – Land and Building
430102 Accum. Prov. for Impairment – Infrastructure
430103 Accum. Prov. for Impairment – Plant and Machinery
430104 Accum. Prov. for Impairment – Transportation Equipment
430105 Accum. Prov. for Impairment – Office equipment
430106 Accum. Prov. for Impairment – Furniture and Fittings
22.9 Accounting Documentation

The following Accounting records are key to accounting for PPE:
a. Approved Budget
b. Cash Book
c. Purchase Order
d. General Ledger
e. Invoice/Waybill Register
f. Fixed Assets Register
g. Fixed Assets Maintenance Register
h. Fixed Assets Transfer Voucher
i. Store Vouchers (SRV and SIV)
22.10 Accounting Procedures

The following procedures must be followed if the agency does not
want to be queried by the Office of the Auditor-General for the
Federation:
22.10.1 Acquisition of PPE

Whenever Property Plants and Equipment (PPE) is to be acquired:
i. Confirm Budget Provision for the acquisition.
ii. Obtain approval for the acquisition from appropriate
authorities prior to acquisition.
iii. Post all expenditure in respect of outright acquisition to

the books/ledger using source documents like payment
vouchers.
iv. Accrue for all expenditures on PPE not yet paid.
v. Ensure proper attachment of relevant documents to the
payment voucher.
22.10.2 Constructed PPE

a. Confirm Budget Provision for the construction of PPE.
b. Obtain approval for the construction from appropriate
authorities prior to commencement of work.
c. Advertise for the construction and select the most
qualified contractor. Ensure that due process is followed.
d. Post all expenditure in respect of construction to the
relevant books/ledger using source documents like
payment vouchers.
e. Accrue for all expenditures on construction of PPE not
yet paid.
f. Ensure proper attachment of relevant documents to the
payment voucher.
g. Obtain valuation reports/certificate of work done.
22.10.3 Donated/Granted PPE

• Ascertain the value of PPE donated to the entity.
• Post the value to the relevant books/ledgers.
22.10.4 Swapped PPE

• Identify the PPE to be swapped.
• Ascertain the fair value of PPE to be swapped.
• Ascertain the value of incoming PPE.
• Raise journal to recognise the incoming PPE.
• Raise journal to recognise gain or loss on swapped PPE.
22.10.5 Taken over or Inherited PPE

• Identify the taken over or inherited PPE.
• Ascertain the fair value of the taken over or inherited PPE.
• Raise journal to recognise the PPE taken over or inherited.
22.10.6 Reclassified PPE

• Identify item of PPE to be reclassified.
• Obtain approval for reclassification.
• Raise journal to reclassify PPE.
22.10.7 Provision for Depreciation of PPE

• Confirm from the statement of accounting policies the
method and rates applicable.
• Apply the rate in computing the depreciation.
• Post the depreciation to the books/ledgers using accounting
journals.
22.10.8 Provision for Impairment of PPE

(a) Confirm from the statement of accounting policies the
entity’s policy on impairment.
(b) Test for impairment.
(c) Obtain approval for recognition of impairment charges.
(d) Recognise impairment charges in the books using the
relevant accounting journals.
22.10.9 Revaluation of PPE

a. Confirm from the statement of accounting policies the
entity’s policy on revaluation.
b. Engage services of approved experts and professional
valuers to carry out revaluation of PPE.
c. From the approved revaluation report, extract the revalued
balances of the PPE.
d. Compare the revalued balances and the carrying value
of the PPE.
e. Recognise the difference in the books using the relevant
accounting journals.
Illustration 1
During the year ended 31st December, 2011, the Ministry of
Agriculture acquired two vehicles at the cost of N8,000,000.00
each in Lagos from Olukayode Motors and the cost of transporting
them to Abuja each was N50,000.00. As a result of non-release of
the provision in the budget for the year 2011, the cost of one and
transport cost was paid during the year while the balance was paid
in the year 2012.
Required
You are required to show the accounting entries for the 2011 and
2012 respectively.
Note:
• The total cost will be N8m x 2 = N16m plus cost of
transportation N100,000 totalling N16,100,000.00.
• N8,100,000 was paid in 2011 leaving a balance of N8,000,000.
Solution
Details Code Dr (N) Cr (N) Remarks

PPE Vehicle 320104 16,100,000 The cost of the
assets plus
transportation
Bank 8,100,000
Olukayode Motors Payment for
(Account Payable) 8,000,000 one vehicle
while the
balance was
deferred
Account Payable 8,000,000 Payment of the
outstanding in
2012
Bank 8,000,000
Illustration 2
Donated or Granted PPE
The West University Teaching Hospital received motor vehicles
and laboratory equipment from a UK-based Research Institute as
donation during the year. The intervention was to assist to curtail
the widespread of Lassa fever in the country. The cost of the assets
donated amounted to N10,000,000.00.
Note: In most cases, the cost of the asset may not be given; all that
will be given may just be a letter transferring the asset which will
not contain the cost of the asset. Once the model is known, fair
value will be used to measure the cost of the asset. This is done by
calling two or three dealers of the asset asking for the price; the two
prices given divided by 2 will give the fair value of the asset.
Solution 2
Details Code Dr (N) Cr (N) Remarks
PPE (Vehicle and

Lab Equip. 10,000,000 Being donation
received from
UK Research
Inst.
Aid and Grants
Donation Received 10,000,000
Illustration 3
Disposal of PPE
Agency ABC acquired MV on 1st January, 20X2 at N400,000 with
an estimated useful life of 4 years and estimated residual value at the
end of the 4th year to be N40,000. The agency decided to dispose off
the MV for N250,000 at the end of the second year. The Accounting
policy of the entity is to depreciate PPE on straight-line method.
Note: Depreciation= cost less residual value divided by the years
of useful life.
Cost = 400,000-40,000 =360,000 divided by 4 = N90, 000.00

Motor Vehicle
Details Debit (N) Credit (N) Remarks

Bal.B/f 400,000 Being asset
disposed
Disposal A/c 400,000
Disposal A/c 400,000
Accum. Dep. 180,000
Cash/proceed 250,000
Gain c/d 30,000
430,000 430,000
Gain B/d 30,000
22.11 Investment Property — IPSAS 16

22.11.1 An Investment Property
This is a property (land and/or a building or part of a building or both)
held to earn rentals or for capital appreciation or both, rather than for
use in the production or supply of goods or services, administrative
purposes or for sale in the ordinary course of operations. It is
distinguished from other PPE by its capacity to generate cash flows
largely independent of other assets of the entity.
22.11.2 Classes of Investment Property

i. A building owned by the entity (or held by the entity under
a finance lease) and leased out under one or more operating
leases.
ii. A building that is vacant but is held to be leased out under
one or more operating leases.
iii. Property that is being constructed or developed for future use
as investment property.
An interest in a property held by a lessee under a finance lease can

be qualified as investment property provided that the lessee uses
the fair value model of investment property. In other words, an
investment property may be a property (land or a building or part
of a building or both) held by the owner or by the lessee under a
finance lease to earn rentals or for capital appreciation or both.
22.11.3 Cost of Investment Property

The cost of an item of investment property comprises the following:
a. its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates;
b. any cost directly attributable to bringing the assets to the
location and condition necessary for it to be capable of
operating in the manner intended by management of the
entity;
c. the initial estimate of costs of dismantling and removing
the item and restoring the site on which it was located to its
pre-installation condition. The obligation which an entity
incurs either when the item is acquired or as a consequence
of having used the item during a particular period for
purposes other than to produce inventories during that
period.
22.11.4 Recognition
The recognition criteria of PPE also apply.
22.11.5 De-recognition
An investment property should be de-recognised (eliminated from the
statement of financial position) on disposal or when the investment
property is permanently withdrawn from use and no future economic
benefits or service potential are expected from its disposal. Gains or
losses arising from the retirement or disposal of investment property
are generally determined as the difference between the net disposal
proceeds and the carrying amount of the asset. This difference is
recognised as a surplus or deficit in the period of the retirement or
disposal. Such gains on disposal of investment property are not to

be classified as revenue but rather as other income.
22.12 Measurement
22.12.1 Initial Measurement
An item of investment property that qualifies for recognition as an
asset shall be measured at its cost or at its fair value as at the date of
acquisition where it is acquired through non-exchange transaction.
22.12.2 Subsequent Measurement

It is required that subsequent to initial recognition, investment
property is to be measured in consistence with either the fair value
or cost model. The chosen measurement model shall be applied to
all of the entity’s investment property. If an entity uses the fair value
model and there is clear evidence that the entity will not be able to
determine fair value on a continuing basis, when a particular property
is acquired, the cost model should be used for that property – and it
shall continue to be used until disposal of the property. In that case,
the residual value of the investment property shall be assumed to
be zero. Change from one model to the other shall be made only
if the change will result in a more appropriate presentation (highly
unlikely for change from fair value to cost model).
22.12.3 Accounting Policy

Public Sector Entities in Nigeria shall adopt the cost model in line
with the Statement of Accounting Policies.
22.12.4 Disclosure
• Investment property shall be disclosed on the face of the
Principal Statement (Statement of Financial Position) in the
GPFS.
• In addition, an entity shall disclose in the notes to the GPFS
the following:
a. the measurement basis used;
b. the depreciation method used, if any;
c. the gross carrying amount;

d. the accumulated depreciation at the end of the period, if
any; and
e. a reconciliation of the carrying amount at the beginning
and end of the period showing certain components
thereof:
 additions;
 disposals;
 acquisitions through entity combinations;
 increases or decreases resulting from revaluations;
 impairment losses recognised in surplus; or
 impairment losses reversed in surplus or deficit;
 depreciation;
 the net exchange differences arising on the translation
of the financial statements from the functional currency
into a different presentation currency, including the
translation of a foreign operation into the presentation
currency of the reporting entity.
Note: that the PPE schedule should provide all the above.
The financial statements shall also disclose for each class of

investment property recognised in the financial statements:
i. the existence and amounts of restrictions on title and property
pledged as securities for liabilities;
ii. the amount of expenditure recognised in the carrying amount
of an item of the investment property in the course of its
construction;
iii. the amount of contractual commitments for the acquisition
of investment property; and
iv. if it is not disclosed separately on the face of the statement
of financial performance, the amount of compensation from
third parties for items of investment property that were
impaired, lost or given up that is included in surplus or
deficit.
f. selection of the depreciation method and the estimation of the

useful life of the assets are matters of judgment. Therefore,
disclosure of the methods adopted and the estimated useful
lives or depreciation rates provide users of financial statements
with information that allows them to review the policies
selected by management and enables comparisons to be made
with other entities.
g. for similar reasons, it is necessary to disclose:
• depreciation, whether recognised in surplus or deficit or as a
part of the cost of other assets, during a period; and
• accumulated depreciation at the end of the period.
h. an entity shall disclose the nature and effect of a change in
an accounting estimate that has an effect in the current period
or is expected to have an effect in subsequent periods. For
investment property, such disclosure may arise from changes
in estimates with respect to:
• residual values;
• the estimated costs of dismantling, removing or restoring
items of investment property;
• useful life; and
• depreciation methods.
i. if an investment property is stated at revalued amount, the
following shall be disclosed:
i. the effective date of the revaluation;
ii. whether an independent valuer was involved;
iii. the methods and significant assumptions applied in
estimating the assets’ fair values;
iv. the extent to which the assets’ fair values were
determined directly by reference to observable prices in
an active market or recent market transactions at arm’s
length terms, or were estimated using other valuation
techniques;
v. the revaluation surplus, indicating the change for the
period;
vi. the sum of all revaluation surpluses for individual items
of investment property within that class; and
vii. the sum of all revaluation deficits for individual items of

investment property within that class.
j. an entity shall disclose information on the impairment of
investment properties;
k. the following information are relevant:
• the carrying amount of a temporary investment property;
• the gross carrying amount of any fully depreciated
investment property that is still in use;
• the carrying amount of investment property retired from
active use and held for disposal; and
• when the cost model is used, the fair value of investment
property when this is materially different from the
carrying amount.
22.13 Applicable Accounts code
NCOA
CODE DESCRIPTION
3202 Investment Property
140502 Gain on Disposal of Investment Property- General
280102 Loss on Disposal of Investment Property – General
2402 Depreciation Charges – Investment Property
240201 Depreciation Charges – Investment Property – Land
and Building
2502 Impairment of Investment Property
250201 Impairment charges – Investment Property – Land and
Building
22.14 Accounting Documentation

a. ledger;
b. cash book;
c. payment voucher;
d. receipts/invoice;
e. certificates/rights of occupancy;
f. title deeds;
g. approved budget;
h. purchase order;
i. invoice/waybill register;
j. investment property register;
k. investment property maintenance register;
l. investment property transfer voucher
m. assets valuation reports/certificates

i. For the Purchase of Investment Property
• confirm budget provision for the acquisition;
• obtain approval for the acquisition from appropriate
authorities prior to acquisition;
• post all expenditure in respect of outright acquisition to
the books/ledger using source documents like payment
vouchers;
• accrue for all expenditures on investment property not yet
paid; and
• ensure proper attachment of relevant documents to the
payment vouchers.
ii. For Investment Property Constructed by the Entity
• confirm budget provision for the construction;
• obtain approval for the construction from appropriate
authorities prior to commencement of work;
• post all expenditure in respect of construction to the
relevant books/ledgers using source documents like
payment vouchers;
• accrue for all expenditures on construction of investment
property not yet paid;
• ensure proper attachment of relevant documents to the
payment vouchers; and
• obtain valuation reports/certificate of work done.
iii. To Provide for Depreciation

• confirm from the statement of accounting policies the
method and rates applicable;
• apply the rates in computing the depreciation; and
• post the depreciation to the books/ledgers using accounting
journals.
iv. To Provide for Impairment
• confirm the entity’s policy on impairment from its statement
of accounting policies;
• test for impairment;
• obtain approval for recognition of impairment charges; and
• recognise impairment charges in the books using the
v. For Revaluation of Investment Property
• confirm from the statement of accounting policies the
entity’s policy on revaluation;
• engage services of approved experts and valuers to carry
out revaluation of investment property;
• from the approved revaluation report, extract the revalued
balances of the investment properties;
• compare the revalued balances and the carrying value of
the investment property; and
• recognise the difference in the books using the relevant
accounting journals.
vi. For Recognition of Rentals
Rental income from government buildings shall be recognised
as earned in accordance with the terms of the tenancy agreement.
This is in addition to its measurability and derivation of economic
benefits.
vii. Disposal of Investment Property
• identify item of investment property to be disposed;
• raise journals to close the ledger account of the investment
property, accumulated depreciation and impairment charges;
• post proceeds from the disposal to the books/ledgers; and
• post the resultant gain or loss on the disposal to the relevant

ledger.
viii. De-recognition of Investment Property
• identify item of investment property to be de-recognised;
and
• raise journals to close the ledger accounts of the property to
be de-recognised, its accumulated depreciation charges and
impairment charges.
Illustrations: Investment Property Constructed by the Entity

Ministry of Agriculture acquired Land in 20x2 at the cost of
N1,000,000.00 to construct a plaza for rent. Cost of construction
was put at N23,000,000.00 as at the end of the year 20x2. The plaza
was estimated to have a useful life of 25 years and residual value
of N500,000.00. The market value of the property at the end of the
10th year was put at N35,000,000.00. It is the policy of the entity to
depreciate its Investment Property using the straight-line method.
Note:
• The cost of the plaza will be N1,000,000 + N23,000,000
= N24,000,000.
• The plaza was estimated to have 25 years useful life and
the residual value is N500,000.
• Therefore, annual depreciation will be N24,000,000-
N500,000 = N23,500,000, N23,500,00/25 = N940,000.
• Accumulated depreciation for 10 years is N940,000 x 10
= N9,400,000.00
• Method of depreciation is straight line method.
Accounting Treatment
S/N Details DR (N) CR (N) Remark

i. Investment property 24,000,000 To recognise the
investment
property in the books
Bank 24,000,000
ii. Accumulated To close the
Depreciation 9,400,000 Investment
Property Accounts
Revaluation Accounts 14,600,000
Investment Property 24,000,000
iii. Investment Property 35,000,000 To instate the new
value of the
investment
property
This is a sample of assets schedule that must be noted.
811
Land Building- Buildings Furniture & Plant & Work in Office & Teaching & Library Motor Art Total
WIP Fittings Machinery Progress Computer Research Books vehicles Collections
Equipment Equipment
N N N N N N N N N N N N
Rate of Depreciation % % % % % % % % % % %
Cost
At 1st January
Additions in the year
Transfer
At 31st December
Deposal
Reclassification to investment
properties
At 31st December
Depreciation and Impairment
Losses
At 1st January
Reversal
Change for the year
At 31st December
Charge for the year
Deposal
At 31st December
Carrying Value
At 31st December
At 31st December
At 1st January
Accounting for Investment Property — IPSAS 16 & Property, Plant & Equipment ...
Practice Questions
1. Explain what constitutes Capital Expenditure and its analysis

into Income Generating and Non- Generating Assets.
2. Discuss an overview of Investment Property and Property,
Plants and Equipment and demonstrate the criteria for:
a. recognition;
b. measurement; and
3. Identify the books of account to be maintained and reports to
be generated
4. List the codes of the following:
NCOA -CODE DESCRIPTION

 Investment Property
 Gain on Disposal of Investment Property –
General
 Loss on Disposal of Investment Property –
General
 Depreciation Charges – Investment Property
 Depreciation Charges – Investment Property–
Land and Building
 Impairment of Investment Property
 Impairment charges – Investment Property –
Land and Building
5. Discuss the Accounting Procedures for treating purchased

investment property, constructed investment property and for
revaluation of investment property.
6. What do you understand by componentisation of asset?
Chapter Twenty Three
Accounting for Intangible Assets — IPSAS 31
Learning Outcomes
At the end of this chapter, the readers should be able to:
i. explain the concept of Intangible Assets;
ii. discuss the Intangible assets and demonstrate the criteria for:
a. recognition;
b. measurement bases; and
iii. identify the book of accounts to be maintained and reports to
be generated.
23.0 Intangible Assets

These are identifiable non-monetary assets without physical
substance. In other words, they are assets that can generate economic
benefits but cannot be seen physically or felt and can either be
purchased or internally generated. In public sector, example of
intangible assets are Computer software, Copyrights, Patents,
acquired import quotas, Research and Development (R&D) Rights
under licensing agreements for items such as motion picture films,
video recordings, plays and manuscripts. All these are within the
scope of this Standard.
Intangible assets apply to, among other things, expenditure on
advertising, training and start-up research and development
activities. Research and development activities are aimed at the
development of knowledge. Therefore, although these activities
may result in an asset with physical substance (e.g., a prototype),
the physical element of the asset is secondary to its intangible
component, i.e., the knowledge embodied in it. Some intangible
assets may be contained in a physical substance such as a compact/
813
hard disk (in the case of a computer software), legal documentation

(in the case of licence or patent) or film, etc.
The same applies to the operating system of a computer. When the
software is not an integral part of the related hardware, computer
software is treated as an intangible asset. To determine whether an
asset that incorporates both intangible and tangible elements can
be treated as intangible asset, an entity should use professional
judgment to assess which element is more significant.
Comment: The above statement had made most of the
government entities using intangible assets as balancing figure.
The shock about the whole issue of a Intangible asset was that
most of the Intangible asset figure in the financial statement is
still the same figure that will be reproduced in the note without
any analysis which invariably render the account unreliable. For
instance, statement No. 4, Statement of Capital Development
Fund as at 31st December, 2014 Note 54 page 181 of the
audited financial statement for the year 2014, having N1.411b as
Intangible assets and there was no budgeted figure and claim to
be for prior year adjustment. In 2016, financial statement Note
34, Intangible asset of N41.88b which was equally reflected
in the cash flow statement which shows that there was actual
movement of cash without breakdown or analysis of such assets
claimed acquired. HABA!!! The danger is that the account will
be used by state government as correct treatment of Intangible
assets including the students and researchers.
23.1 Definition of Some Terms Relating to Intangible Assets

23.1.1 Amortisation
This is the systematic allocation of the depreciable amount of an
intangible asset over its useful life.
23.1.2 Depreciable Amount

This is the cost of an asset, or other amount substituted for cost, less
its residual value.
23.1.3 An Impairment Loss

This is the amount by which the carrying amount of an asset exceeds
its recoverable amount.
815 Accounting for Intangible Assets — IPSAS 31
Note: Depreciation and amortisation are the systematic

allocation of the depreciable amount of an asset over its useful
life. In the case of an intangible asset, the term “amortisation”
is generally used instead of “depreciation.” Both terms have
the same meaning.
23.2 Identifying Intangible Asset That May Be Impaired

An entity shall assess, at each reporting date, whether there is any
indication that an asset may be impaired. If any such indication
exists, the entity shall estimate the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, an
entity shall also test an intangible asset with an indefinite useful
life or an intangible asset not yet available for use for impairment
annually by comparing its carrying amount with its recoverable
amount. This impairment test may be performed at any time during
the reporting period, provided it is performed at the same time every
year. Different intangible assets may be tested for impairment at
different times.
However, if such an intangible asset was initially recognised during
the current reporting period, that intangible asset shall be tested
for impairment before the end of the current reporting period. The
ability of an intangible asset to generate sufficient future economic
benefits or service potential to recover its carrying amount is usually
subject to greater uncertainty before the asset is available for use
than after it is available for use. Therefore, this Standard requires an
entity to test for impairment, at least annually, the carrying amount
of an intangible asset that is not yet available for use.
23.3 Indicators of Impairment of Intangible Assets

In assessing whether there is any indication that an asset may be
impaired, an entity shall consider, as a minimum, the following
indicators, which are classified into external and internal factors.
23.3.1 External Sources of Information

a. during the period, an asset’s market value has declined
significantly more than would be expected as a result of
the passage of time or normal use;
b. significant changes with an adverse effect on the entity
have taken place during the period or will take place in the
near future, in the technological, market, economic or legal
environment in which the entity operates or in the market
to which an asset is dedicated; and
c. market interest rates or other market rates of return on
investments have increased during the period and those
increases are likely to affect the discount rate used in
calculating an asset’s value in use and decrease the asset’s
recoverable amount materially.
23.3.2 Internal Sources of Information
a. evidence is available of obsolescence or physical damage
of an asset;
b. significant changes with an adverse effect on the entity
have taken place during the period or are expected to
take place in the near future, in the extent to which, or the
manner in which, an asset is used or is expected to be used.
These changes include the asset becoming idle, plans to
discontinue or restructure the operation to which an asset
belongs, plans to dispose of an asset before the previously
expected date and reassessing the useful life of an asset as
finite rather than indefinite;
c. a decision to halt the construction of the asset before it is
complete or in a usable condition; and
d. evidence is available from internal reporting that indicates
that the economic performance of an asset is, or will be,
worse than expected.
23.4 Recognition Criteria for Intangible Assets

Intangibles Assets shall be recognised if they meet the following
criteria:
817 Accounting for Intangible Assets — IPSAS 31
a. clearly identifiable. An Intangible Asset meets the

identifiable criterion if it:
i. is separable, i.e., capable of being separated or
divided from the entity and sold, transferred,
licensed, rented or exchanged, either individually
or together with a related contract, identifiable asset
or liability, regardless of whether the entity intends
to do so;
ii. arises from binding arrangements (including rights
from contracts or other legal rights), regardless of
whether those rights are transferable or separable
from the entity or from other rights and obligations.
b. it is probable that future economic benefits or service

potential that are attributable to the asset will flow to the
entity;
c. the cost or fair value of the asset can be measured reliably;
and
d. the entity has control over it i.e. power to obtain future
economic benefits and service potentials and restrict the
access of others from such benefits or service potentials.
23.5 Research and Development

A Public Sector entity classifies the generation of the asset into a
research phase and a development phase.
23.5.1 Research Phase

Research is the original and planned investigation undertaken with
the prospect of gaining new scientific or technical knowledge and
understanding. No intangible asset arising from research (or from
the research phase of an internal project) shall be recognised.
Expenditure on research (or on the research phase of an internal
project) shall be recognised as an expense when it is incurred.
23.5.2 Development Phase

Development is the application of research findings or other
knowledge to a plan or design for the production of new or
substantially improved materials, devices, products, processes,
systems or services before the start of commercial production or
use. In the development phase of an internal project, an entity can,
in some instances, identify an intangible asset and demonstrate that
the asset will generate probable future economic benefits or service
potential. This is because the development phase of a project is
further advanced than the research phase. Therefore, it should be
capitalised if the following criteria are met:
a. there is a clearly defined project;
b. expenditure is separately identifiable;
c. the project is commercially viable;
d. the project is technically feasible;
e. project income is expected to outweigh cost; and
f. resources are available to complete the project.
Research costs are to be recognised as expenses when they are

incurred, except in cases where in the research phase of an internal
project, the entity can demonstrate that an intangible asset exists
that will generate probable future economic benefits or service
potentials; while the development costs/phase are required to be
recognised as an asset except otherwise assessed.
23.6 What Does Not Constitute Intangible Assets

23.6.1 Internally Generated Goodwill
This is not recognised as an asset because it is not an identifiable
resource (i.e. it is not separable nor does it arise from binding
arrangements – including rights from contracts or other legal rights
– controlled by the entity that can be measured reliably at cost.
819 Accounting for Intangible Assets IPSAS 31
23.7 Measurement of Intangible Assets

23.7.1 Initial Measurement
The initial measurement of separately acquired intangible assets
comprises the following:
a. its purchased price, including import duties and non-
refundable purchase taxes, after deducting trade discounts
and rebates; and
b. any directly attributable cost of preparing the assets for its
intended use.
Intangible assets like airport landing rights, licenses to operate radio
or television stations or import licenses, etc., acquired free of charge
or for nominal consideration, through a non-exchange transaction,
are measured at their fair values at the date they are acquired.
23.7.2 Subsequent Measurement

Subsequent measurement is based on Cost Model or the Revaluation
Model.
a. Cost Model
• An intangible asset shall be carried at its cost less
any accumulated amortisation and any accumulated
impairment losses.
• The accounting for an intangible asset is based on its
useful life. An intangible asset with a finite useful life
is amortised while an intangible asset with an indefinite
useful life is not amortised.
b. Revaluation Model
An intangible asset is accounted for using the revaluation model,
all the other assets in its class shall also be accounted for using the
same revaluation model. It shall be carried at revalued amount,
being its fair value at the date of the revaluation less any subsequent
accumulated amortisation.
Note: If an intangible asset is revalued, any accumulated
amortisation at the date of the revaluation is either: (i) restated
proportionately with the change in the gross carrying amount of

the asset so that the carrying amount of the asset after revaluation
equals its revalued amount; or (ii) eliminated against the gross
carrying amount of the asset and the net amount restated to the
revalued amount of the asset.
c. Disclosure Requirements
i. Intangible assets shall be disclosed on the face of statement
of financial position in the GPFS.
ii. In addition, an entity shall disclose the following for
each class of intangible assets, distinguishing between
internally generated intangible assets and other intangible
assets:
a. whether the useful lives are indefinite or finite and, if
finite, the useful lives or the amortisation rates used;
b. the amortisation methods used for intangible assets
with finite useful lives;
c. the gross carrying amount and any accumulated
amortisation (aggregated with accumulated impairment
losses) at the beginning and end of the period;
d. the line item(s) of the statement of financial
performance in which any amortisation of intangible
assets is included;
e. a reconciliation of the carrying amount at the
beginning and end of the period showing:
• additions, indicating separately those from
internal development and those acquired
separately;
• assets classified as held for sale or included
in a disposal group classified as held for sale
in accordance with the relevant international
accounting standards dealing with non-
current assets held for sale and discontinued
operations and other disposals;
• increases or decreases during the period resulting

from revaluations;
• impairment losses recognised in surplus or
deficit during the period;
• impairment losses reversed in surplus or
deficit during the period;
• any amortisation recognised during the period;
• Net exchange differences arising from the
translation of the financial statements into the
presentation currency, and on the translation
of a foreign operation into the presentation
currency of the entity; and
• other changes in the carrying amount during
the period.
23.7.3 Applicable Accounting Codes
NCOA CODE DESCRIPTION

330101 Intangible Assets
33010101 Software
33010102 Patent Right
33010103 Copyright
33010104 Trade Mark
33010105 Franchise
23.7.4 Accounting Documentation

For proper accountability of intangible assets, the following must
be in place:
a. Intangible Assets Register
b. Official Receipts/Invoices
c. Ledger
d. Cashbook
e. Payment Vouchers
f. Journals

23.8.1 For Purchased Intangible Assets
a. Confirm budget provision for the purchase.
b. Obtain approval for the purchase from appropriate authorities.
c. Confirm that procurement due process has been followed.
d. Post all expenditures to the cashbook using source documents
like payment vouchers.
e. Post all expenditures on intangible assets not yet paid to the
day books/ledgers.
f. Ensure proper attachment of relevant documents to the
payment voucher.
23.8.2 For Internally Generated Intangible Assets

a. confirm budget provision for expenditures on the intangible
assets;
b. obtain approvals for related expenditures;
c. confirm the asset is separable and arises from a binding
legal agreement and that it can be measured reliably;
d. post all related expenditures to the books/ledgers using
source documents like payment vouchers; and
e. ensure proper attachment of relevant documents to the
payment vouchers
23.8.3 For Swapped Intangible Assets

a. obtain approvals for swap;
b. determine the fair value of the intangibles involved;
c. recognise the transaction in the books/ledgers using
journal entry; and
d. recognise gain or loss arising from the transaction in the
books/ledgers.
23.8.4 To Provide for Amortization

a. confirm from the statement of accounting policies the
rates applicable;
b. apply the rates in computing the amortization; and

c. post the amortization charges computed to the books/
ledgers using accounting journals.
23.8.5 To Provide for Impairment

a. confirm from the statement of accounting policies the
entity’s policy on impairments;
b. test for impairments;
c. obtain approval for recognition of impairment charges;
and
d. recognise impairment charges in the books using the
Illustrations
Illustration 1: Purchase of Intangible Assets
Entity XYZ acquired patent from a third party at the cost of
N500,000. Other attributable costs amounted to N55,000.
Details DR (N) CR (N) Narration

Intangible Assets 555,000 To recognise
intangible assets
acquired
Account Payable 555,000
Account Payable 555,000 Upon payment
Bank 555,000
Illustration 2: Swap of Intangible Assets

Entity ABC decided to exchange a drug patent(X) it owns with a
third party for another drug patent (Y). Patent X’s carrying amount
as at the date of transaction was N250,000, while patent Y’s fair
value was N400,000.

Intangible Assets
(Patent Y) 400,000 To recognise
Non-monetary
exchange of
intangible assets
Intangible Assets
(Patent X ) 250,000
Gain on Exchange 150,000
Illustration 3: Research & Development Costs

Entity ABC developed a new accounting software that will enhance
the preparation and presentation of financial statements. It has
expended a total sum of N650,000 on its development between 1st
January, 20X4 to June 20X4. Prior to 1st January, the expenditure
incurred by the entity for the research of the software was N150,000.
It is certain that the economic benefits will be derived from the
software and it met all the criteria for recognition as an intangible
asset.

Research Expenses 150,000 To recognise
expenditure
incurred for the
research and
development of
the software
Intangible Assets
Software 650,000
Bank 800,000
Illustration 4: Disposal of Intangible Asset

Entity ABC acquired patent to manufacture vaccines for a period
of 20 years at a cost of N350,000 in 20X2. The Entity decided to
sell the right to another agency at a cost of N300,000. The carrying
amount of the patent right at the time of disposal was N250,000.

Intangible Asset
Disposal A/C 350,000 To close the
Account of the
Patent A Right
Patent Account 350,000
Accumulated
Amortisation 100,000 To close
accumulated
Amortisation
Account
Intangible Asset
Disposal A/C 100,000
Bank 300,000 To recognise
proceeds and gain
on the disposal
of intangible
asset
Intangible Asset
Disposal A/C 250,000
Gain on disposal
of intangible asset 50,000
Commentary: From this chapter “Intangible Assets,” it is cleared

that those intangible assets in most of the government entity audited
financial statements are balancing figures and the Financial Reporting
Council of Nigeria that ought to checkmate all the unreliable
financial statement all over the nation, it concentrated on Private
Sector fogetting that Public sector is the driver of the economy. I
am suggesting that the Economic Advisory Council should focus on
accountability by ensuring that all agencies submit audited account
which must be reviewed.
Practice Questions
1. Explain the concept of intangible assets.

2. Discuss the intangible assets and demonstrate the criteria for:
• recognition;
• measurement bases; and
• disclosure requirements.
3. Identify the books of accounts to be maintained and reports to
be generated.
4. Discuss the concept of amortisation of intangible assets?
5. Why is it important to annually test for impairment for assets
with indefinite life?
Chapter Twenty Four
Accounting and Management of Inventories under IPSAS 12
Learning Outcomes
i. explain what constitutes inventories;
ii. discuss the accounting treatment of inventories;
iii. enumerate and discuss the costs to be recognised as an asset;
iv. demonstrate the criteria for.
a. Recognition,
b. Measurement bases and
c. Disclosure requirements.
v. identify the book of accounts to be maintained and reports to
be generated; and
vi. discuss the roles of store officer and procedures of stock
taking.
24.0 Stores Accounting and Custody

According to Financial Regulation 2101 under the cash basis
of Accounting, stores was defined as “all moveable property
purchased with public fund or otherwise acquired by government.”
For accounting purposes, stores were classified into two classes,
namely: Allocated and Unallocated Stores. They are further sub-
divided into three:
a. Non-expendable stores
b. Expendable stores
c. Consumable stores
24.1 Allocated Stores

These are stores with items whose cost are chargeable directly to
the sub-head of expenditure in which funds for their purchases are
827
provided for in the estimates. These stores are taken on numerical

charge and may either be purchased, or obtained from the unallocated
stores.
24.2 Unallocated Stores

These are stores with items purchased for general stock (rather than
for a particular work or service). Their final vote of charge cannot be
stated or determined at the time of purchase. Their cost is debited to
an unallocated store sub-head in the expenditure estimate. They are
held on charge by book value and unit. When issued for use, they are
charged to the appropriate sub-head of expenditure as an allocated
store and the corresponding credit is posted to the unallocated store
sub-heads. There are three types of stores:
a. Expendable Stores: are stores of a semi-permanent nature
such as shovels, machetes, paintbrushes, etc., which are
expected to give a comparatively short period of serviceable
life.
b. Non-Expendable Stores: are stores of permanent nature
such as furniture, typewriter, motor vehicles etc., which are
expected to give a varying but considerable number of years
of serviceable life.
c. Consumable Stores: are stores with items, which, once used
for the purpose for which they were acquired, cease to exist
as store item. For example, a tin of paint (which is a store
item) becomes a coat of paint on a wall (which is not a store
item).
In line with the International Public Sector Accounting Standards
(IPSAS) accrual basis, the definition of store as “all moveable
property/items”, is obsolete. There are some store/inventories items
that are not moveable. For instance, Federal Housing Authority. Its
main mandates including acquisition of land and houses for sales
and at any time, unsold land and houses stand as store property and
they are not moveable. Therefore, the word inventories is more
appropriate and is globally acceptable.
829 Accounting and Management of Inventories under IPSAS 12
Under accrual basis of accounting, all purchases are regarded as

inventories pending when they are issued either for use for the
general office administration or issued to production line, in which
case, it will be charged as part of cost of production. It is important
to note that unlike under the cash basis, whenever store items are
issued out from the store, it is assumed that they have been consumed
and therefore, they no longer exist. But under IPSAS accrual basis,
until the items are actually consumed, they will still be regarded as
inventories. For instance, 20 reams of papers were issued to finance
and accounts department; until they are actually consumed or used
up, they will be regarded as inventory or stationeries bought directly
by the department. They will be regarded as inventory until they are
consumed and expensed. As a result of this, at the end of the year,
there is need to give stock sheet to all departments to list out the
unused items in their custody for end of year count.
Note: Issue of allocated and unallocated stores does not arise.
24.3 Purposes of Unallocated Stores (Under Cash Basis)

i. To acquire store items of standard design and which are in
constant demand.
ii. To make the stock immediately available from the
unallocated store for such project or service.
iii. To reduce overall cost.
iv. To save storage space by holding minimum stock
requirements.
In case of unallocated stores, the vouchers and ledgers will record

quantity and value.
Note: The store keeper must not maintain or have access to the
store ledger, as the store ledger officer should maintain the store
ledgers.
24.4 Inventories
These are assets held in the form of materials and supplies to be
consumed in the production process, materials or supplies to
be consumed or distributed in the rendering of services, sale or
distribution in the ordinary course of operation in the process of
production for sale or distribution. In line with the transition to
International Public Sector Accounting Standards (IPSAS) accrual
accounting by PSEs with effect from 1st January 2016, unissued
store items and unconsumed items are to be counted, valued on 31st
December, 2015 and recognised in the books of accounts (Opening
Statement of Financial Position) on 1st January, 2016. Subsequently,
end of the year stock taking will be an annual event.
24.4.1 The Following do not Constitute Inventories

a. work-in-progress arising under construction contracts,
including directly related contracts; and
b. financial instruments.
24.5 Examples of Inventories

Examples of inventories in the public sector include the following:
i. Ammunition
ii. Consumable stores
iii. Machine materials/components
iv. Spare parts for plant and equipment
v. Strategic stock piles (for example, energy reserves)
vi. Stocks of unissued currency
vii. Postal services supplies held for sale (for example, stamps)
viii. Work-in-progress, including:
• Educational/Training course materials.
• Client services (for example, auditing where those
services are sold at arm’s length prices).
ix. Land/property held for sale.
24.6 Cost of Inventories

The cost element of inventories depends on whether the item of
inventory is:
i. A bought-in inventories or
ii. Internally created inventories.
24.7 Bought-in Inventories

These are inventories from an outside supplier. The cost of bought-
in inventories includes:
a. The purchase price.
b. Import duties and other taxes (other than those subsequently
recoverable by the entity from the taxing authorities).
c. Transport, handling, and other costs directly attributable to
the bought-in inventory.
d. Trade discounts, rebates and other related items deducted
in determining the cost of purchase.
24.8 Entity Internally Created Inventories

This may be in the form of work-in-progress or finished goods. The
elements of cost involved include the following:
i. Bought-in material cost
ii. Conversion cost incurred for transforming the raw materials
into work-in-progress or fully completed product/finished
goods. The elements of cost include:
a. Cost directly related to the units of production such
as materials introduced and direct labour.
b. Systematic allocation of overhead costs such as
fixed/variable overhead costs. Fixed overhead
costs are indirect cost of production that remain
relatively constant regardless of:
• The volume of production, such as depreciation,
maintenance of factory buildings and the cost
of management staff.
• Variable overhead costs are those in direct costs

of production that vary directly with the volume
of production, such as indirect materials and
indirect labour.
Note: Example of internally created inventories can be found in the
workshop of Federal Ministry of Works where planks are issued to
workshop and after conversion to tables and chairs, SRV are issued
to transfer them to the store.
24.9 Allocation of Fixed/Variable Overhead Cost

a. Fixed overhead costs are allocated to work-in-progress/
fully completed goods on a basis of budgeted fixed overhead
costs divided by budgeted completed goods. The result is
referred to as Fixed Overhead Absorption Rate (FOAR).
b. Variable overhead cost are allocated to each unit of
production on the basis of actual use of the production
facilities. These costs include:
i. Energy costs
ii. Direct labour cost incurred
iii. Packaging cost for finished goods
These costs are absorbed into costs of finished goods by dividing
total budgeted cost by total budgeted completed finished goods.
The result is termed Variable Overhead Absorption Rate (VOAR).
A production process may result in more than one product being
produced simultaneously and the cost of conversion of each product
may not be separately identifiable. In such cases, the conversion
costs are shared on the basis of what is called “Cost Differential
Factor.” Cost Differential Factor is weight allocated to the products
based on the time taken for the conversion of individual product or
the man labour hours required.
Note: The knowledge of costing will be useful in allocation of
fixed and variable cost to the production.
24.10 Costs Excluded from the Cost of Inventories

It is important to state that the following are not part of the cost of
inventories in the public sector as is applicable in the private sector.
These are:
a. Abnormal amounts of wasted materials.
b. Storage costs, unless these costs are necessary in the
production process before a further production starts.
c. Administrative overheads that do not contribute to bringing
inventories to their present location and condition.
d. Selling costs.
e. Interest and other borrowing costs.
f. The foreign exchange fluctuation on the inventories
acquired in foreign currency.
g. The difference between the cost of purchase of inventories
under normal credit terms and the amount payable under
deferred settlement terms.
24.11 Distributing Goods at No Charge or for a Nominal

Charge (Subsidy)
A public sector entity may hold inventories whose future economic
benefits or service potential are not directly related to their ability
to generate net cash inflows. These types of inventories may arise
when a government has determined to distribute certain goods at
no charge or for a nominal amount to the citizens. In this case, the
item of inventory is reflected in the account by the amount the entity
would need to pay to acquire the economic benefit. Estimate of
replacement cost will need to be made where the economic benefit
cannot be acquired in the market. However, this can be categorised
as subsidy as provision is made under the National Chart of Accounts
(NCOA) for this type of transaction.
24.12 Recognition
The criteria for recognition of inventories are:
a. it is controlled by the entity;
b. it arises as a result of a past event (acquisition or production
thereof);
c. it is probable that future economic benefits or service
potentials associated with the item will flow to the entity;
and
d. the cost or fair value of the inventory can be measured
reliably.
24.13 Recognition of Inventories as an Expense

When inventories are sold, exchanged or distributed, the carrying
amount of those inventories shall be recognised as an expense in
the period in which the related revenue is recognised. If there is
no related revenue, the expense is recognised when the goods are
distributed or the related service rendered. The amount of any write-
down of inventories and all losses of inventories shall be recognised
as an expense in the period the write-down or loss occurs.
24.14 Measurement
a. Inventories shall be measured at the lower of cost and net
realisable value, except where inventories are:
i. acquired through non-exchange transaction, or
ii. they are held at no charge, or
iii. they are held for consumption in the production process
of goods to be distributed at no charge.
b. Where inventories are acquired through a non-exchange
transaction, their cost shall be measured at fair value as at the
date of acquisition.
c. Inventories shall be measured at the lower of cost and current
replacement cost where they are held for:
i. distribution at no charge or nominal charge; and
ii. consumption in the production process of goods to be

distributed at no charge or for a nominal charge.
24.15 Net Realisable Value (NRV)

This refers to the estimated selling price that is realisable in the
normal course of business less the estimated cost required to
complete and make the sale. The cost of inventories may not be
recoverable if:
i. they become obsolete;
ii. they are damaged; and
iii. the estimated cost of completion or the estimated cost
to be incurred to make the sale, exchange or distribution
has increased.
The practice of writing inventories down below cost to NRV is
consistent with the view that assets are not to be carried in excess of
the future economic benefits or service potential expected.
Inventories are normally written down to NRV on an item by
item basis. There are circumstances where it may be appropriate
to group similar or related items. This may be the case with items
of inventories that have similar purposes and cannot practically
be evaluated separately from other items. It is not acceptable to
write down inventories based on a classification of inventories, for
example, all inventories in a particular geographical segment.
24.16 Techniques for the Measurement of Costs

Inventories held in the stores may have been acquired and brought-in
in a number of batches each at a separate price. At the time the items
of inventory are issued from store to the users in the organisation,
the costs of inventories are measured using one of the following cost
methods:
a. Specific Identification method;
b. First-in First-out (FIFO) method; and
c. Weighted Average cost method.
Note: First-in-first-out (FIFO) is the method adopted by Nigeria.
24.16.1 Specific Identification Method

This is used when items issued from store are not ordinarily
interchangeable and are specifically segregated for a specific project.
24.16.2 FIFO Method

This method assumes that inventories first purchased or produced are
issued first. In other words, the items remaining on hand in custody
at the close of accounting period are those items of inventory that
have most recently been purchased or produced.
24.16.3 Weighted Average Cost Method

The cost of each item is determined from the weighted average of
the cost of similar items at the beginning of a period and the cost of
similar items purchased or produced during the accounting period.
24.17 Disclosure
a. Inventory is to be reported on the face of the principal
statements in the GPFS.
b. In addition, an entity shall disclose in the notes to the GPFS
the following:
i. the accounting policies adopted in measuring
inventories including the cost formula used;
ii. the total carrying amount of inventories and the
carrying amount in classifications appropriate to the
entity;
iii. the carrying amount of inventories carried at fair
value less cost to sell;
iv. the amount of any written down inventories recognised
as an expense in the period;
v. the amount of any reversal of any write-down that is
recognised in the statement of financial performance
in the period;
vi. the circumstance or events that led to the circumstances
of write-down of inventories; and
vii. the carrying amount of inventories pledged as security

for liabilities.
24.18 Accounting Codes
NCOA
Code Description
3105 Inventories
310501 Inventories
24.19 Accounting Documents/Records Used in the Stores

a. Store Ledger
b. Tools Ledger
c. Tally Card/Bin Cards
d. Store Receipt Voucher
e. Furniture Inventory Board
f. Store Issue Voucher
g. Requisition Book
h. Conversion Voucher
i. Local Purchase Order /Job Order
j. Way Bill

(a) Store Ledger
A store ledger is used to record both the issuance and
receipt of store items and such other information as
Date, SRV Number, SIV Number, Movement, Quantity
Received, Issued, Balance and Remarks. A separate ledger
will be maintained for each store and records of articles
of the same group will be kept in one ledger. The unit or
quantity will be shown and articles will be taken on charge
in that unit. Separate folio will be assigned to the various
articles in the stock and the description will, in every case,
agree with that of the tally card kept in the store. All store
ledgers must be clearly indexed. The ledger will be posted
daily and a voucher, the number of which will be recorded against

the entry, must support every entry. Receipts and issues vouchers
will be numbered consecutively for each financial year and will
be filled in numerical order. The store ledger must be posted daily
as soon the SRV and SIV are received, either manually or through
software ledger.
(b) Unserviceable and Obsolete Stores Items
These should be posted in a separate ledger to separate serviceable
from unserviceable store items so that the financial statement will
show a true and fair view. At the end of each financial year, a red
line must be drawn immediately below the last entry of the ledger.
(c) Specimen of Store Ledger

Store Ledger
Name of the Article…………… Minimum………….…..
Symbol……………..Unit……………..
Maximum Qty.………………………..
Bin No……………… Previous Year’s Consumption…….
Bin Card No…………………..
Date SRV/ Movement Unit Qty Qty Balance Remarks

Issued/ SIV No Cost Received Issued
Received
Qty Value
Bal of
Stock
(d) Tools Ledger

Officers to whom plant and tools have been issued for
current use will enter those tools into the ledger for
effective control of the tools issued.
(e) Bin/Tally Card
Tally card is used by the storekeeper to record both receipts
and issues of store items. A separate tally card is used for
each item in the store, which must correspond, with items
recorded in the stores ledger. The relevant ledger folio will
be quoted on the Tally card. Tally cards must be kept in
the Bin containing the article except where impracticable.
(f) Specimen of Tally Card
Bin Card
Maximum:…….…………....
Stock...................................
Product................................ Unit of Issue........................
Ledger Folio..................... Pack.................... Minimum Stock.....................

Date SIV No Movement Quantity Balance Signature
Issued or SRV
Received No Received Issued

(g) Store Receipt Voucher

This is one of the documents used in store accounting. It
is used to record all store items that come into the stores
which must be numbered serially. See a specimen of store
receipt voucher (paragraph 24.20.8) on the next page.
(h) Furniture Inventory Board
In addition to store ledgers, each officer to whom such
property has been issued will maintain inventories
of non-expendable stores in use. A Master Inventory
Board should also be maintained containing all items in
individual offices or quarters.
(i) Store Receipt Voucher
No:.................................. Date:.......................................
To the storekeeper............................................................................
Articles Denomination Quantity to be VALUE Ledger
of Quantity Received N K Folio
I hereby certify that the above mentioned store items have been received.
Name: ..........................................................................................................
Date:.............................................. Signature:....................................
(j) Store Issue Voucher/Requisition Book

This is used to issue store items out of the store. Issuance will be
made only on the authority of numbered store requisition. Quantities
should be written both in words and figure and each type of article
required will be given an item number. Therefore, to prevent
unauthorised additions, a line will be drawn immediately below the
last entry. All issues should be supported with stores issue vouchers.

(See the Specimen of Store Issue Voucher)

Store Issue Voucher Nigeria Store BK
Station…………Date……20……… No……….………………
To the Storekeeper…………………. Department/District………
YOU ARE HEREBY AUTHORISED to issue the undermentioned articles

to…………..………………….………Department/District.
FGN 1274/876/10,000 Bks of 50-1 m 44
……………………………………
Signature of Head of Issuing Dept.
Article Denomination Quantity to Folio in Folio in Rate/ Amount Remarks

of Quantity be issued issuing receiving Unit N
Ledger Ledger Cost
(a) (b)

RECEIVE the above mentioned Stores……..........……..…Recipient………..20…….

(Signature in full)
Entered......…………………………Storekeeper……………….………….20…….
___________________________________________________________________
• The issuing storekeeper will insert against each article the

numbers of the folio of the store ledger upon which it is
entered.
• The receiving storekeeper will insert against each article
the number of the folio of his store ledger upon which it is
entered.
Should the store be for immediate consumption and not
taken on charge, the words `“For immediate consumption”
should be written by the Receiving Officer in column (b).
Should any alteration be necessary, the alteration must
be initialed by the officer authorising the issue, and also
by the recipient. The authorising Officer must write his
initials in the article column immediately below the last
item authorised. Original to be receipted in full (in ink if
possible) and returned to the issuing officer who will file
it as an issued voucher. Duplicate to be retained by the
receiving officer as a receipt voucher. The triplicate will
remain in the book.
(l) Job Order/Local Purchase Order (LPO)
This is a written document authorising contractor or
supplier to supply or carry out a specific job for the
organisation.
(m) Way Bill/Invoice
This is a written document containing details relating to
the shipment of a consignment of goods with a statement
of the sum due for the service or good supplied.
24.20 Ideal Staff Strength of the Store

The following are the staff to be found in the store unit of any entity
for proper accountability.
a. Store officer
b. Store keeper
c. Store ledger keeper/management accountant
24.20.1 Store Officer

He is the head of the unit who receives all correspondence to the
store and who keeps all security documents such as Store Receipt
Voucher (SRV) and Store Issue Vouchers (SIV). He issues SRV to
the store keeper who keeps the bin card of the store items and copies
the Store ledger keeper. On no account should the custody of the
security document be in the hands of storekeepers.
24.20.2 Storekeeper
He is the one in custody of the store items. He therefore keeps the
bin/tally card of the store items and takes store items on store charge.
He confirms quality of the store items with the user department and
issues out store item vide SIV, approved by the store officer.
24.20.3 Store Ledger Keeper/Management Accountant

The store ledger keeper or management accountant, depending on
the nomenclature given to the store ledger keeper, maintains the
store ledger of the entity. For proper record keeping, the store ledger
should not be manual. A desktop computer must be issued to him
with store ledger software arranged according to the classification
adopted by the entity. Copies of SRV and SIV are forwarded to him
for posting into the ledger. At any time, reports are printed out for
management decision. With the migration to IPSAS accrual basis,
manual store ledger keeping will not be useful to the management.
The ledger page must carry folio number having mostly the same
column with the bin card.
24.21 Sources of Receipts of Store Items

a. Local Purchase Order (LPO)
b. Transfer from other stores
c. Conversion and manufacture
d. By contract award
e. Returned store
f. Excess taken on charge
g. Any other source.
24.22 Documentation of Receipts into the Store

24.22.1 Local Purchase Order (LPO)
This is a written document authorising contractor or supplier to supply
or carry out a specific job for the organisation. LPO contains four
copies: original, duplicate, triplicate and quadruplicate. Procurement
department usually issues LPO after due process. The original
and duplicate copies are given to the contractor or supplier while
the triplicate copy is sent to the accounts department to take the
liability and open creditor’s ledger in the name of the contractor.
The fourth copy is kept in the booklet for record purposes. Ideally,
the photocopy of the LPO or the award letter ought to be forwarded
to the store officer to inform him in advance of the items coming
into store. This will enable him find out the user so that when the
items are supplied, he knows who to contact to confirm and inspect
the goods before receiving them into the store.
When the contractor is about to supply the goods, he is required to
come along with the original copies of the LPO/award letter and the
waybill/invoice. These documents will be handed over to the store
officer to enable him confirm the order and its associated terms/
conditions before receiving them. The store officer will issue Store
Receipt Voucher (SRV) listing all the items supplied as contained
in the invoice in the SRV. The original SRV, original LPO/award
letter and the original waybill/invoice are forwarded to finance and
accounts department with a covering letter and with dispatched
register.
The duplicate of the SRV is equally forwarded to the storekeeper
who has responsibility for such store items. It is the storekeeper that
signs the SRV. The SRV booklet goes to the storekeeper who checks
the items and signs before the booklet is returned to the store officer.
24.22.2 Transfer from Other Store

Whenever there is shortage of store items in one location of the store,
it is possible to transfer store item to another by issuing transfer
voucher. An SRV must also be issued to receive the items into the
new store. It is mandatory that store receipt voucher must be issued

to acknowledge the receipt of the items.
24.22.3 Contract Award

These are store items purchased through the award of contract. In
most cases, this must pass through the Tenders Board Committee of
the agency.
24.22.4 Conversion and Manufacture

This is when some items in the store are converted to another item
and conversion vouchers need to be used. For example, in the
Ministry of Works, there are workshops where tables and chairs are
constructed. In that case, planks will be issued to the workshop where
conversion voucher will be used to determine the number of planks
required to produce the agreed set of chairs and tables. Before the
issuance of the produced tables and chairs to the prospective users,
they will be sent to the store and SRV will be issued to bring the
tables and chairs to the store. The cost of each will be valued based
on the measurement method adopted by the entity.
24.22.5 Returned Store

Any store item issued out that are returned must be brought back by
issuing SRV.
24.22.6 Excess Taken on Charge

This occurs during the checking of store by the auditor or inspectors
from the Accountant-General’s office. Once the physical store items
are more than what is in the store ledger and bin card, it means
there are surplus, which must be written back to the store. To make
it permanent, the store officer should be instructed to issue SRV,
which will be taken away, by the inspector or auditor.
24.23 Management of Inventories

Management of Inventories is very crucial as any store not properly
managed can lead to loss of funds. Therefore, it is the responsibility
of the store officer to always carry out the following tasks:
a. Checking, handling and storage of store items received.
b. Issuance of stores supported by authorised vouchers and
ensures that such issues are checked and properly packed.
c. Observing first-in-first-out (FIFO) method so that items from
old stock are issued before the new stock.
d. Issue of store receipt voucher for all store items received into
the store.
e. Maintain the prescribed stock level as regards minimum and
maximum limits (recorder level).
f. Avoidance of waste of stores and irregular issues.
g. Ensuring that the storeroom is clean and properly ventilated.
h. Report when the storeroom is not in good condition.
i. Ensure adequate security for the store items in respect of
strong burglar proof and fire-fighting equipment.
j. He is solely responsible for the keys and no delegation of
duties of locking up is permitted.
24.24 How Stores are Checked by Inspectors

Checking of inventories is the physical verification of the quantities
and condition of items held in warehouse or store. It is also the
process of counting and recording the amount and value of stock
held by an entity. It involves:
a. Carry out physical survey of the store items and let the store-
keeper sign the survey sheet.
b. A test comparison of the ledger balances with the physical
and the tally cards balances.
c. A test verification of the ledger entries with receipt and issues
vouchers.
d. An examination of the condition of the stock and manner of
storage.
e. A scrutiny of the books and register in use, which should be

up to date and relevant voucher properly filed.
f. An examination of security measures in the stores premises
including adequate fire-fighting appliance, which should be
provided and maintained in a serviceable condition.
g. Test-checking to confirm physical existence of the highly
marketable items which can be easily removed.
h. Any surplus found after the checking should be taken on
charge by issuing of SRV to cover the items in excess and the
auditor or checker should take the SRV away.
i. Any deficit should be made good together with any necessary
recommendations.
24.25 Purpose of Annual Stocktaking

In line with the IPSAS accrual basis of accounting, the annual
stock taking must be compulsorily conducted at year-end.
Stocktaking is not entirely novel in the public sector as many
government parastatals carry out this exercise, albeit, improperly.
Under IPSAS Accrual accounting, it is mandatory. Therefore,
there is need to explain the method of stock taking in Public Sector
Entities (PSEs) in line with FAAC sub-committee guidelines on
end of the year stocktaking. This involves the physical count of
inventories and is applicable to all PSEs that hold inventories for
regular operations.
The year-end physical inventories will:
i. bring into account unissued and unconsumed store items for
IPSAS accrual first time adopters;
ii. minimise wastage of inventories arising from obsolete or
being damage by poor storage;
iii. streamline store management; and
iv. supply PSEs with a key financial figure for its inventories for
the year end.
24.26 Responsibility of Relevant Officers in Stocktaking

a. Director/head of Administration is responsible for ensuring
the physical counting of inventory items in as much as the
store is under administration.
b. Director/head of finance and accounts is responsible for the
inventory valuation and any adjustments are entered in the
relevant books of accounts.
24.27 Guidelines for Effective Stocktaking in PSEs

Since this is a new requirement in the preparation of the financial
statement, there should be a team responsible for the stocktaking.
The team should be made up of the following officers to ensure that
all relevant units are carried along in the stocktaking.
i. Director/head of administration or his representative –
chairman
ii. Director/head of finance and accounts or representative – vice
chairman
iii. Head of internal audit or representative – member
iv. Head of stock verifier or his representative – member
v. Head of store or his representative – member
vi. Head of final accounts or his representative – member/
secretary
vii. Representative of Federal/State/LG Auditor-General or
external auditors – observers
In stocktaking, the stock sheet is a very important document which
must be understood by the team members. There must be serial
number, stock code based on NCOA, description of the items, unit of
measurement (e.g., in packets or in unit), unit/packet cost, quantity
per store records, actual stocktaken, surplus/deficit (as there might
be surplus/deficit when actual quantity counted is compared to store
records), finally the value of stocktaken (i.e., multiplying unit cost
column with actual stocktaken column).
24.28 Specimen of Stock Sheet
…………..…..Entity ...…...…………Government of Nigeria
Stock-Take Sheet
Stock Category …………………………………..
Stock Economic Code (NCOA) ……………………..
LOCATION….......…..…... WAREHOUSE NUMBER........ DATE.........…….
S/No Stock Item Unitof Unit Qtyper Actual Surplus Def Valueof
Item Description Measurement Cost Store Stock Stock
Code Record Taken Taken
(a) (b) (axb=c)
Total Xxxxx
Stock counted by……………………Date…………………………
Witnessed By:
a. Internal Auditor…………………………………Date…………………
b. Store Officer…………………………..…………Date………………..
c. Other Team……………………………………….Date……..…………
Stock Valued By………………………………………………Date………………
Note: The method of stock valuation shall be FIFO in line with

the approved accounting policies of Nigeria.
24.29 Responsibilities of the Stocktaking team

The following are the responsibilities of the stocktaking team:
a. The chairman of the stock count team shall make copies
of the stock sheet available to the relevant storekeepers, to
enable them list all the store items in their custody as at the
end of the year. The department stores should be inclusive.
b. The relevant storekeepers should list the available store
items in his custody in the stock sheet properly labelled.
c. The team should ensure that there is no store items available
not listed on the stock sheet.
d. The team will then carry out physical stock count of the
store items.
e. The team shall reconcile the counted store items against the
stock sheet, bin card and store ledger for each item.
f. The chairman shall forward the completed stock sheet and
accompanying report to the director/head of finance and
accounts.
g. The director/head of finance and accounts shall ensure that
the stock sheet are properly valued.
h. For PSEs already on accrual accounting, reconciliation shall
be made between stock sheet and balances in the general
ledger while the differences are adjusted in the statement of
financial performance.
i. For PSEs on cash accounting (first time adopters) the valued
closing stock in ‘g’ above shall be adjusted to reserve:
Dr: Relevant Inventory Account
Cr: Reserve Account (Accumulated Surplus/Deficit)
j. Variance should be treated according to extant regulation.
Illustration 1
Bought-in Inventories
Ministry of Education Procurement Officer issued Purchase order to
XZY Nig Ltd to supply 50,000 units of stationery worth N500,000.
The consignment was supplied accordingly on the 5th March,
20X3. The supplier was paid 50% of the money as at the end of the
financial year.
Accounting entries
S/No Details Code DR (N) CR (N) Remarks

i. Inventory Acct. 3xxxxxxx 500,000 To recognise the
transaction in the
book
Account Payable 4xxxxxxx 500,000
ii. Account Payable 4xxxxxxx 250,000 On payment of

50% of the
liability
Cash/Bank 3xxxxxxx 250,000
Illustration 2
Measurement of Inventory (using FIFO Method)
In addition to the illustration (i) above, a consignment of 100,000
units was received from another supplier ABC Nig Ltd valued at
N1,500,000. The supplier was fully paid. As at the end of the year
only 130,000 units were issued from store to the user departments.
Determine the closing inventories. The entity adopts FIFO method
of valuing stock.
Accounting Entries
S/No Details Code DR (N) CR (N) Remark

i. Inventory Accounts 3xxxxxx 1,500,000 To recognise the
transaction in the
books
Account Payable 4xxxxxx 1,500,000
ii. Account Payable 4xxxxxx 1,500,000 Upon payment of
cash
Cash/Bank 3xxxxxx 1,500,000
iii. Stationary Expenses To recognise
Acct. 2xxxxxx 1,700,000 consumption of the
stationeries using
FIFO method
Inventory Account 3xxxxxx 1,700,000
Note: Each consignment unit cost must be determined, and it should

also be issued out based on the unit cost.
a. Therefore, the cost unit of 50,000 units is N500,000/50000 =
N10.
b. The second consignment of 100,000 units is N1,500,000/100,000
= N15.
c. Total units issued out 130,000 units which means that, the
first 50,000 will be issued out at N10, while the balance of
70,000 unit will be issued out at N15, the value of both will
give the total of N1,700,000.
d. The closing inventories on stationery will be 20,000 units at
N15= N300,000.
e. N1,700,00 will be expense in the Statement of performance.
f. N300,000 Inventory in the statement of financial position.
Illustration 3
Recognition of Damaged Inventory (Loss of Stock)
Ministry of Agriculture on completion of physical verification of
stock in custody discovered that 5,000 units of stationery bought-in
were damaged by water. The value of the items was estimated at
N45,000.
Accounting Entries
S/No Details Code DR (N) CR (N) Remark

i. Loss on Inventory 45,000 To recognise
value of damage
inventory
Inventory Account 45,000
Illustration 4
Internally Created Inventory
XX University of Technology purchased printing materials worth
N150,000 to be used in printing of files by the printing department
of the university. A total of N100,000 worth of materials was issued

from stores, N50,000 was paid as direct labour, N25,000 was
incurred as overhead cost in printing of the files. A total of 500 units
of files were printed. What is the cost of a file produced?
Note:
a. Payment of N150,000 was made and receipt vide SRV.
b. N100,00 worth material issued to printing department
vide SIV.
c. N50,000 paid for labour.
d. N25,000 overhead expenses.
e. Cost of production is N175,000.
The cost of a file produced = 175,000

500 = N350
Illustration 5
Enter the following in the Tyres Bin Card in the store of Federal
Ministry of Education, Lagos.
Date Particulars Unit

1/6/94 Balance in the store 40
4/6/94 Purchase vide SRV/003/94 35
5/6/94 Issues to 7 FGN 31 Vide SIV/004/94 3
7/6/94 Issue to 7 FGN 44 Vide SIV 005/94 2
“ Issues to Ogun State vide SIV/007/94 15
“ Issues to Osun State vide S1V/008/94 5
11/6/94 A team of Auditors led by Miss Ogunlaja
discovered surplus tyres during the physical
survey which was taken on charge vide
SRV/0012/94 5
12/6/94 Transfer from Oyo State vide SRV/0013/94 10
“ Issues to 7 FGN 17 vide SIV/0010/94 2
13/6/94 Issues to 7 FGN 48 vide SIV/0011/94 1
“ Issues to 7 FGN 14 vide SIV/0012/94 2
4/6/94 Award of contract vide SRV/0016/94 50
Accounting Entries
BIN CARD
Product………………………....Tyre
Date SRV/SIV Movement QUANTITY Balance Remarks

No.
Received Issued
1/6/94 Balance 40
4/6/94 SRV/003/94 Purchase 35 75
5/6/94 SIV/004/94 7 FGN 41 3 72
7/6/94 SIV/005/94 7 FGN 44 2 70
8/6/94 SIV/005/94 Purchase 25 95
“ SIV/007/94 Ogun State 15 80
“ SIV/008/94 Osun State 5 75
10/6/94 SRV/009/94 Purchase 34 109
11/6/94 SRV/01 2/94 Surplus 5 114
12/6/94 SRV/0 13/94 Oyo State 10 124
“ SIV/010/94 7 FGN 47 2 122
13/6/94 SIV/011/94 7 FGN 48 1 121
“ SIV/012/94 7 FGN 15 2 119
14/6/94 SRV/0 16/94 Contract 50 169
Note: All received store items should be recorded in red ink just for
easy identification.
Practice Questions
1. What is stocktaking? Explain the place of bin card in inventory

management.
2. Explain what constitutes inventories.
3. What are functions of store officers?
4. What are the criteria of recognising an inventory?
5. Explain what you understand by “Store Ledger’’ and “Store
Ledger Keeper.”

Chapter Twenty Five
Procurement in Public Sector (Part 1)
Learning Outcomes
i. discuss the concept of procurement in the public sector and its
importance;
ii. explain the provisions of the Public Procurement Act 2007;
iii. evaluate the objectives and fundamental principles of
procurement;
iv. appreciate the reasons for the failure of previous, and
challenges of current reforms; and
v. suggest way forward for procurement reforms in Nigeria.
25.0 Introduction
Procurement is defined as the acquisition of goods and services
at the best possible total cost, in the right quantity and quality, at
the right time, in the right place, for the direct benefit or use of
government, corporation or individuals, generally via a contract.
Procurement activity is an essential area in any organisation. It needs
special attention especially in Nigeria where 80% of the annual
budget involves the procurement of works, goods and services
by the government in its strategic efforts to improve the nation’s
infrastructural facilities.
25.1 Procurement Practice as Global Norm

Public Procurement is a global initiative adopted by both the
developed and developing nations in an effort to derive value for
money and improve efficiency in the use of their scarce resources.
856
857 Procurement in Public Sector (Part 1)
To strengthen this resolve, the United Nations Commission on

International Trade Law (UNCITRAL) established by the UN
General Assembly Resolution 2205 (xxxi) of 17th December, 1966
was mandated to: “Further the progressive harmonisation and
unification of the law of international trade and procurement in the
interest of all peoples, in particular those of developing countries”.
The UNCITRAL Model Law on Public Procurement identifies
the following parameters, which will ensure that transparency is
achieved:
a. The public disclosure of the rules that apply in the procurement
process.
b. The publication of procurement opportunities.
c. The prior determination and publication of what is to be
procured and how offers are to be considered.
d. The visible conduct of procurement according to the prescribed
rules and procedures.
e. The existence of a system to monitor that these rules are being
followed (and to compel officials to follow them if necessary).
It is against the above background that in the last two decades
or so, a good number of African countries’ governments have
implemented public procurement reforms aimed at strengthening
their public procurement systems, e.g., Ghana, Liberia, Sierra-
Leone, Kenya, Zambia and Lesotho. The Nigerian government
has obviously realised that sound public procurement policies and
practices are among the essential elements of good governance. It is
common knowledge that good procurement practices reduce costs
and produce timely results whereas, poor practices lead to waste,
delays and allegations of corruption and government inefficiency.
25.2 Procurement Reform Strategies adopted by the

Nigerian Government
Based on the UNCITRAL model, the Nigerian Government decided
to reform and align its procurement procedures and strategies with
global best practices. The following steps were taken to reform
procurement process in Nigeria.
a. A diagnostic/baseline study of existing systems.

b. Legal and institutional framework.
c. Implementation/evaluation of the system.
25.2.1 Diagnostic/Baseline Study

The Federal Government of Nigeria under the leadership of former
President, Chief Olusegun Obasanjo GCFR, in 1999 invited the
World Bank to conduct a Country Assessment (baseline study) of
Nigeria’s entire procurement system. The objective of the exercise
was to promote dialogue with the various tiers of government on
how to strengthen their public procurement systems and to assess, in
practice, the efficiency, transparency and integrity of the country’s
entire procurement system. (Source: World Bank Memo of May 23,
2002).
25.2.2 Major Highlights of the Diagnostic/Baseline Study

i. Previous reform efforts failed because those leading the
reforms were public servants who wanted to maintain the
status quo.
ii. Contracts were used to reward those in government to serve
specific political interests.
iii. Open abuse of rules and standards in the award and execution
of public contracts (e.g. over invoicing, inflation of contract
costs, white elephant projects and diversion of public funds
through all manners of manipulations of the contract award
process).
iv. Award of contracts to friends, relations and use of primordial
considerations in exercising public procurement decisions.
v. Projects admitted into budget to serve personal interests.
vi. Sharing of contracts to civil servants through their own
registered companies as part of informal welfare package
especially during festive seasons.
vii. Loss of confidence in the public service by the public and

contractors.
viii. The report also revealed that out of every N1.00 spent by
government, 60kobo was lost to underhand practices.
ix. Contracts were awarded to unqualified and ill-equipped
contractors.
x. Staff who insisted on doing the right thing were threatened or
posted out, or sacked in some cases.
xi. All these resulted to abandonment of government projects
after huge sums of money had been paid out to unqualified
and ill equipped contractors.
25.2.3 Unacceptable Procurement Practices

The above major highlights were reasons for the reform, which gave
birth to the Public Procurement Act 2007. Sadly, notwithstanding
the enactment and implementation of the Public Procurement Act of
2007, a review of the current situation may not present a different
picture.
One of the purposes of this book is to strive to provide possible
solutions to the nation’s procurement processes and procedure both
to enhance the nation’s perception in the global community and also
ensure that the citizens will derive value for money. Pursuant to this,
the following questions can be raised:
a. Will award of contracts not still be used to reward specific
political interests?
b. Will there be an end to over invoicing in our contracts?
c. Will projects be included in the budget to serve general
interest?
d. Will contracts not continued to be awarded to friends?
e. Will the sharing of contracts to civil servants through their
own registered companies stop?
f. Will the public still have confidence in the public officers?
g. Will the award of contracts still be to unqualified contractors?
h. Will there still be abandoned projects?
Fellow Nigerians, there is need to demonstrate courage by admitting

that the nation and its citizens have not done well in public procurement
practices. In the 70s, the situation in the country was not as bad. Civil
servants were well respected because of their discipline and adherence
to the values of the service. People were content with their rewards
or salaries and the value of the Naira was high. With the small salary,
families were able to meet their needs while public schools were
performing and the infrastructural developments were in progress.
The situation today has completely changed. It is imperative to bring
back the good old days.
25.2.4 The Way Forward

For the various reforms to work in Nigeria, the following measures
are recommended:
i. Payment of Living Wages: Workers should be paid wages that
assist them to meet the basic needs of life like food, clothing,
shelter, education, access to potable water and health care
facilities.
ii. Infrastructural Facilities: This should also be provided so
that the citizens can embark on economic activities on their
own. In this respect, the law should be reviewed to enable
states and estates to generate their own power without linking
up with the nation grid. Let people own and use power they
can generate.
iii. Concessioning of Major Roads: Both local and foreign
investors should be invited to invest in the nation’s road
infrastructural development through Build, Own, Operate and
Transfer (BOOT) strategy. When the investor has recouped
his investments through toll gate fees, the asset will revert to
the government. Apart from getting annual revenues on the
toll gate fees, the capital that would have been spent on the
road construction can be used to develop rural roads that will
bring development to all areas of the nation.
If the above measures are considered, approved and faithfully

implemented, there might be a ray of hope for the various
procurement process reforms. To underscore the importance of
these recommendations, consider, for instance, a federal director
who is on a monthly salary of N350,000 or Deputy Director on
N180,000.00 monthly in a rented apartment of N2,000,000 per
annum in Abuja. Either of them would have children in private
schools and universities. Note also that the Public Procurement
Bureau employees saddled with the responsibility of monitoring the
process are also on the same salary structure. If either of them has
the opportunity to approve and monitor procurement processes, it
will be foolhardy to expect transparency, accountability and honesty
on their path. Here lies the justification for the recommendation to
pay living wages to reduce the level of temptation to be corrupt.
Except some of these practical steps are taken, the on-going reforms
of the procurement process may be ineffectual.
25.3 Legal and Institutional Framework

The World Bank Country Assessment was conducted between
financial year 1999 and 2000 and a Country Procurement Assessment
Report (CPAR) was presented with recommendations to the Federal
Government. In order to address the observed shortcomings,
the Federal Government, in 2001, set up the Budget Monitoring
and Price Intelligence Unit (BMPIU) and to institutionalise the
operations of BMPIU, the Public Procurement Bill was sent to the
National Assembly in 2003/2004. On 31st May, 2007, the Public
Procurement Bill was passed and on 4th June, 2007, the Bill was
signed into law by late President Umaru Yar’Adua, GCFR.
25.4 Major Highlights of the Legal/Institutional Framework

The law established the Bureau of Public Procurement as the
regulatory authority responsible for Monitoring and Oversight of
Public Procurement and Practices. It regulates, sets the standards
and develops the legal framework and professional capacity for
procurement in Nigeria and for other related matters. It has the
additional mandate to achieve the following four core objectives:
i. Economy and Efficiency

ii. Competition — providing a level playing ground for all
bidders
iii. Value for money
iv. Transparency
The Procurement Act made Open Competitive Bidding the main

method of award of contract for all public procurement. Nigeria’s
Public Procurement Act, 2007 is designed primarily after the
UNCITRAL Model Law on Public Procurement.
25.5 The Act Empowers the Bureau of Public Procurement

to:
i. carry out prior review of award recommendations for
contracts in excess of defined value thresholds;
ii. establish general policies, regulations, guidelines and
standard bidding documents relating to public sector
procurement;
iii. supervise procurement implementation as well as
reviewing the procurement and award of contract
procedures of every public entity, including certifying all
federal procurement prior to, during and after award of
contracts; and
iv. hold Accounting Officers (Permanent Secretaries and
Chief Executives of Parastatals) personally responsible
for implementation and compliance with the Act.
25.6 Implementation/Evaluation of the System

To give effect to the Law, the Bureau has implemented the following
measures:
i. Since 2007, the Bureau with support from the World Bank, has
rolled out various policies, regulations, standards and guidelines
and conducted series of capacity building programmes for public
procurement officers and other stakeholders involved in the
procurement process.
ii. Established the Procurement Cadre within the Federal Public

Service since year 2008 and the process is still ongoing.
iii. Developed and adopted a code of ethics for public officers
involved in procurement.
iv. Created a Compliance and Audit Unit.
v. Developed robust complaint/recourse mechanism, which
allows aggrieved parties in a procurement process to petition
such outcomes.
vi. Developed a procurement manual and implementing
regulations as well as National Standard Bidding Documents
(NSBDs) for the procurement of goods, works and consultancy
services issued to date is as stated below:
a. Standard Bidding Document selection of procurement
of small works.
b. Public Procurement Regulations for consultancy
services.
c. Standard request for proposals for the selection of
consulting firms in respect of complex lump sum.
d. Standard request for proposals for the selection of
consulting firms in respect of small assignments time-
based.
e. Standard Bidding Document for the procurement of
goods.
f. Standard request for proposals for selection of
consulting firms (small assignment time–based).
g. Sample document for national shopping.
h. Approved policy for procurement of health and
medical equipment/list of manufactures and equipment
for tertiary hospital.
i. List of Civil Society Organisations (CSOs).
j. Approved revised thresholds for service-wide application
and special thresholds for procurement in oil sector.
k. Procedures and pre-requisite for the issuance of a

certificate of “No Objection” to MDAs.
The above standards are in line with section 5(a) of the Procurement
Act 2007, which state that the Bureau shall formulate the general
policies.
vii. Whilst the Procurement Law clearly sets out best practices
and principles which are consistent with internationally
accepted principles and practices, it also recognised that the
successful implementation of a modern procurement system
hinges on the development of the necessary institutional
and organisational structures and human resources for both
the operational and oversight dimensions of the system. For
instance, the bureau is required to:
i. ensure that goods and services needed are procured
with due attention to economy and efficiency;
ii. ensure that public fund is used to buy only those
goods and services needed for national development.;
iii. give all qualified bidders an equal opportunity to
compete for contracts;
iv. encourage development of local contractors and
manufacturers; and
v. ensure that the procurement process is transparent.
It is the Bureau’s policy that Procuring Entities outsource those

services that are either not part of their core business activity or for
which there is a fluctuating requirement in terms of specialist skills
or equipment, or where the open market provides a more efficient
and commercial alternative. It is the Bureau’s policy to support
the development of an indigenous contractor base in Nigeria and
particularly in the areas in which the various Procuring Entities
operate.

25.7 Physical and Practical Impact of Public Procurement

Act 2007
The establishment of Procurement Planning Committee where they
were allowed to function had contributed positively because issue of
buying what was not required or needed has become a thing of the
past. In addition, the public knows information of the type of job or
contracts available even though most of the job advertised had been
allocated. The public will be aware that advert of the job was made
sometimes ago, but the public may not know whether it was actually
awarded. Though there is provision that the award of all contracts
should be notified to the Bureau of Public Procurement and should
be published in two national dailies with description of the contract,
name of contractor/supplier and the contract price clearly stated, it
is not common for the BPP to publish the name of contractors that
won the contracts.
25.8 Establishment of National Council on Public

Procurement
The Act established the National Council on Public Procurement
(referred to as “the Council”).
The Council shall consist of:
a. Minister of Finance as Chairman
b. Attorney-General and Minister of Justice of the Federation
c. Secretary to the Government of the Federation
d. Head of Service of the Federation;
e. Economic Adviser to the President;
f. six part-time members to represent;
i. Nigeria Institute of Purchasing and Supply Management;
ii. Nigeria Bar Association;
iii. Nigeria Association of Chambers of Commerce,
Industry, Mines and Agriculture;
iv. Nigeria Society of Engineers;
v. Civil Society; and
vi. the Media.
g. The Director-General of the Bureau who shall be the Secretary

of the Council.
Notwithstanding the provisions of Section (2), of the Act, the Council
may co-opt any person to attend its meeting but the person so co-
opted shall not have a casting vote or be counted towards quorum.
The President shall appoint the Chairman and other members of the
Council.
25.9 Functions of the Council

It shall:
a. consider, approve and amend the monetary and prior review
thresholds for the application of the provisions of this Act by
procuring entities;
b. consider and approve policies on public procurement;
c. approve the appointment of the directors of the bureau;
d. receive and consider, for approval, the audited accounts of the
Bureau of Public Procurement;
e. “approve changes in the procurement process to adapt to
improvements in modern technology”; and
f. give such other directives and perform such other functions as
may be necessary to achieve the objectives of the Act.
Note: As earlier said that 80% of government budget are spent
through procurement as such, for internal control and transparency
purposes, the above Council provision was made to have control on
the affairs of the Bureau by the Council. It is very unfortunate that
up till date, the Council has not been constituted.
25.10 Director-General of the Bureau

The President on the recommendation of the Council shall appoint
the Director-General after competitive selections.
a) The Director-General shall be:
i. the Chief Executive and Accounting Officer of the
Bureau;
ii. responsible for the execution of the policy and day to
day administration of the affairs of the Bureau; and
iii. a person who possesses the relevant and adequate

professional qualification and shall have been so
qualified for a period of not less than 15 years.
b) The Director-General shall hold office:
a) for a term of 4 years in the first instance and may
be re-appointed for a further term of 4 years and no
more; and
b) on such terms and conditions as may be specified in
his letter of appointment;
c) without prejudice to the provisions of the Act, the
Director-General of the Bureau may be removed from
office at the instance of the President on the basis of
gross misconduct of financial impropriety, fraud and
manifested incompetence proven by the Council.
Now that there is no Council in place, evidence of control in the
Bureau is doubtful.
25.11 Functions of the Bureau

The functions of the Bureau will be to:
(i) formulate the general policies and guidelines relating to
public sector procurement;
(ii) publicise and explain the provisions of the Procurement
Act;
(iii) subject to thresholds as may be set by the Council, certify
federal procurement prior to the award of contract;
(iv) supervise the implementation of established procurement
policies;
(v) monitor the prices of tendered items and keep a national
database of standard prices;
(vi) publish the details of major contracts in the procurement
journal;
(vii) publish electronic and paper editions of the procurement
journal and maintain an archival system for the procurement
journal;
(viii) maintain a national database of the particulars and classifications

and categorisation of federal contractors and service providers;
(ix) collate and maintain in an archival system, all federal
procurement plans and information;
(x) undertake procurement research and surveys;
(xi) organise training and development programmes for
procurement professionals;
(xii) periodically review the socio-economic effect of the policies
on procurement and advise the Council accordingly;
(xiii) prepare and update standard bidding and contract
documents;
(xiv) prevent fraudulent and unfair procurement and where
necessary apply administrative sanctions;
(xv) review the procurement and award of contract procedures
of every procuring entity to which these regulations apply;
(xvi) perform procurement audits and submit such reports to the
National Assembly bi-annually;
(xvii) introduce, develop, update and maintain related database
and technology;
(xviii) establish a single internet portal that shall serve as a primary
and definitive source of all information on government
procurement containing and displaying all public sector
procurement at all times; and
(xix) co-ordinate relevant training programmes to build institutional
capacity.
25.12 Method of Procurement in Public Sector in Nigeria

The procurement method to be adopted by a procuring entity will
depend on the nature and size of procurement and the urgency
with which the goods or services to be procured are required. The
key to the selection of method is to understand what situations are
suitable for each of them. Depending on the nature and size of the
procurement and its elements, the choice of procurement method
should depend on:
a. the nature of the goods and services to be procured;

b. the value of the procurement;
c. the local availability and cost of goods and services;
d. critical dates for delivery;
e. agreement with the funding agency; and
f. transparency of procedures proposed.
25.13 Commonly Used Methods of Procurement Include:

i. International Competitive Bidding (ICB),
ii. National Competitive Bidding (NCB),
iii. Limited International Bidding (LIB),
iv. International and National Shopping,
v. Direct Contracting, and
vi. Force Account (Direct Labour).
Contract packaging, scheduling and choice of procurement methods
are all interlinked. In most cases, arriving at the procurement plan
requires iterative adjustments in all three of these aspects. It is
impossible, for example, to think about what contract packaging
would be appropriate without having in mind how this affects the
choice of procurement method and the time that will be needed to
carry it out.
25.14 Public Service Procurement Methods

Generally, there are two major ways of procuring goods and services
in public service;
• Direct purchase through Cash Advance and
• Contract Award/Engagement of Consultant
25.14.1 Cash Advance

i. Cash advance is money given to an officer to purchase items
for official use. In most cases, this occurs when it is urgent in
which case, contracting it out may not meet the urgency of the
items by the entity.
ii. Another reason for cash advance is to reduce cost when
the fund allocated will not accommodate the items and the
mandatory deductions, such as VAT and withholding tax, if it

is awarded as contract.
From experience, the general aim of granting cash advance for
procurement appears to have been defeated because most of the
items purchased through cash advance, in most cases, were not
urgent and were not taken on store charge. Therefore, they could
not be captured as part of items consumed for the accounting period
especially as the nation is migrating to accrual basis of accounting.
In view of the abuse or limitation of the use of cash advance for
procurement, a Federal Treasury Circular Number TRY/A2&B2/2009
OAGF/CAD/026/V dated 24th March, 2009 paragraph 3 was issued
pegging the amount of cash advance to be granted to N200,000.00.
According to the circular, “All Accounting officer and officers
controlling expenditure are to ensure that all local procurement of
stores and services costing above N200,000.00 shall be made only
through award of contract”.
The second reason for the use of cash advance has also been
defeated because the receipts often attached to the vouchers relating
to the cash advance were always higher than when the items were
awarded to contractor.
25.14.2 Contract Award

Government contracts are made in accordance with the ordinary
law of contract through offer by one side and acceptance by the
other. The only difference between government contract and that
of commercial undertakings is that the Managing Director or the
Manager can freely choose any contractor to supply or carry out
the job while government officer cannot do so. Since the money to
be spent is the tax payer’s money, all care must be taken to avoid
favouritism by ensuring that the best qualified firms are selected.
25.14.3 Procurement Procedure

In line with the Public Procurement Act 2007, the procedure for
procurement has been stipulated in the Act and the States Government
have been advised to domesticate the Public Procurement Law. The

following steps shall be adopted for procuring goods, works and
services:
a) Preparation of a procurement plan based on proper needs
assessment
b) Selection of a method of procurement
c) Preparation of the relevant procurement documents
d) Transparent pre-qualification of bidders
e) Submission/receipt of tenders
f) Evaluation of tenders
g) Comparison of tenders
h) Recommendation of the winning bid to Tenders Board or
Accounting Officer
i) Certification of the procurement action by the Bureau (prior
review items only)
j) Award of the contract.
25.15 Tendering Methods

There are three methods of tendering in public sector, which have
been embedded in the Public Procurement Act 2007. These are:
Competitive method; Selective method; and Negotiable method:
a. Competitive Method
Competitive method is used when an advert is placed in the
dailies for the general public to bid for a job. Quotations will
be obtained from interested individual members of the pubic
and members of the Tenders Board Committee will meet to
decide who to award the contract. Conditions to be satisfied
for the award are usually predetermined e.g. least cost,
history of quality job, presentation, ability to deliver, timely
submission of bid, etc. Competitive method is used when the
job or contract requires little or no urgency.
b. Selective Method
This method is used when the implementation of a project
requires urgency. Therefore, few contractors would be invited
to quote for the job. But the number of contractors to be invited

should not be less than five. The Tenders Board members will
carry out the short listing of the contractors.
c. Negotiable Method
This method is used where the job to be contracted out is a
specialised one for which contractors are not easily available.
As such, the available contractor and the government
organisation have to negotiate the price of the contract based
on the peculiarity of the job.
25.16 Tenders Board Thresholds and Compositions

The Tenders Board shall be responsible for the approval of:
i. the award of contracts for the procurement of works, goods and
services within the monetary threshold set in the regulations;
ii. procurement plans;
iii. pre-qualification evaluation report;
iv. bid evaluation report for goods and services;
v. a technical evaluation sub-committee of the Tenders Board
charged with the responsibility for the evaluation of bids,
which shall be made up of professional staff of the procuring
entity and the Secretary of the Tenders Board who shall also
be the chairman of the Evaluation Sub-committee. It is also to
constitute the sub-committee;
vi. Negotiated contract for consultancy and non-consultancy
services;
vii. contract variations resulting in price changes;
viii. responses to complaints.
Note: It should be noted that all construction works in line with
provision of FR 2925 should carry out soil test. The documents
relating to the land, the survey map, the soil test report or certificate
of exemption by the architect should form part of contract documents
to be presented to the Tenders Board during the consideration of
the award papers. The reason is to avoid the frequent collapse of
buildings and failures of roads due to lack of soil test. Decision
of the Tenders Board shall be communicated to the minister for
implementation. What then happened to most of our failed roads?
25.17 Some Definition of Terms

i. “Monetary Threshold” means the value limit in naira set
by the Bureau outside of which a procuring entity may not
award a procurement contract without prior certification by
the Bureau.
ii. “Certification” means the approval by the BPP of the process
and conduct of public procurement by any procuring entity
at any stage.
25.18 There are Two Major Tender Boards and Federal

Executive Council
a. Ministerial Tender Board is responsible for the approval of
contract awarded within the ministry approval limit. The
composition is the permanent secretary as chairman, heads
of department as members and head of procurement as
secretary.
b. Parastatals Tender Board is responsible for the approval of
contract awarded within the parastatal approval limit. The
compositions are the chief executive officer as chairman,
heads of department as members and the head of procurement
as Secretary.
c. Federal Executive Council is responsible for the approval of
contract awarded from the range above the ministerial limit.
The composition is the president as chairman, all Federal
Executive Council members as members and Secretary to
the Federal Government as secretary. This is not a tenders
board but the supreme decision making organ of the
government.
Table 25.1 Approved Threshold for all Ministries, Departments and

Agencies
Approving Goods Works Non- Consultant

Authority/ Consultant Services
No Objection Services
to award
BPP issue N100 million N1 billion N100 million N100
“No and above and above and above million and
Objection above
Certificate”
Ministerial N5million N10million N5million N5million

Tenders and above and above and above and above
Board but less than but less than but less but less than
N100million N1billion than N100 N100million
Parastatal N2.5 million N5million N250million N250million

Tenders and above but and above and above and above
Board less than but less than but less than but less than
N50 million N250million N50million N50million
Accounting Less than Less than Less than Less than

Officer; N5million N10million N5million N5million
Permanent
Secretary
Accounting Less than Less than Less than Less than

Officer; N2.5million N5million N2.5million N2.5million
Director-
General/CEO

Table 25.2 Special Financial Limits and Thresholds, Procurement

Methods and Thresholds of Application and for Expenditure
Related to the Nigerian National Petroleum Corporation
Approving Authority/ “No Objection Special Works (NNPC)

Certification”
BPP issue “No Objection Certification N2.7billion (US$29M) and above

”/FEC Approves
Ministerial Tenders Board N1.4 billion (US$10million) and above

(NNPC Tenders Board) but less than N2.7Billion (US$20M)
For NNPC Tenders Board
Group Headquarter/Tender Board N540million (US$4M) and above but

less than N1.4billion (US$10M)
For GEC NNPC
Parastatal Tender Board N270million (US$2M) and above but

(Refinery & Petrochemicals/ less than N540million (US$4M)
Exploration & Production/ For SBU MD/MT/ (DEXCOM)
Corporate Supply Chain Tender
Board)

Parastatal Tender Board N70 million (US$0,5million) and above
(Minor Refinery & Petrochemicals/ but less than N270 million (US$2Million)
Exploration & Production/ For SBU MD/ MT/(MEXCOM)
Corporate Supply Chain Tender board)
Accounting Officer; Permanent Less than N40 million (US$0.30M)

Secretary (Group Managing
Director at CHQ Level)
Accounting Officer: Director Less than N13.50 million (US$0.10million)

General/CEO
(Managing Directors at SBU Level)
Table 25.3 Procurement Methods and Thresholds of

Application
Procurement/ Goods Works (N) Non-consultant Consultant

Selection Services (N) services (N)
Method and
Pre-qualification
International/ N100million N1billion and N100million Not

National and above and above and above Applicable
Competitive Not applicable
Bidding
National N2.5million N2.5million N2.5million Not

competitive and above but and above but and above Applicable
Bidding less than N1 less than but less than
billion N1Billion N100million
Shopping Less than N2.5 Less than N2.5 Less than N2.5 Not
(Market million million million Applicable
Survey)
Single Source/ Less than N0.25 Less than Less than Less than
Direct million N0.25million N0.25million N0.25
contracting million
(Minor Value
Procurement)
Pre- N100million N300million N100million Not

qualification and above and above and above Applicable
Quality and Not applicable Not applicable Not applicable N25million

Cost Based and above
Consultant Not Applicable Not Applicable Not Applicable Less than

Qualifications N25 million
Least Cost Not Applicable Not Applicable Not Applicable Less than
N25 million
25.19 Project that Requires Pre-qualifications

It is important to note that only projects in excess of N300million
for works and N100 million for goods and services qualify for pre-
qualification. Therefore, Ministries/Departments/Agencies (MDAs)
should go straight to invite bids for tender for projects costing less than
N100 million for goods (supply items) and N300 million for works
(Construction). Where the Bureau has set prior review thresholds,
no funds shall be disbursed from the Treasury/Federation Account/
or any bank account of any procuring entity for any procurement
falling above the set thresholds unless the cheque, warrant or other
form of request for payment is accompanied by a “Certificate of ‘No
Objection’ to Award of Contract” duly issued by the Bureau. Every
procurement contract within the purview of the Public Procurement
Act shall contain a clause stipulating that the non-issuance by the
Bureau of a “Certificate of ‘No Objection’ to Contract Award” (for
prior review items) shall render the contract null and void.
25.20 Public Procurement Processes

It is important to note that good and sound public procurement
policies and practices are among the essential elements of good
governance and reduce wastages and cost of governance. Before
the Public Procurement Act, and its implementation, procurements
were made without planning and contracts were awarded without
budgetary provisions. These have been worrisome to the government.
For instance, in one of the ministries audited during one of the
assignments by the author, it was observed that items were just
purchased even when there was no justifiable reason for them. The
purpose was just to exhaust the vote before the year-end. In another
assignment, the number of tyres in the store, based on the number of
vehicles in the agency, will last for 8 years. For lack of space, some
of the tyres were parked outside the store. The only indication that
they were new tyres was the papers on the tyres. Since tyres have
expiration date, the waste associated with this unnecessary purchase
can be imagined.
25.21 Function of Procurement Planning Committee

To overcome the above, Section 18 of the Act made provision for
Procurement Planning when it stated that, “Subject to regulations as
may from time to time be made by the Bureau under the direction of
the Council, a procuring entity shall plan its procurement”. Pursuant
to this, each MDA is required to
a) prepare needs assessment and evaluation;
b) identify the goods, works or services required;
c) carry out appropriate market and statistical surveys and on
that basis prepare analysis of the cost implications of the
proposed procurement;
d) aggregate its requirements whenever possible, both within the
procurement entity and between procuring entities, to obtain
economy of scale and reduce procurement cost;
e) integrate its procurement expenditure into its yearly budget;
f) prescribe any method for effecting the procurement subject to
the necessary approval under the Act; and
g) ensure that the Procurement Planning Committee carries out
the procurement entity functions stipulated in this section.
25.22 Procurement Planning Committee Composition

For each financial year, each procuring entity shall establish a
Procurement Planning Committee. The Procurement Planning
Committee shall consist of:
a. the accounting officer of the procuring entity or his
representative who shall chair the committee;
b. a representative of :
a) The procurement unit of the procuring entity who
shall be the Secretary,
b) The unit directly in requirement of the procurement,
c) The department of finance and accounts of the
procuring entity,
d) The planning, research and statistics unit of the
procuring entity,
e) Technical personnel of the procuring entity with expertise in

the subject matter for each particular procurement, and
f) The legal unit of the procuring entity.
Note: It should be noted that the personnel, in respect of

the unit directly in requirement of the procurement, and the
technical personnel of the procuring entity with expertise in
the project, will always be changed depending on the items
to be purchased. (ii & v). Furthermore, certificate of “No
Objection” is the responsibility of the procurement planning
committee in each MDA for contract that qualify under the
Bureau for Public Procurement (BPP).
25.23 Type of Procurement/Contract in Government

i. Award of contract that does not require pre-qualification.
ii. Award of contract that require pre-qualification which the
contract sum is in excess of N300 million for works and
N100 million for goods and services.
iii. Engagement of consultant.
iv. Direct procurement/emergency.
v. National shopping.
25.23.1 Award of Contract that does not Require Pre-

Qualification and General Steps for Procurement in
Nigeria’s Public Sector
In line with the Public Procurement Act, 2007, all procurement must
be by Open Competitive Bidding to give everybody the opportunity
to bid for the job. The type of job must have been identified and
budgeted for as against what used to happen before the Act. The
source of fund will be clearly stated in the invitation to bid.
25.23.2 Invitation to Bid

Invitations to bid may be either by way of National Competitive
Bidding or International Competitive Bidding and the Bureau shall
from time to time set the monetary thresholds for which procurements
shall fall under either system. However, every invitation to an open

competitive bid shall:
a. In the case of goods and works under International
Competitive Bidding, be advertised in at least two national
newspapers and one relevant internationally recognised
publication, any official websites of the procuring entity and
the Bureau as well as the procurement journal not less than
six weeks before the deadline for submission of the bids for
the goods and works;
b. in the case of goods and works valued under National
Competitive Bidding, be advertised on the notice board of the
procuring entity, any official website of the procuring entity,
at least two national newspapers and in the procurement
journal not less than six weeks before the deadline for
submission of the bids for the goods and works.
25.23.3 Validity of the Bid

For a bid submitted to be valid, the following guidelines must be
followed otherwise the bid will be null and void.
a. The period of validity for a bid shall be the period specified
in the tender documents.
b. A procuring entity may request suppliers or contractors
to extend the period of validity for an additional specified
period of time.
c. A supplier or contractor may refuse the request for the
extension of bid, in which case the effectiveness of its bid
will terminate upon the expiration of the un-extended period
of effectiveness.
d. A supplier or contractor may modify or withdraw its bid
prior to the deadline for the submission of bids.
e. The modification or notice of withdrawal is effective if it is
received by the procurement entity before the deadline for
the submission of tenders.
25.23.4 Eligibility of the Tender

To be eligible to bid for and execute contracts for the procurement
of works, goods and consulting services, every bidder must:
i. have the necessary professional and technical qualifications,
managerial competence, bona fide reputation, financial
viability, equipment and other physical facilities, including
post-contract consultations or services (where appropriate),
and qualified personnel to perform the contract;
ii. possess the legal capacity to enter the works, goods and
consulting contract;
iii. not be in receivership, insolvent, bankrupt or being wound-
up, being suspended, or be the subject of any proceedings of
the foregoing;
iv. have fulfilled all fiscal obligations and social security
contributions; e.g. evidence of taxes paid; and
v. not have any partners/directors who have been convicted
in any country for criminal offence related to fraudulent
or corruptive practices, or criminal misrepresentation or
falsification of facts relating to any matter.
25.23.5 Submission of Bids

a. All bids in response to an invitation to open competitive
bidding shall be submitted in writing and in addition to any
other format stipulated in the tender documents, signed by
an official authorised to bind the bidder to a contract and
placed in a sealed envelope.
b. All submitted bids shall be deposited in a secured tamper-
proof bid-box.
c. All bids submitted shall be in English language.
d. The procuring entity shall issue a receipt showing the date
and time the bid was delivered.
e. Any bid received after the deadline for the submission of
bids shall not be opened and must be returned to the supplier
or contractor which submitted it.
f. No communication shall take place between procuring

entities and any supplier or contractor after the publication
of a bid solicitation.
25.24 Site Visit

The tender is encouraged to visit and examine the site and obtain
all information that may be necessary for preparing the tender and
entering into a contract for performance of the work
25.25 Obtaining of Tendering Documents

If the contractor is convinced that he can meet all the criteria to tender
for the job, he needs to obtain all necessary tendering documents
from the procuring entity. Any document not purchased or obtained
from the procuring entity may be rejected. Clarification can be made
in writing to the procuring entity if need be.
In addition, in line with the provision of Financial Regulation
(FR2925) which states that no contract work involving construction
shall be considered by Tenders Board unless soil test has been carried
out, the contractor should make arrangement to comply as the report
of the test will be part of tender documents to be handed over to
the bidder for proper costing of the constructions. For example and
for further clarification, designing of construction of building and
roads, is broken down into:
a. Architectural design.
b. Structural design.
c. Electrical design.
d. Mechanical design.
e. Bills of Quantities.
These technical details of the project shall be made available to the
Procurement Planning committee for proper costing. Tenders shall
be requested to purchase the designs for a non-refundable fee, the
amount of which shall be determined from time-to-time.
25.26 Pre-tender Meeting

In some cases where it is necessary to provide some clarification
on the scope of the job, a pre-tender meeting will be the ideal place
to get the clarification. The tenderer is requested to submit any
questions in writing so as to reach the procuring entity not later than
five (5) working days prior to the date of the meeting. Minutes of
the pre-tender meeting including the text of the questions raised and
the responses given, together with any responses prepared after the
meeting, will be transmitted within seven (7) days to all those who
purchase the bid documents.
25.27 Bid Opening

All bids shall be submitted before the deadline or date specified in
the tender documents or any extension of the deadline for submission
and the procuring entity shall:
a) invite two credible persons as observers, one person each
representing a recognised (i) private sector professional
organisation whose expertise is relevant to the particular
good or service being procured and (ii) non-governmental
organisation working in transparency, accountability and
anti-corruption areas, and the observers shall not intervene
in the procurement process but shall have the right to submit
their observation report to the Bureau and any other relevant
agency including their own organisations or associations;
b) permit attendees to examine the envelopes in which the bids
have been submitted to ascertain that the bids have not been
tampered with;
c) cause all the bids to be opened in public, in the presence
of the bidders or their representatives and any interested
member of the public;
d) ensure that the bid opening takes place immediately
following the deadline stipulated for the submission of bids
or any extension thereof;
e) Ensure that a register is taken of the names and addresses

of all those present at the bid opening and the organisations
they represent which is recorded by the secretary of the
tenders board;
f) call-over to the hearing of all present, the name and
address of each bidder, the total amount of each bid, the
bid currency and shall ensure that these details are recorded
by the Secretary of the Tenders Board or his delegate in the
minutes of the bid opening; and.
g) ensure that relevant pages of financial bids are endorsed by
all bidders present to avoid substitution of documents.
25.27.1 Examination of the Bid

All bids shall first be examined to determine if they:
a. meet the minimum eligibility requirements stipulated in the
bidding documents;
b. have been duly signed;
c. are substantially responsive to the bidding documents; and
d. are generally in order.
25.27.2 Rejection of Bids

A procuring entity may reject all bids at any time prior to the
acceptance of a bid, without incurring any liability to the bidders.
25.28 Evaluation of Bids and Qualification Criteria

There will be evaluation of all bids that have been adjudged as
valid. The purpose of the evaluation is to determine and select the
lowest evaluated responsive bid from bidders that responded to the
bid. When bid prices are expressed in two or more currencies, the
prices of all bids shall be converted to Nigerian currency, according
to the rate and date of rate specified in the solicitation documents.
The bids will be evaluated based on the criteria stipulated. In most
cases, evaluation committees are set up to carry out the evaluation.
The major areas are of their focus would be:

i. Experience criteria
ii. Financial criteria
iii. Personnel capacity
iv. Equipment criteria
The Evaluation Committee must prepare and submit its report which
must be duly signed by all members of the committee.
25.28.1 Bid Evaluation Report

After the completion of the evaluation process, the procuring entity
should prepare a bid evaluation report setting out the process of
evaluation. The procuring entity shall use standard forms available
for the purpose. This report covers amongst other things:
i. key dates and steps in bidding process (copy of the invitation
to bid as advertised attached);
ii. bid opening information (copy of the bid opening minutes
should be attached);
iii. for all bidders: Table showing the bidders compliance
with major commercial conditions (e.g. completeness,
bid security. bid validity, delivery or completion period,
payment terms);
iv. for all bidders: Table showing bidder’s compliance with
key provisions of the technical specifications (e.g. capacity,
operating characteristics, etc.);
v. for all substantially responsive bids: Table showing
arithmetical errors, discounts and currency conversion;
vi. for all substantially responsive bids: Table showing additions
and adjustments (indicating methods used in computing the
adjustments);
vii. for all substantially responsive bids: Table showing currency
conversion;
viii. for all substantially responsive bids: Table showing domestic
preference;
ix. for all substantially responsive bids: Table showing various

steps from bid price announced to evaluated bid price);
x. record of clarifications made from all bidders;
xi. for lowest evaluated responsive bidder: Post qualification
verification;
xii. names of bidder’s rejected and reasons for rejection;
xiii. the proposed contract award recommendation;
25.28.2 Acceptance of Bids

The successful bid shall be that submitted by the lowest cost bidder
from the bidders responsive as to the bid solicitation. However,
the bid need not necessarily be the lowest cost bidder provided the
procuring entity can show good grounds for its decision to award.
Notice of the acceptance of the bid shall immediately be given to
the successful bidder, after due consideration and approval by the
procuring entity’s Tenders Board or the BPP (for prior review items).
Notwithstanding the above, where the procurement proceeding is
with regard to a value threshold for which approval should be sought
from either the minister or Federal Executive Council, the notice
given to a successful bidder shall serve for notification purposes
only and shall not howsoever be construed as a procurement award
until after all such approvals have been obtained.
Where the procurement proceeding is with regard to a value
threshold for which the Tenders Board is the approving authority,
then subject to the fulfilment by the successful bidder of any
special conditions expressed in the bid solicitation document and
the execution of the procurement contract, the notice shall serve as
notice of a procurement award.
25.28.3 Letter of Award and Signing of the Contract

Prior to contract award, the procuring entity shall ensure that
budgetary provision is confirmed to meet the cost of the contract.
Thereafter, the Letter of Award shall be issued within the validity
period of the bid and the final decision of contract award is completed.
This Letter of Award should be free from any new conditions. This
should essentially state the sum that will be paid to the contractor by
the procuring entity in consideration of the execution and completion
of construction as prescribed in the contract. The issuance of this
letter constitutes the formation of the contract. The Letter of Award
should be sent to the successful bidder only after evaluation of bids
and after obtaining approval from the relevant authorities.
Once the procuring entity has evaluated the tenders and made
a determination on the lowest evaluated responsive tender, and a
decision has been made about the award, the procuring entity should:
i. Request and obtain the Bureau’s “no-objection” prior to
awarding the contract, if applicable;
ii. Send notification of the award, and a contract form to the
successful bidder in a manner and within the time specified
in the tendering documents;
25.29 Mobilisation Fees

A mobilisation fee of not more than 15% may be paid to a supplier
or contractor-supported by the following:
a. in the case of National Competitive Bidding – an unconditional
bank guarantee or insurance bond issued by an institution
acceptable to the procuring entity; and
b. in the case of International Competitive Bidding – an
unconditional bank guarantee issued by a banking institution
acceptable to the procuring entity.
Once a mobilisation fee has been paid to any supplier or contractor,

no further payment shall be made to the supplier or contractor
without an interim performance certificate issued in accordance
with the contract agreement.
25.30 Contract Performance Guarantee

The provision of a Performance Guarantee shall be a precondition for
the award of any procurement contract upon which any mobilisation
fee is to be paid, provided, however, it shall not be less than 10%

of the contract value in any case or an amount equivalent to the
mobilisation fee requested by the supplier or contractor whichever
is higher. There must be Bank Guarantee to support the mobilisation
received by the contractor. In case the contractor failed to perform,
the bank will be call upon to refund the amount collected by the
contractor.
25.31 Interest on Delay Payment

Payment for the procurement of goods, works and services shall
be settled promptly and diligently. Any payment due for more than
sixty days from the date of the submission of the invoice, valuation
certificate or confirmation or authentication by the ministry, extra-
ministerial office, government agency, parastatal or corporation shall
be deemed a delayed payment. All delayed payments shall attract
interest at the rate specified in the contract document. All contracts
shall include terms, specifying the interest for late payment of more
than sixty days.
25.32 Record Keeping of Procurement Proceedings by MDAs

Every procuring entity shall maintain a record of the comprehensive
procurement proceedings. The portion of the record referred to in
this section shall, on request, be made available to:
a. any person after a tender, proposal, offer or quotation has
been accepted or after procurement proceedings have been
terminated without resulting in a procurement contract; and
b. suppliers, contractors or consultants that submitted tenders,
proposals, offers or quotations or applied for pre-qualification,
after a tender, proposal, offer or quotation has been accepted
or procurement proceeding have been terminated without
resulting in a procurement contract.
A disclosure of procurement proceeding records, prior to award of
contract may be ordered by a court, provided that when ordered
to do so by a court, the procurement entity shall not disclose such
information, if its disclosure would:
a. be contrary to law;
b. impede law enforcement; or
c. prejudice legitimate commercial interests of the parties.
The procuring entity shall not be liable to suppliers, contractors or
service providers for damages owing solely to failure to maintain
a record of the procurement proceedings in accordance with
the provision of Public Procurement Act 2007. The records and
documents maintained by procuring entities on procurement shall
be made available for inspection by the Bureau, an investigator
appointed by the Bureau and the Auditor-General upon request
and where donor funds have been used for the procurement, donor
officials shall also have access upon request to procurement files for
the purpose of audit and review.
25.33 Proposed Amendment to the Public Procurement Act

2007
There are growing agitations for the amendment of the Public
Procurement Act 2007. Some of the areas that need urgent
amendments, according to the Minister of Works, Power and
Housing, Mr. Babatunde R. Fashola, SAN, which have been
incorporated in the amendment bill that has passed third reading in
the House of Representatives are:
a) Mobilisation fees: The mobilisation fees was increased from
15% to 50% claiming that the 15% is very inadequate to
carry on with any contract and banks were not given loan
resulted to abandonment of most of the contracts awarded for
lack of finance. But during the visit of Senate Committee on
Works, Power and Housing to the Minister, the matter was
raised again which the committee pegged the rate at 30%.
Section 35(3) of the amendment state that “Any contractor
who has been paid the mobilisation fee but abandoned the
project faces a prison term of two years on conviction.
b) Another area looked at was the processing period from the
current average of four months in preparing for the award
of the contract in a budget year, for instance, not less than
six weeks for adverting for the job; two weeks for the
consideration of the technical bid and four weeks for financial

bid.
c) Other areas mentioned by the Minister are the requirements
for bidding for contract by small business enterprises which
may not have such documents that are part of requisite for the
award of contract such as pension compliance and audited
Accounts which the Minister argued that are not suppose to
be part of requisite for qualification for the bid.
d) The House also amended the Chairperson of the Board
from Minister of Finance to a person to be appointed by the
President from the pool of qualified persons.
Practice Questions
1. Discuss the concept of procurement in the public sector and

its importance.
2. Explain the provisions of the Public Procurement Act 2007.
3. Evaluate the objectives and fundamental principles of
procurement.
4. Discuss the reasons for the failure of previous, and challenges
of current reforms.
5. Suggest way forward for procurement reforms in Nigeria.

Chapter Twenty Six
Procurement in Public Sector (Part 2)

Award of Contract That Requires Pre-Qualification
Learning Outcomes
i. discuss the concept of procurement in the public sector and its
importance;
ii. explain the requirements to pre-qualify contractors;
iii. discuss the contract award processes;
iv. evaluate the thrusts of technical and financial bids;
v. analyse the contents of request for proposals and terms of
reference; and
vi. suggest way forward for procurement reforms in Nigeria
26.0 Introduction
As noted in the preceding chapter, some contracts may require
pre-qualification of contractors while some many not require.
What define this difference are usually the values of the contracts
and the mode of financing. This chapter focused on the processes
to be followed to award contracts that require pre-qualification of
contractors.
26.1 Award of Contract That Requires Pre-Qualification

A contract that requires pre-qualification must be a sum in excess
of N300million for works and N100 million for goods and services.
Under this pre-qualification, contracts which are mostly constructions
will require bills of quantity and drawing of the projects. There is
always an instruction to tenders/contractors where all the following
information will be highlighted:
891
i. scope of the tender will be stated;

ii. source of funding for the contractors to be sure that there
are funds available for the payment (if part is from foreign
donors, it will be made available);
iii. issues of corrupt practice will be highlighted to the effect
that it will not be tolerated in the process of the award of the
contract;
iv. eligible tender;
v. site visit: the bidders are encouraged to visit to examine the
site and obtain all information that may be necessary for
preparation of the tender;
vi. pre-tender meeting: in some cases, there might be need to
carry out pre-tender meetings where classifications will
be made on some issues arising from tendering document.
Bidders are encouraged to attend the meeting. Minutes of the
pre-tender meeting, including the text of the questions raised
and the responses given, together with any responses prepared
after the meeting, will be transmitted within seven days to all
those who purchased the tender document;
vii. submission of bids/tender;
viii. tender opening and evaluation;
ix. technical evaluation;
x. financial evaluation; and
xi. contract award: the contract will be awarded and letter for
notification will be sent and signing of the contract agreement
will be done.
It is important to note that bill of quantity and the drawing of the
project are very essential in this type of contract.
26.2 External Consultant on Project/Contract

It is important to note that under this type of contract, there is always
an external consultant engaged by the procuring entity to supervise
the project on behalf of government. The official government policy
on this type of contract requires that a member of the designated
professional body be engaged as a consultant to carry out this
function. Notwithstanding the engagement of the external consultant,
893 Procurement in Public Sector (Part 2) Award of contract that required ...
the in-house professional person must be vigilant and prepared to

scrutinise the approved certificate for payment that will be issued by
the external consultant. The procuring entity should provide in clear
terms what is required of the consultant. The actual requirements
will then be discussed and agreed during the negotiations stage and
the final agreed requirements will be incorporated as Annex A to the
contract agreement.
26.2.1 Engagement of Consultant

The procurement of consultancy services is a specialised form of
procurement requiring procedures and documents, which are very
different from those for goods and works. The use of a shortlist
of candidates, a merit-point evaluation system and two-envelope
procedures are standard features in selection of consultants.
Selecting consultants on the basis of cost alone is unlikely to
achieve the required quality of services. Engagement of consultant
is a special task, which prompted the BPP to segregate the selecting
of consultancy services into five parts as a result of its peculiarities.
a) Selection of Consulting Firms (Small Assignments Time-
Based)
b) Selection of Consulting Firms (Complex Time-Based)
c) Selection of Consulting Firms (Small Assignments Lump-
Sum)
d) Selection of Individual Consultants
e) Selection of Consulting Firms (Complex Lump Sum)
According to Public Procurement Regulation for Consultancy
Services produced by BPP, procurement of consultancy services
involves any one or a combination of the following;
i. Advisory and review services
ii. Pre-investment or feasibility studies
iii. Design
iv. Construction supervision
v. Other technical service or special studies.
In terms of construction projects, the Public Procurement Act 2007,

made it mandatory that there must be an external consultant even
though the procuring entity has an engineer. In that case, all projects
in Public Sector, both federal and state, must engage external
consultants for all projects awarded.
26.2.2 Government Agencies as Consultant

Government-owned agencies can also participate as consultant such
as universities or research centres for the procurement of consulting
services.
26.2.3 Hire of Government Officials

Persons who are civil/public servants may only participate in or be
hired under consulting contracts, either as individuals or as members
of a team of consultants, if they are:
a) Acting in their capacities as employees of a government-
owned agency, university or research centre.
b) On leave of absence without pay.
c) Where their participation does not cause any conflict of
interest situation.
26.2.4 Conflict of Interest

a) Where a firm (or the firm with which it is affiliated) combines
the functions of consultant with those of a contractor or is
associated with a manufacturer or is a manufacturer offering
services as a consultant and is short-listed by a procuring
entity for participation in a procurement, its proposal shall
include relevant information on such relationship along with
a statement to the effect that it shall limit its role to that of a
consultant, and that neither the firm nor its associates/affiliates
shall participate in the project in any other capacity.
b) Consultants hired to prepare terms of reference for an
assignment may not be hired to carry out the assignment itself.
Where a procuring entity wishes to procure services for its
needs, which are precise and ascertainable:
i) Generally, it shall solicit for expressions of interest or

applications to pre-qualify to provide the services by publishing
a notice to that effect in at least two national newspapers and
the tenders journal.
ii) However, where the value of the services to be procured is
less than one million naira, or with the approval of the Bureau,
of such a low value that only national consultants would be
interested, the procuring entity may, without placing a notice
as indicated above, request at least three and not more than
ten consultants or service providers to make proposals for the
provision of the services in a format stipulating:
i. a statement of qualifications of the consultant to
provide the service;
ii. a statement of understanding of the procuring entity’s
needs;
iii. the methodology for providing the service;
iv. the time frame for providing the service; and
v. the cost or fee for the service.
26.3 The Steps of the Selection Process

The procurement of consultancy services will normally include the
following steps:
i. Preparation of the Terms of Reference (TOR).
ii. Preparation of a cost estimate and confirmation of available
budgeted funds.
iii. Choice of selection method.
iv. Advertising for expressions of interest.
v. Preparation of the shortlist of consultants on the basis of the
expressions of interest received.
26.4 Preparation and Issue of the Request for Proposals

(RFP), Including:
a. Letter of Invitation (LOI)
b. Information for Consultants (IFC)
c. Draft contract
d. Receipt of proposals in two envelopes
e. Opening and evaluation of technical proposals first

f. Opening and evaluation of financial proposals of those who
pass the technical test
g. Consolidated evaluation according to the criteria and selection
method stated in the RFP
h. Negotiations and award of the contract to the selected firm
26.5 The Terms of Reference (TOR)

The Term of Reference must define clearly the objectives and scope
of the assignment and provide background information (including
a list of existing relevant studies and basic data) to enable the
consultant to prepare a proposal. The Term of Reference should:
- describe the background to the assignment;
- state the objectives of the assignment;
- the scope of the services;
- the duration of the assignment;
- a detailed list of the consultants’ duties and responsibilities;
- where applicable, the required inputs in terms of expected
days, or months;
- detail the required outputs, e.g. reports, detailed designs,
recommendations, draft laws, etc. which the consultants will
be required to produce (also referred to as ‘deliverables’);
- set the time periods for the deliverables;
- not be over-detailed or inflexible, so that competing consultants
may propose their own methodology and staffing;
- list any services and surveys necessary to carry out the
assignment;
- include details of the services, facilities and counterpart staff
to be provided by the client;
- specify detailed requirements when transfer of knowledge or
training is an objective, to allow candidates to estimate the
required resources; and
- all other important element considered necessary to enable the
consultant to submit a comprehensive proposal and estimate
of the cost.
26.6 Preparation of Cost Estimates and Budget

After preparation of the Terms of Reference, the procuring entity
shall prepare a budget estimate. The budget is to be estimated based
on the breakdown of the assignment into detailed tasks. Each task
should be associated with appropriate quality and qualified staff,
adequate time schedule with breakdown of duration for home and
field works, and all other charges. Budget estimates should reflect
the following costs: the procuring entity shall estimate the cost of a
proposed consulting assignment, including:
i. the estimated resources needed for the assignment (level
and type of personnel, realistic staff time, physical outputs
and logistical support, if needed (such as vehicles, office
supplies and computer equipment);
ii. cost estimates covering the technical requirements of the
Term of Reference to ensure that the financial commitments
of the consultants fully reflect their technical proposals,
which, if inaccurate, could result in deficient proposal
evaluation and contract award, and unsatisfactory contract
implementation;
iii. costs divided in two separate categories:
i. remuneration (fees); and
ii. reimbursable cost items (travel and transport,
communications, production of reports, office rent,
local staff salaries, local taxes, etc.);
iv. Local taxes (indirect and direct) and customs duties on
imported equipment and supplies, which shall be identified
separately from the base cost.
26.7 Types of Consultants

Consultants, to whom these regulations apply, may be grouped into
one or a combination of the following:
a. independent consulting firms (business and/or professional
partnerships, private companies or corporations operating
internationally or nationally, financial institutions and
procurement agents);
b. autonomous/semi-autonomous government organisations,

multilateral-agencies, or non-governmental organisations
(NGOs);
c. universities/research institutes;
d. consulting firms forming part of, or otherwise affiliated to, or
associated with, or owned by contractors or manufacturers;
or consulting firms combining the functions of consultants
with those of contractors/manufacturers; and
e. individual consultants.
26.8 Term of Reference for Complex Assignments

Term of Reference for assignments of a complex nature as such,
might require research and innovation to achieve the aims of
the assignment may be issued stipulating the allowance for the
consultants to propose suitable approaches and methodology to
meet the aims of the procuring entity.
26.9 Preparation of Complex Terms of Reference

Where a procuring entity does not have the capacity to prepare the
Terms of Reference for a complex assignment, it may engage a
specialist with the requisite qualifications to prepare such a Term
of Reference in accordance with the Regulations for Individual
Consultants (Section V).
26.10 Description of Services

The Terms of Reference and any modifications agreed at the
negotiation stage shall constitute the “Description of Services” in
the contract between the consultant and the procuring entity.
26.11 Selection Methods

The procuring entity shall use any of the following selection
methods:
a. Quality and Cost-Based Selection (QCBS): This method
takes into account the quality of the proposal and the cost of
the services. Selection based on the technical quality with

price consideration. Using this method, quality and price
factors are combined and weighted in varying proportions
depending on the importance of the quality versus price. The
weight given to price in the overall ranking of the consultants
shall depend on the technical complexity of the assignment
and the nature of the project. Careful consideration shall be
given to evaluations to ensure that price considerations do
not compromise quality. Generally, the proportional weights
shall be set at 80 points for quality and 20 points for price,
but could be 70 and 30 points respectively, for assignments
of standard or routine nature, or conversely 90 and 10 points
respectively, for assignments where technical quality is of
critical importance. Only the technical proposals, which
have passed the minimum technical mark set in the request
for proposal, will proceed to the financial evaluation. The
required methodology shall be explained in the request for
proposal.
b. Quality-Based Selection (QBS): This a selection process
based solely on the technical quality of proposals, where the
degree of technical quality is of paramount importance and
decisive for the success of the project, where the procuring
entity elects to make a quality based selection, based on
consultant’s qualification.
Quality-Based Selection can be applied only to the following
types of assignments:
(i) Complex or highly specialised assignments for which
it is difficult to define a precise Term of Reference
and the required input from the consultants.
(ii) Assignments where the downstream impact is so
large that the quality of the service is of overriding
importance for the outcome of the project. e.g.
engineering design of major infrastructure.
(iii) Assignment that can be carried out in substantially

different ways such that financial proposals may be
difficult to compare.
(iv)
Assignments including supervision of large
and complex construction works for which it is
particularly important to take safety precautions.
c. Least-Cost Selection (LCS): Selection based on the technical

quality of comparable smaller and routine assignments,
where the qualified lowest financial proposal is selected.
d. Fixed-Budget Selection (FBS): Selection based on a fixed
budget, for simple assignments for which the budget is fixed
and cannot be increased.
e. Consultants Qualification Selection (CQS): Selection based
on the consultants’ qualifications, for smaller assignments,
where the selection procedure only comprises the comparison
of the most appropriate qualification and references. The
selected most qualified consulting firm is requested to prepare
a technical and financial proposal on the basis of detailed
Terms of Reference. For this procedure, only a simplified
request for proposal is required.
f. Sole-source Selection or Direct Contracting (SSS): Shall be
allowed only in exceptional circumstances, subject to BPP
prior certification and generally for small assignments only.
The justification for direct contracting shall be examined
in the context of the overall interests of the project and
BPPs responsibility to ensure efficiency and transparency
in the selection process and non-discrimination among
eligible consultants for contracts. Direct contracting may
be appropriate if only it presents a clear advantage over
competition:
a. for tasks that represent a natural continuation of
previous work carried out by the firm;
b. in emergency cases, such as in response to disasters;

c. for very small assignments; and
d. when only one firm is qualified or has the experience
of exceptional worth for the assignment.
26.12 Choice of the Appropriate Selection Method

The procuring entity shall determine the appropriate method for
selection of consulting firms by reference to the Terms of Reference
and the types of and complexity of tasks to be carried out under the
assignment. The need for and timing of consulting services shall be
based on the procurement plan, the approved expenditure, and the
schedule for implementation of the project.
26.12.1 Prior Review by Bureau of Public Procurement

The selection methods, procedures and contract award shall be
subject to the prior review thresholds as may be set from time to
time by the BPP. In the special case of national defence and security,
selection of consultants may be subject to such procedures and
considerations as prescribed by the BPP. The application of selection
methods, procedures and the award of consulting contracts shall be
subject to monetary thresholds set by the BPP from time to time.
26.13 Request for Proposals (RfP)

For all selection methods (except CQS and SSS, when only a
simplified request for proposal is necessary), the procuring entity
shall prepare a request for proposal, using the standard request for
proposals and contract documents approved by the BPP.
26.13.1 Contents of the Request for Proposal

The request for proposal shall comprise a complete set of documents,
including:
a. the letter of invitation;
b. a standard section comprising the instructions to consultants

(ITC) on how and when to submit their proposals,
complemented by the specific instructions elaborating
on the standard instructions and indicating the specific
requirements for the proposed assignment, including the
evaluation criteria;
c. technical forms to detail the consultants’ technical proposal
and qualifications;
d. financial forms to detail the consultants’ financial proposal
and qualifications;
e. the term of reference, and
f. the draft contract, including the general conditions of
contract and the special conditions of contract.
26.14 Selection Criteria

For all selection methods, including CQS and Direct Contracting/
SS, the consultant shall be required to submit both technical and
financial proposals.
26.14.1 Setting the Technical Selection Criteria in the Request

for Proposal
The procuring entity shall base its selection of consultants on the
following factors:
i. the consultant’s professional qualifications, reliability,
professional and managerial competence, and relevant
experience for the assignment;
ii. the effectiveness of the proposal in meeting the needs of
the procuring entity (thoroughness of the consultant’s
methodology, approach, and work plan, including its
comments on the term of reference;
iii. the qualifications and expertise of the key staff proposed for
the assignment and whether the majority of such staff are
drawn from the permanent staff of the consultant;
iv. the price of the proposal;
v. for shortlists including international consultants: the

consideration given by international consultants to the
inclusion of domestic consultants in the consulting
assignment.
The procuring entity shall, for all selection methods subject to
competition (that is except for CQS and SSS), grade the technical
criteria on a scale of 0 to 100 points. This grading scale is detailed
in the specific instructions of the request for proposal. The points
attributed to each evaluation criteria are a function of the importance
of each criterion for the assignment and may be adjusted as necessary.
As an example, the following range shall be used for domestic
shortlists:
Example
Grading Scale of Technical Quality Range 1 2

Consultant’s qualifications and
experience relevant to the
assignment 5-10 points 10 10
Methodology, approach
(understanding of the TOR) 20-50 points 50 30
Work plan qualifications of

key personnel 30-60 points 30 55
Transfer of technology
(training), (if asked for in
the RfP) 0-10 points 10 5
Total (not to exceed) 100 points 100 100
For shortlists involving international consultants, the scale might be

as follow:
Example
Grading Scale of Technical Quality Range 1 2

Consultant’s qualifications and
experience relevant to the
assignment 5-10 points 05 05
Methodology, approach
(understanding of the TOR),
work plan, 20-50 points 50 30
Qualifications of key
personnel 30-60 points 30 45
Transfer of technology
(training), (if asked for in
the RfP) 0-10 points 05 10
Use of domestic consultants 0-10 points 10 10
Total (not to exceed) 100 points 100 100
The allocation of points to the above factors will differ for the type
of assignment. For assignments of detailed engineering and design
(example 1), greater weight shall be given to the consultant’s proven
experience and past performance, and relatively lesser weight shall
be given to key staff, because such assignments are mostly carried
out at a consultant’s home office.
For an assignment for construction supervision and implementation
services (example 2), the quality of key staff is much more important,
since it has a direct bearing on supervision and management of the
works, quality of performance and quality control, as well as transfer
of technology/know-how.
26.14.2 Request for Expressions of Interest to Be Advertised

The procuring entity shall advertise requests for “Expressions of
Interest” (EoI) from interested firms in at least two widely distributed
publications, the procurement journal, and on the procuring entity’s
website.
To enable the procuring entity to evaluate the EoI submissions and

draw-up a short list, the request for EOIs shall list explicit criteria of
the assignment including:
i. a statement of the subject and main elements of the assignment
and the timeframe for conduct of the assignment;
ii. stipulations for consultants to provide details (technical and
financial) of the core business of their organisation and years
of experience, relevant experience in assignments of similar
nature, references that can attest to successful completion,
key personnel available for the assignment, and any other
information that may show the consultant’s ability to carry out
the assignment satisfactorily;
iii. the name, telephone, fax number, website, e-mail address and
physical address of the procuring entity and the responsible
contact person;
iv. stating the time for response to the EOI (not less than 14 days
from publication).
The procuring entity shall allow sufficient time for the preparation
and submission of the requested proposals but shall in no case give
less than 30 days between the issue of the notice and the deadline
for submission.
26.14.3 Analysis of the “Expression of Interest” and Short-

listing of Consultants.
The procuring entity shall analyse the expressions of interest
and the responses of the consultants, dividing the responses into
‘responsive’ and ‘non-responsive.’
The ‘responsive’ “Expression of Interest” shall be those which
meet or are nearest to meeting the minimum level of experience or
capacity expected of consultants by the procuring entity. A short-
list of the best ranking candidates is then drawn up from the list of
responsive EoIs such that there are six candidates.
Contracts estimated to cost less than N250 million, the shortlist can
be made of only national consultants if there are enough qualified
firms in that assignment.
26.14.4 Finality of Shortlists

A shortlist shall be drawn up only after the deadline for the
submissions of EoIs. Once the procuring entity has drawn up a
shortlist, no further application from other firms or individuals shall
be considered and the procuring entity shall not add or delete names
without BPP’s prior approval.
26.15 Letter of Invitation

The procuring entity shall ensure that the ‘Letter of Invitation’
includes the following:
i) the subject of the assignment;
ii) a statement that the financing of the assignment is provided for
in the budget of the procurement entity;
iii) a statement that the Letter of Invitation is a formal invitation to
submit proposals to undertake the assignment;
iv) a statement that a consulting firm shall be selected on a
competitive basis;
v) the selection method;
vi) the details of the procuring entity;
vii) the names of the shortlisted consultants;
viii) the list of the documents attached (instructions to consultants,
TOR, standard forms for the technical and financial proposals,
and the draft standard contract) on the basis of which the
proposals shall be formulated;
ix) an indication if it is a fixed price consultancy or if the duration
of the assignment may be longer than 18 months, and will be
subject to price adjustment;
x) the deadline for proposal submission;
xi) if the submission procedure will include a pre-proposal
meeting;
xii) a statement that the invited consultants are requested to respond
immediately to the procuring entity that they are interested to
submit a proposal for the assignment or that they decline.
26.16 Submission of Proposals

The procuring entity shall allow sufficient time for the preparation
and submission of the requested proposals but shall in no case give
less than 30 days between the issue of the notice or request and the
deadline for submission.
The technical and financial proposals shall be submitted
simultaneously but in separate envelopes. Any proposal received
after the deadline for submission of proposals shall be returned to
the sender unopened. Immediately after the deadline for submission
of proposals, the technical proposals shall be opened for evaluation
whilst the financial proposals shall remain sealed and kept in a
secured bid-box until they are opened publicly.
Only the financial proposals of shortlisted consultants who have
satisfied the technical requirements shall be opened on a stipulated
date. Consultants who are not successful at the technical evaluation
stage shall have their financial bids returned to them unopened.
Under no circumstances should the technical evaluation committee
have access or insight to the financial proposals until the evaluations
including any Tenders Board review are concluded.
26.17 Criteria for Evaluation of Proposals

The procuring entity shall establish criteria to evaluate the proposals
and prescribe the relative weight to be accorded to each criterion
and the manner in which they are to be applied in the evaluation of
proposals. The criteria may concern only the following:
i. the qualifications, experience, reliability, professional
and managerial competence of the consultant or service
provider and of the personnel to be involved in providing
the services;
ii. experience on similar assignments and in similar conditions;
iii. evidence of similar assignments successfully completed in
the past 3-5 years;
iv. the effectiveness of the proposal submitted by the consultant

or service provider in meeting the needs of the procuring
entity;
v. the proposal price, subject to any margin of preference
applied, including any ancillary or related costs;
vi. the effect that the acceptance of the proposal will have on
the balance of payments position and foreign reserves of the
government, the extent of participation by local personnel,
the economic development potential offered by the
proposal, including domestic investment or other business
activity, the encouragement of employment, the transfer
of technology, the development of managerial, scientific
and operational skills and the counter trade arrangements
offered by consultant or service providers; and
vii. national defence and security considerations.
26.18 Specific Aspects of the Technical Proposal

The technical proposal is the main proposal of the service the
consultant intend to render to the agency. The technical proposal
must cover the following information and evidence:
i. background, organisation and experience of the consultancy
firm;
ii. a list of similar assignments undertaken by the firm, at least
during the last 3 to 5 years. Evidences must be attached.
Similar information regarding the associated firm or firms
must also be submitted;
iii. proposed technical approach and work programme
including:
• comments on the terms of reference;
• the general approach proposed for carrying out the
work plan, including the organisation and time-
schedule of the proposed services;
• a bar chart indicating clearly the estimated duration
(separately, in the home office and in the field)
and the probable timing of the assignment of each
professional to be used as well as estimates of the

number of man-months to be allocated by each
professional;
• detailed description of the specific tasks to be assigned
to each member of the proposed team; in case of an
association, details of the agreement defining the role
of each firm and the mutual relationship;
• name, age, nationality, background, education,
employment record and detailed professional
experience of each professional to be assigned for
providing the services;
• arrangement for office space, vehicles, office and
field; equipment etc. required for carrying out the
services;
26.19 Evaluation of the Technical Proposals

There is always evaluation of the technical proposal before
examining the financial proposal. The technical evaluation will be
based among others on the following criteria:
• General experience of the firm and particular experience
in the sector concerned, years of experience and proven
verifiable results.
• Responsiveness to the TOR and thoroughness of the
approach and work plan.
• Qualifications and expertise of key personnel.
• Other aspects such as transfer of knowledge, training
programme, participation of domestic consultants in
international proposals (if requested in the RfP)
26.20 Specific Information on the Financial Proposal

The financial proposal provides details on the following, both in the
case of a lump sum or time-based assignment (staff-month rates
plus reimbursable costs);
a. the currency in which the cost of services shall be converted,
compared (Naira at the medium exchange rate of the Central
Bank of Nigeria at the date of financial proposal opening),

and paid;
b. a breakdown of all time-based rates, including basic
salaries, benefits, allowances, local taxes, overheads etc.
The proposal must also give an estimate of the cost of
any reimbursable items such as per diem, office space,
equipment, travel and transportation;
c. a breakdown of the individual items of expenditure in local
cost for domestic proposals or foreign and local currency
cost for international proposals;
d. final evaluation will be based on the cost of the financial
proposal. For Quality and Cost Based Selection, the weight
of the technical and financial proposals is usually based on
a proportion of 80-20 points;
e. proposals should remain valid for a period of 60 to 120
days from the date indicated in the RfP, depending on the
complexity of the assignment;
f. price quoted shall be fixed but subject to variation, under
exceptional reasons during negotiation;
g. consultant shall maintain the availability of professional
staff experts nominated in the proposal during the proposal
validity period.
26.21 Direct Procurement/Emergency

i. Sometimes, there might be need to make direct procurement.
Accordingly, there are conditions to be fulfilled before such
direct procurement can be carried out. Section 42 (1) of the
Public Procurement Act 2007 stipulates that:
• a procuring entity may carry out any emergency
procurement where goods, works or services are only
available from a particular supplier or contractor or
if a particular supplier or contractor has exclusive
rights in respect of the goods, works or services and
no reasonable alternative or substitute exists;
• there is an urgent need for the goods, works or
services and engaging in tender proceedings or any
other method of procurement is impractical due

to unforeseeable circumstances giving rise to the
urgency which is not the result of dilatory conduct on
the part of the procuring entity;
• owing to a catastrophic event, there is an urgent need
for the goods, works or services, making it impractical
to use other methods of procurement because of the
time involved in using those methods;
• a procuring entity which has procured goods,
equipment, technology or services from a supplier or
contractor, determines that :
ii. Additional supplies need to be procured from that supplier
or contractor because of standardisation.
iii. There is a need for compatibility with existing goods,
equipment, technology or services, taking into account the
effectiveness of the original procurement in meeting the
needs of the procurement entity.
iv. The limited size of the proposed procurement in relation to
the original procurement provides justification.
v. The reasonableness of the price and the unsuitability of
alternatives to the goods or services in question merit the
decision.
vi. The procuring entity seeks to enter into a contract with
the supplier or contractor for research, experiment, study
or development, except where the contract includes the
production of goods in quantities to establish commercial
viability or recover research and development costs.
vii. The procuring entity applies this Act for procurement that
concerns national security, and determines that single-
source procurement is the most appropriate method of
procurement.
In the above scenarios, the procuring entity may procure the goods,
works or services by inviting a proposal or price quotation from
a single supplier or contractor. When this happens, the procuring
entity “shall include in the record of procurement proceedings a
statement of the grounds for its decision and the circumstances in

justification of single source procurement”.
26.22 Emergency Procurement

In an emergency situation, a procuring entity may engage in direct
contracting of goods works and services where:
• the procuring entity may, carry out an emergency
procurement where the country is either seriously threatened
by or actually confronted with a disaster, catastrophe, war,
insurrection or act of God;
• the condition or quality of goods, equipment, building or
publicly owned capital goods may seriously deteriorate
unless action is urgently and necessarily taken to maintain
them in their actual value or usefulness;
• a public project may be seriously delayed for want of an
item of a minor value.
It should be noted that all procurements made under
emergencies shall be handled with expedition but along
principles of accountability, due consideration being given
to the gravity of each emergency.
Immediately after the cessation of the situation warranting any
emergency procurement, the procuring entity shall file a detailed
report thereof with the Bureau, which shall verify the same and if
appropriate, issue a Certificate of ‘No Objection.’
26.23. National Shopping

Shopping is an appropriate procurement method for procuring
frequently used readily available off the shelf goods of small value.
Under national shopping, procuring entity may:
i. Publish a notice for inviting applications from suppliers; and
after evaluating the past experience and other qualifications
such as capacity of the applicant, by a committee
consisting of not less than three members appointed by
the accounting officer of the procuring entity, prepare a
list comprising names of at least three suppliers who are

able to supply particular categories of goods and services
such as stationery, electrical items, motor vehicle repairs,
periodicals and publications, etc.
ii. Remove any supplier or contractor who has not responded
twice for an invitation to submit a quotation or performed
unsatisfactorily under any contract previously awarded.
iii. The selection shall be based on comparison of price
quotations obtained from invited bidders appearing on the
bidders list.
iv. When the appropriate authority is satisfied, in the case of
supplies of goods, that sufficient number of reputed vendors
is available, quotations may be invited from the list.
v. Requests for quotations shall be addressed to firms in the
approved bidders list of suppliers and shall indicate:
♦ the description and quantity of the goods;
♦ time and place of delivery; and
♦ warranties.
vi. When shopping procedures are used for works, request
for quotation shall be only from the shortlisted contractors
and the minimum number of quotation shall be three. The
comparison of quotations shall follow National Competitive
Bidding principles wherever applicable but the terms of the
accepted offer shall be incorporated in a purchase order.
Applicable Procedures for National Shopping:
a) Quotations must be obtained from at least three
unrelated contractors or supplier.
b) Each contractor or supplier from whom a quotation is
requested shall be informed whether any factors other
than the charges for the goods, works or services
themselves, such as any applicable transportation and
insurance charges, customs duties and taxes are to be
included in the price.
c) Each contractor or supplier shall give only one
quotation and shall not be allowed to change or vary
the quotation.
d) No negotiations shall take place between a procuring

entity and a contractor or supplier with respect to a
quotation.
e) Telephone or verbal quotations shall not be accepted,
but online or email quotations are acceptable
f) The procurement shall be awarded to the qualified
contractor or supplier that gives the lowest priced
responsive quotation.
In evaluating quotations submitted by bidders under shopping, price
and ability to meet required delivery requirements are usually the
main selection considerations for these simple purchases. However,
the procuring entity may also take into account, things such as the
availability and costs of maintenance services and spareparts. The
terms of the accepted offer are incorporated in the purchase order.
Where the total value of the procurement is below the threshold
specified by the Bureau of Public Procurement, the procuring entity
need not obtain the Bureau’s certification for award of contract but
shall include in the record of the procurement a statement giving
justification for the use of this procedure.
26.24 Payment Procedure after the Award of Contract or

Engagement of Consultant
The accounting officer will be the person responsible for supervision
of all procurement activities in the procuring entity. The accounting
officer will establish a procurement unit and a tenders board for the
procuring entity and other functions as they affect procurement as
follows:
i. Ensure that adequate appropriation is available for the
procurements in their annual budget.
ii. Integrate their entity’s procurement expenditures into its
yearly budget.
iii. Ensure the establishment of a procurement planning committee
over whose activities they shall preside.
iv. Constitute a procurement evaluation committee for the
efficient evaluation of tenders.
v. Constitute a procurement management unit/committee.

vi. Render annual returns of procurement records to the Bureau
of Public Procurement.
vii. Ensure that the implementation of the awarded contract is in
accordance with the terms and conditions of award.
viii. Implement the recommendations of the Bureau.
ix. Establish and appoint members of the Tenders Board.
x. Investigate any complaint by a bidder.
xi. Submit of reports of findings in respect of complaints to the
Bureau.
26.25 Functions of Procurement Unit/Section

The procurement unit/section will have the responsibility of
processing all procurement activities including the following:
i. submission of the procurement plan prepared by the
procurement planning committee to the tenders board for
approval;
ii. preparation of tender notifications and request for expressions
of interest;
iii. preparation and submission to advertising media the
documents for: soliciting quotations, pre-qualification,
bidding and request for proposals;
iv. issuing documents for: soliciting quotations, pre-qualification,
bidding and request for proposals;
v. receiving and arranging opening of: pre-qualification
documents, bids, quotations and, request for proposals;
vi. submission of evaluation reports to the tenders board for: pre-
qualification, bids, quotations and consultants’ proposals, for
approval;
vii. submission of quotations for minor value procurements
(below Naira 1.0 million) to the accounting officer for
approval;
viii. making arrangements for contract negotiations;
ix. making arrangements for contract signing by the accounting
officer;
x. preparing documentation for submission to the Bureau for

approval;
xi. preparing responses to complaints for submission to the
Tenders Board; for approval;
xii. preparation of documentation on complaints for submission
to the Bureau;
xiii. preparation of all data and information required by the
Bureau; and
xiv. any other assignment that will be given by the accounting
officer that may be necessary to enhance performance of the
procurement function.
26.26 Disposal of Public Property

Open competitive bidding shall be the primary source of receiving
offers for the purchase of any public property offered for sale. The
Bureau shall with approval of Council:
• determine the applicable policies and practices in relation
to the disposal of all public property;
• issue guidelines detailing operational principles and
organisational modalities to be adopted by all procuring
entities engaged in the disposal of public property;
26.26.1 Planning of Disposals

Before slating any public property for disposal, the accounting
officer in charge of any public property set for disposal shall
authorise the preparation of a valuation report for such property by
an independent evaluator, or such professional with the appropriate
competence to carry out the valuation.
26.26.2 Financial Regulation Provisions on Disposal of Assets

Financial Regulation FR 2609 made provision for the disposal of
unserviceable inventories, building and other non-current assets
under the personal authority of the Accounting Officer, Accountant-
General of the Federation and Minister of Finance with certain
estimated cost of the asset to be disposed. The following estimated

cost is the threshold they have authority to approve.
(i) Accounting Officer: The original cost or estimated value,
does not exceed N250,000.00 in case of general stores,
or N500,000.00 in case of plants, motor vehicles and
equipment, or Nl,000,000.00 in case of buildings in any
financial year.
(ii) Accountant-General of the Federation: The original cost
or estimated value, does not exceed N300,000.00 in case
of general stores or N750,000.00 in case of plants, motor
vehicles and equipment, or N1,500,000.00 in case of
building, in any financial year.
(iii) Minister of Finance: Where exigencies of the service
demand, special dispensation will be granted to each
ministry/extra-ministerial office and other arms of
government by the Minister of Finance.
Before the above approval, the stores, buildings, plants, motor

vehicles or equipment must have been surveyed and found to be
obsolete, unserviceable or dilapidated, as the case may be, by an
independent Board of Survey, for procedure for the convening of a
Board of Survey).
Disposal of assets whether or not listed in the Assets Register of
a procuring entity shall be planned and integrated into the income
and expenditure budget projection of the procuring entity. Disposal
of assets shall be timed to take place when the most advantageous
returns can be obtained for the asset in order to maximise revenue
accruing to the procuring entity.
26.26.3 Disposal Methods

Procuring entity’s property, which is no longer needed, may be
disposed of in accordance with the methods indicated below:
(a) Trade-in
(b) Sales to other governmental agencies
(c) Public auctions

(d) Sales by sealed bid
(e) Negotiated sale
(f) Set price
26.27 Payment of Contract Sum

To effect payment, the basic steps for the preparation and payment
of a voucher are to be followed. When payment on a contract is due,
the appropriate authority will check and confirm if the request is in
order before accepting same for payment. The guideline regarding
the payment of any contract awarded depends on the type of contract
or consultancy service. Therefore, we shall categorise the payment
into three:
i. Supplies
ii. Consultancy/other services
iii. Works/projects
In line with regulations, all contractors or consultants to be given
any contract must have registered with Federal Inland Revenue
Service and TIN (Tax Identification Number) issued. The era of
payment by cheque to contractors is over as e-payment is now in
vogue in the Federal Public Service. The states are encouraged to
emulate the federal government. It is a known fact that before the
issue of payment arises, award letter must have been issued. All
contract award letters emanate from procurement unit/section and
the agreement must also have been signed. These documentary
evidence must be verified and confirmed.
26.28 General Payment Guidelines

• Mobilisation Fee: Mobilisation fee should not be more
than 15% of the contract sum although, there are agitations
to increase the mobilisation to 50%. However, the Senate
Committee on Works, Power and Housing has pegged it at
30%.
• Performance Bank Bond: There should be bond to cover

the 15% (the amount of) mobilisation fee paid.
• Maximum of (5) Work Completion Valuation Certificate:
The total contract sum should not be paid more than five
instalments including the mobilisation fee which shall be
repaid by deducting proportionate amounts from payments
otherwise due to the contractor. The payments should
follow the schedule of completed percentages of the works.
• Interest on Delay Payments: Interest is expected to be
paid to the contractor if there is a delay in settling his
claim of more than 60 days from the date of submission
of his invoice/valuation certificate and authenticated by
the relevant ministry, provided this clause is inserted in the
contract agreement.
• Auditor-General: As a condition for final payment for
contracts exceeding N5m, the Auditor-General for the
Federation or his representative should co-sign the
certificate releasing final payment. The Office of the
Auditor-General for the Federation has discontinued this
provision because it contradicts the role of the office as it
only carries out post-payment and not pre-payment audit.
The only pre-payment done is that on pension and gratuity.
• The project manager is required to submit a technical and
financial progress report to enable the accounting officer
effectively evaluates the value for money to be released.
• Retention fee of 5% of the contract sum must be retained
for any defect that may occur before six months after the
completion and handover of the project to the owner. Note
that defect liability period is normally six months.
• The minutes of the Tenders Board which awarded the
contract. It should be seen that the amount of the contract is
within the power of the Tenders Board Committee.
• The letter of award of the contract and/or copy of the
Contract Agreement.
• There should be a completion certificate or certificate of

work done by a competent authority, e.g. an engineer,
surveyor, architect or an appointed valuer.
• In case of suppliers, there should be a delivery note and
stores receipt vouchers issued.
• There should be a bill or invoice submitted by the firm
requesting for the payment.
• The payment voucher should indicate the following
information clearly:
(a) The name of the contractor
(b) Contract number
(c) AIE number
(d) Vote of charge
(e) Name of project
(f) Certificate number being paid
(g) The amount of the contract in WORDS and FIGURES
(h) The correct classification to the appropriate vote
(i) If it is part payment of a certificate, a statement to
show full amounts, the amount being paid and the
balance to be paid.
26.29 Payment of Supplies Contract

In most cases, supply contract payment are effected after the supplies
had been made. It is rare to pay mobilisation fee on supply contract.
There must be evidence of award and items to be supplied must be
stated with the amount. The contractor is expected to present the
following documents to the procuring entity:
i. The minutes of the Tenders Board awarding the contract. It
should be seen that the amount of the contract is within the
power of the Tenders Board Committee, that is, within the
thresholds of the approving officer.
ii. Original letter of award with list of items to be supplied.
iii. Way Bill/Invoice listing the items.
iv. Delivery note.
v. Store receipt voucher from the store after consultation

with user department to ensure that the right items were
supplied. In addition, the user department can equally issue
a completion certification.
vi. Evidence of budget provision.
vii. Raising the payment voucher and deduction of withholding
tax and VAT.
26.30 Payment of Consultancy and Other Services

i. Payment of consultancy service: In some cases, there might
be advance payment to the consultant, that is, mobilisation
fee.
ii. Bank guarantee for advance payments to be issued by
commercial bank. The validity of the guarantee should be
noted.
iii. Letter of award including the terms of reference should be
noted. The cost estimate of services and ceiling amount
should also be noted.
iv. Authorised persons must write completion certificate after
the services have been completed. In most cases, evidence
will be attached. For instance, a training workshop. The list
of attendance, papers presented and group pictures during
the workshop should be provided.
v. Request for the payment will be forwarded by the consultant
including evidences of the service rendered.
26.31 Payment for Works/Projects

Before payment, the following should be ascertained:
i. The minutes of the Tenders Board which awarded the
contract. It should be seen that the amount of the contract is
within the power of the Tenders Board Committee. That is,
the threshold according to the value of the contract.
ii. The letter of award of the contract and or copy of the

contract agreement with the Bill of Quantities (BOQ)
iii. There should be a completion certificate or certificate of
work done issued by a competent authority, e.g. an engineer,
surveyor, architect, or an appointed valuer. The number of
certificate should be indicated that is, 1st Certificate, 2nd
Certificate, etc.
iv. If it is part payment of a certificate, a statement to show full
amount, the amount being paid and the balance to be paid.
26.32 Basic Concept of Accounting and Project Finance

The basic principle of project finance is that all transactions
in respect of a project should be documented. There is need to
distinguish between a project and a contract. A project consists
of various activities while a contract is a sub-activity in a project.
For instance, building project. In the building project, we have
various sub-contracts e.g. electrical, plumbing, etc. Therefore, each
contract should have a separate file within the project, otherwise co-
ordinating the project will be difficult.
The following documentation should be carried out:
• Project Register and Project File: Where the project is
awarded to a firm, a project register should be maintained to
record the contract sum, date of award, completion period,
file number, contingency (if any) while the file will contain
all correspondences in respect of the project.
• Contract Register and Contract File: In the contract register,
the following should be recorded: name of contractor,
address, contract sum and date of award. Particular of
contract/purpose, terms of payment, completion period, file
number, contract number and contingency.
Specimen of Contract Register
Name of Contractor ................................................................................

Address..................................................................................................
Contract Number and Date:...................................................................
Particulars of Contract:..........................................................................
Term of Payment:..................................................................................
Completion Period:................................................................................
File Number:..........................................................................................
Contract Sum:........................................................................................
Contingency:..........................................................................................
Total:......................................................................................................
Add. Variation:.......................................................................................
Vide........................................................................................................
Date Certificate No Amount Certified Amount Paid P. V. No Amount Balance Signature of

for Payment Paid Officer Controlling
Vote

• Project Register: In case of a big project containing many

contracts, a project register may be maintained as a summary
of various contracts in order to know at any time how much has
been paid on the project.
26.33 Reality on Public Procurement Act 2007

This chapter has discussed and analysed the provisions of the Public
Procurement Act 2007. However, what operates in reality are quite
different. In spite of this, it is imperative for academics, professionals
and other stakeholders to be aware of the provisions of the Act and what
best practices should be. This is the best way to convince patriots to
strive to act in the public interest. Although the provisions of the Act were
well thought out, the piece of legislation has not made any significant
impact on procurement practices in Nigeria. Yet, 80% of the nation’s
budget involves one form of procurement or the other. Presently, the

government is spending over 60% of its revenue to service debts,
which were incurred on capital projects! How were the activities
of those capital projects procured? Did the nation obtain value for
money? Why are the projects not generating returns to meet these
debt obligations? Or is it too early for them to generate returns? If so,
when will this start to happen? The point must be made that the failure
to properly carry out procurement activities is the cause of this huge
debt that the nation is having to service at great cost. Before budgets
are passed, most of the projects would have been allocated to satisfy
interests other than the public interest. Evidence exists to show that
about 65% of the project in some agencies was executed through
emergency type of method of procurement even when there was no
emergency, as a result due procurement processes were observed
in the breach. Sadly, those who have the responsibility to monitor
these practices like the staff of the BPP performed sub-optimally
because they were owed salaries and wages. Some auditors could
not rise to the calling of their profession by issuing negative reports
because their fees were awaiting the recommendation of the director
of finance and accounts.
We should not pretend that things are in order whereas Nigerians are
suffering in silence. The various organs of government charged with
oversight functions must rise up to do their work.
Practical Questions
1. What is request for proposal?

2. Discuss terms of reference as it concerns contracts.
3. Discuss the various guidelines for the payment of contracts.
4. For a contract of supplies, what documentation would be
required to effect payment.
5. Discuss the various types of procurement.
6. Enumerate and discuss the differences between technical and
financial bid.
Chapter Twenty Seven
Office of the Accountant-General of the Federation (1)
Learning Outcomes
i. specify the various public sector financial reform initiatives;
ii. enumerate and discuss the various funds that exist in the public
sector;
iii. explain the purpose of each of the funds established;
iv. discuss the differences between the Federation Account and
the Consolidated Revenue Fund;
v. discuss the various sources of revenue to the Consolidated
Revenue Fund;
vi. explain the functions of sub-treasury and federal pay offices in
the various states;
vii. discuss the roles of FAAC and the Technical Committee;
viii. explain the challenges of revenue collection to federation
accounts and independent revenue; and
ix. explain the functions of S1 & S2 and A1 & A2 files in investment
and loan section of revenue and investment department.
27.0 Introduction
The Accountant-General of the Federation is the Head of the Federal
Government Treasury and is also regarded as the Chief Accounting
Officer. As part of his responsibilities of managing the treasury, he
receives all monies and makes all payments on behalf of the Federal
Government. As an officer responsible for the receipts and payments
of the Government of the Federation, he is under the direct control
of the minister of finance. He is also the Financial Adviser and
Treasurer of the Federal Government.
925
Public Financial Management (PFM) is the system by which financial

resources are planned, directed and controlled in a transparent and
accountable manner for the purpose of efficient and effective service
delivery to the citizenry. The Ministry of Finance anchors the Public
financial management reform. Public Financial Management is the
pillar three of National Strategy for Public Service Reform (NSPSR)
which was derived from the Vision 20:2020, National Economic
Empowerment Strategy (NEEDS) document and Global Initiatives
aimed at strengthening good governance, enhance accountability,
reduce corruption and improve service delivery. The office of the
Accountant-General of the Federation is central and strategic to the
PFM reform of Government.
27.1 Objectives of Government Financial Reforms

i. To restore financial and macroeconomic stability.
ii. To maintain a sustainable fiscal position.
iii. To enhance efficient delivery of public good and services.
iv. To promote transparency and accountability.
v. To ensure responsive governance.
vi. To ensure optimum allocation of available resources.
27.2 Various Reform Initiatives

The office of the Accountant-General of the Federation is implementing
the following reforms:
• E-Payment System
• Government Integrated Financial Management Information
System (GIFMIS)
• Treasury Single Account (TSA)
• Integrated Payroll and Personnel Information System (IPPIS)
• National Chart of Accounts (NCOA)
• Modernisation of the Internal Audit Functions
• Upgrading of the Federal Treasury Academy
• Adoption and Implementation of International Public Sector
Accounting Standards (IPSAS)
927 Office of the Accountant-General of the Federation (1)
27.3 Directorates in the Office of the Accountant-General of

the Federation
In view of its numerous responsibilities, various directorates were
approved for the office. The creation of directorates is continuous
because as the need arises, new directorates are created to ensure
the efficient discharge of the general function of the Accountant-
General. The following are the Directorates as at 1st January, 2018.
a. Funds
b. Federation Accounts
c. Revenue and Investment
d. Inspectorate
e. Audit Monitoring
f. Consolidated Accounts
g. Administration
h. Planning, Research
i. Information and Communication Technology
j. Finance and Accounts
k. Special Duties
l. Integrated Payroll Personnel Information System (IPPIS)
m. Assets Tracking and Management Project (ATMP)
n. Sub-Treasury
o. Federal Projects Financial Monitoring
p. Internal Audit
q. Treasury Single Account
In addition, there are other units such as:
• Legal Unit
• GIFMIS Implementation Unit
• SERVICOM and Anti-Corruption Unit
• Public Relations and Protocol Unit
27.4 General Functions of the Treasury Office

a. It is the financial organ of the Federal Government, which
receives, keeps and disburses its funds.
b. It is the custodian of the Consolidated Revenue Fund,

Development Fund, Contingency Fund and other public funds
of the Federation.
c. It manages the Federation Accounts and their disbursements
to the three tiers of Government.
d. It is responsible for recording the financial transactions of the
government and reporting financial information thereon.
e. It advises ministries and extra-ministerial departments on
financial and accounting matters and assists them to run their
organisations, programmes and activities in an efficient and
effective manner.
f. It gives cash backing in respect of all funds released to public
bodies by the Ministry of Finance and controls the banking
operations of government.
g. It issues circulars to ministries and departments on government
accounting and financial control matters.
h. The general supervision of the Accounts of all the ministries
and extra-ministerial departments within the Federation lies
with the department.
i. It collates and prepares the Annual Financial Statements
and other Statements of Account as may be required by the
Parliament or the Minister of Finance.
j. It provides oversight services on accounting, budgeting and
financial control through inspections, investigations and
board of survey activities.
k. It is responsible for the training and staff development of
accounting and auditing personnel from the three tiers of
government.
l. It is responsible for public debt management of all external
and internal loans, servicing, funded and unfunded.
m. It is responsible for revenue monitoring and accounting in
ministries and offices.
n. It initiates and formulates financial and accounting policies of
Federal Government.
o. It investigates cases of fraud, loss of funds, assets and store

items and other information.
p. It establishes and supervises Federal Pay Offices in each state
capital of the Federation.
q. It approves and ensures compliance with National Chart of
Account codes, internal audit guides and stock verification
manual of the Federation MDAs.
r. It provides financial guidelines through the issuance of
treasury circulars to Federal MDAs to ensure strict compliance
with existing control systems for the collection, custody and
disbursements of public funds and inventories.
s. It supervises and controls the computerisation of the
accounting system in the MDAs.
t. It issues officially approved forms bearing treasury numbers
for use in all Federal MDAs to ensure uniformity.
27.5 Federation Account Directorate

27.5.1 Establishment and Operation of the Federation Account
The Federation Account was established by Allocation of Revenue
(Federation Accounts, etc.) Act of 22nd January, 1982. “An Act to
prescribe the basis for distribution of revenue accruing to the Federal
Republic of Nigeria between the federal, state governments and
local government councils in the states; the formula for distribution
amongst the states inter se; the proportion of the total revenue of
each state to be contributed to the State Joint Local Government
Account; and for other purposes connected therewith.”
During the compilation of the Laws of Federation in 2004, it became
Allocation of Revenue (Federation Account, etc.) Act CAP. A15
Laws of the Federation 2004.
In the 1999 Constitution of the Federal Republic of Nigeria (as
amended), Section 162 reaffirmed the establishment of the Federation
Account which stipulates that all federally collected revenues
should be paid into the Federation Account otherwise known as
Distributable Pool Account and be shared to the beneficiaries:
federal, states, local governments and the 13% derivation to oil

producing states. These revenue components are made up of oil and
non-oil revenue.
The oil revenues include proceeds from direct sales of crude oil
in the international market, royalties, Petroleum Profit Tax (PPT),
CBN/NNPC Oil and Gas Revenue (Naira) Rentals Gas flared and
Miscellaneous Oil Revenue. The non-oil revenue includes Company
Income Tax (CIT), import duty, excise duty, fees and customs
penalty charges.
27.5.2 Allocation to Other Special Funds

Funds accounting is the main characteristic of public sector
accounting as each fund is governed by special regulation, separated
from other funds and established for specific purpose. It is on this
premise that the following funds were created and funded for
specific purposes to be able to meet their obligations to the citizens
notwithstanding the fact that the citizens are yet to be adequately
impacted by these initiatives:
i. Consolidated Revenue Fund (Federal Government)
ii. Ecological Fund
iii. Development of Natural Resources
iv. Stabilisation Fund
v. Federal Capital Territory
The five special funds to be funded from Federation Accounts
were all well thought out funds to enhance good governance of
any administration in power. The following are their legislative
authorities and purposes:
i. Consolidated Revenue Fund: Section 80 (1) of the 1999
Constitution established the Consolidated Revenue Fund
where all revenues belonging to federal government are paid
into and no money shall be paid out of the Fund without the
authority of National Assembly.
ii. Ecological Fund: Section 5(4) of Allocation of Revenue
(Federation Account, etc.) Act CAP. A15 Laws of the
Federation established this fund to take care of all general

ecological problems in the country. As required by the
enabling law, the fund is expected to be administered, by an
agency to be set up for that purpose. However, instead of an
agency, it is being handled by a department in the office of
the Secretary to the Government of Federation.
iii. Stabilisation Fund: Section 5(5) of Allocation of Revenue
(Federation Account, etc.) Act CAP. A15 Laws of the
Federation established this Fund to be administered by the
Minister of Finance. In addition, section 5(7) of the same Act
states that where any state of the Federation suffers absolute
decline in its revenue arising from factors outside its control,
the Stabilisation Fund shall be used to initially augment the
allocation to that state. This is to say that the purpose is to
provide for unforeseen contingences and economic down
turn. With this fund, the effect of the economic downturn
will not be felt and the beneficiaries are all the 36 states.
iv. Development of National Resources: The purpose is to
provide financial resources to develop alternative mineral
resources to oil and gas.
v. Federal Capital Territory (FCT): As the nation’s capital
city, the purpose is to fund its personnel cost and other
capital development projects.
Note: The FCT allocation is transferred to the Federal
Capital Territory which is part of its income in its financial
statement.
27.5.3 Establishment of Federation Account Allocation Committee

(FAAC)
Section 6 of the Allocation of Revenue (Federation Account
etc.) Act CAP. A15 Laws of the Federation 2004 established the
Federation Account Allocation Committee (otherwise known as
FAAC) saddled with the mandate to administer the Federation
Accounts at monthly meetings of the body. The meeting, chaired
by the Honourable Minister of Finance with the Commissioners of
Finance from each state of the Federation including Federal Capital

Territory as members, is basically to consider the revenues that
accrue into the Federation Account during the preceding month
and share same to the beneficiaries using the statutorily approved
formula. Section 6(3b) mandated the committee to report annually
to the National Assembly.
27.5.4 Technical Sub-committee

The plenary session is preceded by the Technical Sub-committee
meeting of the FAAC made up of all the Accountants-General of the
States including the FCT as members chaired by the Accountant-
General of the Federation. The meeting of the Technical-Sub-
committee is usually held a day before the plenary session and
considers the account in details and make recommendations to the
plenary session of the FAAC.
Upon obtaining approval, disbursement to the various tiers of
government is made in accordance with the approved national
Revenue Sharing Formula. In practice, members of the Technical
Committee sometimes raise objections to the revenue report
submitted by the NNPC Management. Incidentally, their objections
are not as fundamental as expected because some anomalies escape
their observations. For instance, the NLGN dividend is used by the
NNPC to pay subsidy without the Technical Committee noticing the
anomaly. Secondly, the report of the post allocation meeting often
show that one day is grossly inadequate for the states Accountants-
General and the Accountant-General of the Federation, as a technical
group, to review the report submitted by NNPC Management. This
is particularly important because oil and gas accounting is complex
and there is need for the Accountants-General to understand oil
and gas accounting, the operations of NNPC and the content of the
report submitted.
In view of the anomalies that always occur in the accounts presented,
the states Accountants-General are urged to co-opt the staff of the
office of the Auditor-General for the Federation in line with Section
168 which states that: “Where any payment fails to be made under
this part of this Chapter, the amount payable shall be certified by

the Auditor-General for the Federation provided that provisional
payment may be made before the Auditor-General has given his
certificate.”
Therefore, to avoid delay in the distribution of the revenue for the
month, provisional approval should be given for the payment to all
the three tiers, and there is need to co-opt Auditor-General’s staff
to review the report. The report of the Auditor-General should be
the first item in the agenda of the following month where the report
will be finally approved. The Auditor-General’s staff should be staff
of Treasury Audit Department who understand the operation of
Federation Account.
27.5.5 Inflows into the Federation Account

The inflows to the Federation Account come from the following
agencies of government:
i. Nigerian National Petroleum Corporation
ii. Federal Inland Revenue Service
iii. Nigeria Customs Service
iv. Department of Petroleum Resources (DPR)
v. Ministry of Mines and Steel Development
27.5.6 There Are Two Divisions:

• Federation and Special Accounts Division: These Divisions
have the responsibility of distributing Statutory Revenue to
the three tiers of government based on the sharing formula
and other indices provided by the Revenue Mobilisation,
Allocation and Fiscal Commission (RMAFC). The division
presents its report to the Federation Account Allocation
Committee (FAAC) members at the monthly meeting.
• FAAC Technical Committee Secretariat Division: This section
serves as the secretariat of the Technical Sub-committee of
FAAC, keeping records of external loans and other deductions
from statutory allocation of states.
27.5.7 Functions of the Department:

• monthly distribution of revenue collected vide the Federation
Account by CBN on behalf of the three tiers of government;
• presentation of the distribution at the monthly FAAC meeting;
• disbursement of the distributed funds to the beneficiaries via
issuance of mandates to Central Bank of Nigeria;
• preparation of ministerial memo for the approval of the
Honourable Minister of Finance;
• maintaining Federation Account, Value Added Tax (VAT)
Account and other Special Accounts (e.g., Development of
National Resource Account, Ecology Stabilisation Account
and Excess Crude Oil Account);
• reconciliation of these accounts;
• provision of data to EFCC, ICPC, MDAs, National Assembly,
corporate bodies and individuals as and when required;
• maintenance of Irrevocable Standing Payment Order (ISPO)
of state governments by deduction made at source from the
statutory allocations;
• deduction of external debt repayment from federal and state
governments as determined by Debt Management Office
(DMO) and processing same into External Creditors’ Account.
• serves as the secretariat for the Technical Sub-committee of
Federation Account Allocation Committee (FAAC);
• updates monthly publication of FAAC distribution.
• monthly meetings: post-mortem meetings are held monthly
with Revenue Mobilisation, Allocation and Fiscal Commission
to reconcile distribution of Federation Accounts to ensure that
no error was made at the Office of the Accountant-General of
the Federation.
Note: The effect of the post-mortem meeting held monthly
has not been felt going by various anomalies that always
come to light.
27.5.8 Accounts Maintained by the Department:

a. Federation Account
b. VAT Account
c. 0.5% Stabilisation Account
d. 1.0% FGN Share of Derivation and Ecology Account
e. 1.68 % FGN Share of Development of Natural Resources
f. Domestic Excess Crude Savings Account
g. Foreign Excess Crude Oil Saving Account
h. Foreign Excess Gas Saving Account
i. Oil Excess Revenue Account
j. Exchange Gain Difference
k. Federation Account Escrow
l. Nigeria Sovereign Wealth Fund
27.5.9 Approvals for Disbursement from the Various Accounts

Are as Follows:
Each account has an approving authority without which no funds
can be withdrawn from it. The following is a schedule of the various
accounts and their respective approving authority.
S/N Accounts Approving Authority

i. Federation and VAT Accounts FAAC
ii. Stabilisation Account Mr. President, Honourable Minister
of Finance, FAAC
iii. Other Accounts Mr. President
27.5.10 Non-Rendering of Report by FAAC and Accountant-

General of the Federation on Federation Accounts to
National Assembly
As provided in Allocation of Revenue (Federation Accounts) Act
CAP. A15 Law of the Federation 2004, Sections 6 (3b) and 9(1)
respectively mandated the FAAC and Accountant-General of the
Federation to report to each House of the National Assembly not
later than ninety (90) days following the end of each financial year
on the disbursement of the inflow into the Federation Account.
In the same vein, Section 9 (2) also mandates the Accountants-
General of each state to report to the state House of Assembly
not later than ninety (90) days following the end of each financial
year on the payments made to each local government council in
the state. The report will state whether or not the payments made
were correctly made under the Act and any relevant law of the state
governing such payment.
Note: There is no verifiable evidence to show that this important
report has ever been rendered to the National Assembly even when
the Auditor-General made this observation in 2007 when the first
Federation Account was audited. Since the Accountant-General’s
office is the Secretariat of FAAC, the same report will be enough to
cover the statutory report.
As a result of this lapse and notwithstanding the mandate given to

FAAC and Accountant-General to render account to the parliament,
there is no where the record of inflow and outflow from the
Federation Accounts could be seen at a glance. This anomaly was
again raised by the Auditor-General’s 2016 report on the special
funds. Without doubt, financial accountability is germane. The
government must, of necessity, account for the revenues mobilised
from various sources and how they were deployed to achieve its
developmental objectives.
Since the enactment of its enabling Act in 2011, the Financial
Reporting Council of Nigeria which has responsibility for financial
reporting both in the private and public sector has not adequately
resourced its Public Sector Accounting Directorate to take on the
responsibility of monitoring and enforcing compliance to standards
and regulations in the Public Sector.
27.5.11 Illustration of Federation Accounts Distribution for the

Month of December 2016
The selected month’s Federation Account distribution is to illustrate
the operation of Federation Accounts Department and the expected
report to be generated in line with the provision of the law and
what is obtainable. For proper understanding of this section and to
refresh the readers memory on Collection of Revenue, visit chapter
Eight (8) where the sources and purposes of revenue collected were
discussed in detail.
The Federation Account Allocation Committee (FAAC) disbursed
the sum of N426.88bn to the three tiers of government in December
2016 from the revenue generated in November 2016.
The amount disbursed comprised:
a. Statutory Account N240.12bn;
b. From foreign exchange gain N38.85bn;
c. Excess Petroleum Product Tax (PPT) Account N66bn;
d. Valued Added Tax (VAT) N75.58bn
e. Refunded to the Federal Government from (NNPC). N6.33bn
Note: Amount Refunded to the federal government is as a result of
short payment in previous months that were subsequently detected
and corrected.
27.5.11.1 Amount Paid to Each Tier of Government

• Federal government received a total of N163.59bn
• States received a total of N110.53bn
• Local governments received N82.64bn
• The sum of N26.42bn was shared among the oil producing
states as 13% derivation fund
• N33.67bn was transferred to the Excess Petroleum Product
Tax (PPT) Account.
27.5.11.2 Revenue Generating Agencies Received the Following

as Their Cost of Collection
• Nigeria Customs Service (NCS) N3.54bn
• Federal Inland Revenue Service (FIRS) N5.28bn
• Department of Petroleum Resources (DPR) N1.21b.
27.5.11.3 Components of the 52.68% of the Inflow of Revenue

Allocation Distribution to the Federal Government of
Nigeria (FGN):
a. FGN Consolidated Revenue Fund:
N141.64bn - 48.50%
b. Derivation and Ecology: N2.89bn - 1.00%
c. Stabilisation Fund: N1.45bn - 0.50%
d. Development of Natural Resources:
N4.87bn - 1.68%
e. Federal Capital Territory (FCT), Abuja:
N3.59bn - 1.00%
Note: The Accountant-General and FAAC are expected to render

account on Derivation and Ecology Fund, Stabilisation Fund
and Development of National Resources Fund to the National
Assembly in line with Allocation of Revenue (Federation Account,
etc.) ACT CAP. A15 Laws of the Federation 2004. Statement of
revenue inflow and outflow is expected to be produced and audited
by the Auditor-General for the Federation before submission to the
National Assembly.
Table 27.1 Summary of Gross Revenue Allocation by FAAC for the Month of November, 2016 Shared in
939
December, 2016
Ti Statutory Exchange Gain NNPC Refund Distribution of VAT Total

Difference to FG N66 billion from
Excess PPT
Saving Account
N N N N N N
FGN 97,896655218.68 18,240,100,338.14 6,330,393,548.39 30,248,856,000.00 10,883,448,451.99 163,599,461,557.20
State 49,654,491,788.97 9,251,626,704.54 - 15,342,624,000.00 36,278,161,506.65 110,526,904,000.16
LGCs 38,281,531,843.29 7,132,616,396.46 - 11,828,520,000.00 25,394,713,054.65 82,637,381,294.41
13% Derivation
Fund 13,612,610,235.11 4,228,210,710.29 - 8,580,000,000.00 - 26,420,820,945.40
Cost of
Collection
NCS 3,536,318,752.85 - - - - 3,536,318,752.85
Transfer to
Excess PPT 33,672,242,747.79 - - - - 33,672,242,747.79
Cost of
collection –
FIRS 2,253,260,269.44 - - - 3,023,180,125.55 5,276,440,394.99
Cost of
collection –
DPR 1,213,397,552.39 - - - - 1,213,397,552.39
Total 240,120,508,408.52 38,852,562,149.44 6,330,393,548.39 66,000,000,000.00 75,579,503,138.84 426,882,967,245.19
Sources: Monthly FAAC Distribution

Office of the Accountant-General of the Federation (1)
Note: This is the allocation of the total revenue for the month
940
Table 27.2 Distribution of Revenue Allocation to FGN by FAAC for the Month of November, 2016 Shared in December, 2016
BENEFICIARIES GROSS LESS NET STATUTORY EXCHANGE NNPC REFUND DISTRIBUTION VAT TOTAL NET
STATUTORY DEDUCTIONS ALLOCATION GAIN TO FG OF N 66BILLION AMOUNT
ALLOCATION DIFFERENCE FROM EXCESS
PPT SAVINGS
ACCOUNT
N N N N N N N N
FGN (CRF
Account) 90,128,849,242.71 9,115,063,778.44 81,013,785,464.27 16,792,810,447.99 5,828,095,806.70 27,848,7000,000.00 10,157,885,221.86 141,641,276,940.81
Share of Derivation
& Ecology 1,858,326,788.51 - 1,858,326,788.51 346,243,514.39 120,166,923.85 874,200,000.00 - 2,898,937,226.75
Stabilisation 929,163,394.25 - 929,163,394.25 173,121,757.20 60,083,461.92 287,100,000.00 - 1,449,468,613.38
Development of
Natural Resources 3,121,989,004.70 - 3,121,989,004.70 581,689,104.18 201,880,432.07 964,656,000.00 - 4,870,214,540.94
Fct Abuja 1,858,326,788.51 38,542,626.01 1,819,784,162.50 340,243,514.39 120,166,923.85 574,200,000.00 725,563,230.13 3,585,957,830.87
Sub Total 97,896,655,218.68 9,153,606,404.45 88,743,048,814.23 18,240,108,338.14 6,330,393,548.39 30,248,856,000.00 10,883,448,451.99 154,445,855,152.75

Note: This was how the FGN share was distributed
Public Sector Accounting and Administrative Practices in Nigeria
Table 27.3 FCT Abuja – Distribution Details of Revenue Allocation

to Local Government Councils by FAAC for the Month
of November, 2016 Shared in December, 2016
LOCAL GROSS EXCHANGE DEDUCTION DISTRIBUTION VALUE TOTAL
GOVERN- STATUTORY GAIN OF N66 B FROM ADDED ALLOCA-
MENT ALLOCATION DIFFERENCE EXCESS PPT TAX TION
COUNCILS SAVINGS
ACCOUNT

Abaji 40,453,387.12 7,537,276.55 - 12,499,596.43 148,771,503.35 209,261,763.45
Abuja
Municipal 103,267,922.34 19,240,883.02 - 31,908,511.13 187,996,018.30 342,383,334.79
Bwari 58,167,996.64 10,837,863.24 - 17,973,191.73 157,957,346.15 244,936,397.77
Gwagwalada 49,850,744.29 9,288,192.48 - 15,403,263.60 154,177,572.02 228,719,772.39
Kuje 47,366,683.57 8,825,362.19 - 14,635,719.55 150,889,986.03 221,717,751.35
Kwali 48,723,168.35 9,078,102.49 - 15,054,856.57 150,262,436.63 223,118,564.05
Abuja Total 347,829,902.32 64,807,679.97 - 107,475,139.01 950,024,862.50 1,470,137,583.79

Note: This was how allocation for Local Councils was distributed
Table 27.4 Distribution of Revenue Allocation to State and Local

Government by FAAC for the Month of November,
2016 Shared in December, 2016 Abia State
Beneficiary Abia
No of LGS 17
N
Gross Statutory Allocation 1,226,135,012.74
13 & Shares of Derivation (Net) 153,355,081.16
Gross Total 1,379,490,093.90
Deductions External Debt (27,791,8029.06)
Contractual obligation (ISPO) 0.00
Other deductions (see note) (312,068,785.95)
Net Statutory Allocation 1,039,629,498.89
Distribution of N66 billion from
Excess PPT Savings Account 470,229,742.35
Distribution of Exchange Gain 277,422,499.94
Gross VAT Allocation 737,257,966.86
Total Gross Amount 2,872,400,303.04
Total Amount 2,532,539,708.03
Note: The table above shows the composition of the allocation to the state.
The important issues to note are the deductions made at source, which are:
External Debt, Contractual Obligations and other deductions. Finally, it is also
important to note the Gross amount and the Net amount.
Table 27.5 Distribution to Local Government Councils of Abia State
LOCAL GROSS EXCHANGE DEDUCTION DISTRIBUTION VALUE TOTAL

GOVERN- STATUTORY GAIN OF N66 BILLION ADDED ALLOCATION
MENT ALLOCATION DIFFERENCE FROM EXCESS TAX
COUNCILS PPT SAVINGS
ACCOUNT
N N N N N N
Aba north 40,706,879.53 7,584,507.09 - 12,577,922.14 22,632,220.05 83,501,527.79
Aba south 67,914,123.91 12,653,762.02 - 20,984,624.55 39,851,130.60 141,403,641.09
Arochukwu 47,785,063.51 8,903,314.76 - 14,764,993.78 26,045,805.77 97,499,177.81
Benue 48,687,804.31 9,071,513.46 - 15,043,929.52 27,238,040.77 100,041,288.06
Ikwuano 44,315,437.48 8,256,853.91 - 13,692,922.23 24,292,531.80 90,557,745.43
Isiala ngwa
north 45,766,392.28 8,527,195.86 - 14,141,249.33 25,149,275.52 93,584,112.99
Isial ngwa
south 44,405,658.03 8,273,663.96 - 13,720,799.52 24,116,676.45 90,516,798.76
Isuikwuato 43,298,286.31 8,067,338.27 - 13,378,635.10 23,010,709.08 87,754,968.76
Nnochi 46,712,685.02 8,703,509.16 - 14,433,642.08 25,704,109.74 95,553,946.01
Obioma ngwa 47,403,923.38 8,832,300.72 - 14,647,226.19 26,657,190.19 97,540,640.48
Ohafia 51,839,981.99 9,658,827.32 - 16,017,913.45 30,124,495.88 107,641,218.64
Osisioma 49,912,687.14 9,299,733.67 - 15,422,403.17 28,735,940.78 103,370,764.77
Ugwunagbo 38,114,428.85 7,101,481.76 - 11,776,887.24 21,279,607.42 78,271,405.28
Ukwa east 36,012,929.21 6,709,930.27 - 11,127,549.84 19,985,790.34 73,836,199.65
Ukwa west 37,500,008.01 6,987,002.85 - 11,587,038.80 21,601,743.65 77,675,793.33
Umuahia north 55,900,419.07 10,415,360.10 - 17,272,538.30 28,791,892.29 112,380,217.75
Umuahia south 48,301,241.32 8,999,489.03 - 14,924,456.34 24,323,936.48 96,542,153.17
Abia total 794,577,949.16 148,045,792.20 - 245,514,761.58 439,540,096.80 1,627,678,599.74
Note: This was how the allocation for the state with the
number of its local council was distributed.
Sources: Monthly FAAC Distribution, Dec. 2016.
The above four tables are to illustrate how monthly Federation

Accounts are distributed, showing the total collection, shares of the
federal, states and local government areas and other special funds
established by Law for specific purposes. If these funds are not utilised
for their purposes, it is the responsibility of the National Assembly to
query such action. Accountability issues will arise if the funds are
neither utilised for the specific purpose nor refunded to Federation
Account.
27.5.12 Expected Financial Statement to be Prepared by the

FAAC and Accountant-General of the Federation
For proper accountability, probity and transparency in line with
extant rules and regulations, the following statements and schedules
must be compiled for the preparation of the General Purpose
Financial Statement of the Federation Accounts. Once the following
statements and schedules are compiled, the financial statement will
be useful to all stakeholders including journalists.
The starting point for this report is the CBN component statement,
which shows all the Federation Account revenues, and Value Added
Tax received by CBN from revenue collecting agencies for the
preceding month. The revenues are broadly classified into:
i. Oil Revenue: Crude oil sales, gas sales, penalty for gas flaring,
oil & gas royalties, rent, pipelines fees and PPT.
ii. Non-Oil Revenue: Company Income Tax, excise & fees,
import duty, other customs revenues/levies.
iii. Value Added Tax (VAT)
27.5.13 Four Inflow and Outflow Statements Are Expected with

Schedules/Notes to Support the Statements
• General Inflow and Outflow Statement of Federation Account
• Inflow and Outflow Statement of Ecological Funds
• Inflow and Outflow Statement of Stabilisation Funds
• Inflow and Outflow Statement of Development of National
Resources
Note: Each of the statement has its own bank account and
bank reconciliation is expected from each account every
month.
27.5.14 Schedules
i. Schedules of allocation of Statutory and VAT to federal
government (Consolidated Revenue Fund)
ii. Schedules of allocation of Statutory and VAT to states
government
iii. Schedules of External Debt, Contractual Obligations and

other deductions state by state
iv. Schedules of allocation of Statutory and VAT to each state
and local governments
v. Schedules of allocation of Statutory and VAT to FCT
vi. Schedule of Domestic Excess Crude Savings
vii. Schedule of Foreign Excess Crude Oil Savings
viii. Schedule of Foreign Excess Gas Savings
ix. Schedule of Exchange Gain Difference
x. Schedule of Oil Excess Revenue Account
xi. 13% Derivation Schedule.
27.5.15 Specimen of Federation Account Inflow and Outflow for

the Year 2016
Statement No. 1
Particulars Schedules N Billions N Billons
Inflow:
- Statutory 1 xxxxxx
- VAT 1 xxxxxx
- Exchange 1 xxxxxx
- Excess (PPT) 1 xxxxxx
- Other 1 xxxxxx xxxxxx
Outflow
- Fed. Govt. (xxxxx)
- Ecological Fund 2 (xxxxx)
- Stabilisation Fund 3 (xxxxx)
- Dev. of Nat. Res. 4 (xxxxx)
- State Govt. 5 (xxxxx)
- FCT 6 (xxxxx)
- Local Govt. 7 (xxxxx)
- Cost of collection; 8 (xxxxx)
NCS, FIRS, DPR (xxxxx)
- FIRS Refund 9 (xxxxx) (xxxx)
10
Balance xxxxxx
27.6 Fund Directorate

Funds department is one of the core departments in the office of the
Accountant-General of the Federation. The department is made of
two divisions, Expenditure and Fiscal Account. It is responsible for,
among others, the following:
(i) Cash Management to ensure that revenues appropriated
are realised including borrowing from Debt Management
Office (DMO) and Central Bank of Nigeria (CBN) to fund
expenditure.
(ii) Disbursement from Consolidated Revenue Fund (CRF) to
finance the operation of the MDAs.
(iii) Disbursement from the Federation Account.
(iv) Excess Crude Account and other Special Accounts.
(v) Loans Servicing.
(vi) Coordination of GIFMIS/TSA Implementation.
(vii) Processing of requests of MDAs on banking relationship with
the CBN.
(viii) Reporting on Budget Performance and Fiscal Operations.
(ix) Liaising with Development Partners like World Bank.
(x) International Monetary Fund, African Development Bank,
West African Monetary Institute.
(xi) Provision of Information on funds released to the National
Assembly, Economic and Financial Crimes Commission.
27.6. 1. Expenditure Division

The Expenditure division is one of the two divisions in the
department headed by the Deputy Director (Expenditure) and the
division is divided into two sections namely:
i. Capital Expenditure Section
ii. Recurrent Expenditure and Loan Servicing
The Expenditure division has the responsibility of processing
Warrants and/or AIEs as issued by the Budget Office of the
Federation and other approvals by the Hon. Minister of Finance for
the issuance of payment mandates to the CBN. It is also responsible
for the opening of new accounts and change of signatories with
CBN for MDAs.
 Capital Expenditure Section: The Capital Expenditure

Section has two units namely Team I and Team II whose
responsibilities include:
• Checking and clearing of Capital Warrants and/or AIEs
as received from Budget Office of the Federation
• Processing of Capital Mandates for payment
• Settlement of FGN Local Contractors’ Debt (LCD)
• Opening of new Accounts and change of signatories
with CBN for MDAs
• Rendition of monthly Budget Performance Reports to
stakeholders
• Reconciliation of Capital Releases with Fiscal Account
Unit and other units
• Preparation of bi-monthly report
• Provision of information to anti-corruption agencies,
State Governments and other stakeholders on request.
 Operation of the Section Concerning Payment: The
procedure is that when the Budget Office, on behalf of the
Minister of Finance, issues a duly signed financial warrant
by the minister to any government department, original
copy of the warrant addressed to the Accountant-General of
the Federation is forwarded to Funds Department. A copy of
the warrant is forwarded to the beneficiary. The beneficiary
ministry or parastatal will then send a demand letter for
release of the fund to the section. On receipt of both the
demand letter and copy of the warrant, the funds section will
send a mandate to the Central Bank of Nigeria authorising
the bank to credit the account of the beneficiary with the
amount stated on the mandate. The amount on the mandate
should, therefore, correspond with the financial warrant.
The procedure is operative with respect to General Warrants
and Development Fund General Warrants. It should be
noted that the Funds Department bears the responsibility of
introducing to the Central Bank of Nigeria the signatories of
any account to be opened with the apex bank.
 Settlement of FGN Local Contractors’ Debt (LCD): In the

execution of large infrastructural projects, the government
often owes local contractors a lot of money. The procedure
for settling this huge indebtedness involves the government
entering into agreements with contractors under a “Special
Purpose Vehicle” option to raise the fund through the Debt
Management Office (DMO). The proceeds of the bonds are
paid into this account from which local contractors debts are
settled by the Accountant-General of the Federation upon
the approval of the Honourable Minister of Finance.
 Recurrent and Loan Servicing Unit: The Recurrent and Loan
Servicing (RLS) Unit consists of three (3) key sections:
i. Personnel Cost
ii. Overhead Cost
iii. Loan Servicing
 Personnel Cost Section is in charge of processing personnel
and pension allocations. The broad classification for such
operations includes:
a. Civilians, military and other security agencies
since all MDAs including all security agencies are
made compulsory to enrol with IPPIS, which has
commenced.
b. Universities pensions
c. Parastatals pensions
d. Statutory pension and NHIS contributions
e. Other incidental releases such as promotion arrears,
personnel shortfall, payment of political office holders
emoluments, pension arrears, severance benefits, etc.
 Overhead cost Section is in charge of processing Overhead
cost releases, Statutory Transfer and releases from special
accounts that are exclusive to federal government.
 Loan Servicing Section: The loan servicing section handles
processing of foreign debt servicing as may be advised by
the Debt Management Office. The creditors usually effect
external debt servicing before due dates in order to avoid

unnecessary penalties. The section also handles processing
of destination and Pre-shipment Inspection Agents’ bills
received from Federal Ministry of Finance (Home Finance
Department). Public Debt Statements are also prepared
annually, for incorporation by Consolidated Accounts
Department (CAD) into Federal Government Financial
Statements. The unit also processes payment from Special
Levies Accounts as earlier listed and treated in Chapter 7
(Collection of Government Revenue), that is, 1% CISS, 2%
Education Funds, 5% Sugar levy,10% Rice Levy and 7%
Port levy.
Accounting Procedures
The following is how the amount approved for each tier is finally
transferred or paid to the beneficiaries.
i. The Federal Government Share: The Federal Government
share of 48.50% will be transferred to Consolidated Revenue
Fund through a Subsidiary Journal Voucher (SJV) by debiting
the Federation Account and crediting the Consolidated
Revenue Fund.
Note: Federation Account is a credit entry as such any
amount to be taken should be debited.
The Central Bank of Nigeria is thereafter authorised to transfer

the amount to the Consolidated Revenue Fund.
ii. Special Funds: The underlisted Special Funds are expected
to keep separate accounts where the Inflow and Outflow will
be made available for auditing by Auditor-General for the
Federation for submission to National Assembly:
 Derivation and Ecology;
 Stabilisation fund; and
 Development of Natural Resources.
iii. State Government: The balance of each of the shares of the
states is transferred to the states approved accounts. This is
done after deduction of Contractual Obligation on Irrevocable

Standing Payment Order (ISPO) and other deductions.
iv. E-Payment Platform
Currently, the Office of the Accountant-General of the
Federation uses two platforms to execute e-payment namely:
GIFMIS and CBN-Remita.
i. GIFMIS is used for payments of Warrants/AIEs issued
on this platform while
ii. CBN-Remita is used where the Budget Office issues
paper-based Warrants/AIEs to OAGF.
27.6.2. Fiscal Account Division

The Division provides information on the Fiscal Operations
of the Government with three sections: Fiscal Accounts; Cash
Management; and GIFMIS Settlement Centre/Reconciliation. The
division performs the following functions:
i. Preparation of Monthly Cash Flow Projections: In line
with the Fiscal Responsibility Act 2007, the Accountant-
General of the Federation is required to prepare annual cash
plan broken into monthly basis and revised monthly. The
division prepares this with input from: Budget Office of
the Federation; Central Bank of Nigeria (CBN); Federation
Account Allocation Committee (FAAC); Bureau of Public
Enterprises (BPE); Debts Management Office (DMO);
Ministries, Departments and Agencies (MDAs).
This cash flow projection plan is considered at the
Technical Sub-committee Meeting chaired by AGF and
the outcome is submitted to the Federal Cash Management
Committee chaired by the Minister of Finance. This latter
committee meets regularly to consider and approve the
Cash Flow Projections. Upon approval, this is captured
in the GIFMIS Cash Plan module to enable the Budget
Office issue Warrant and Authority to Incur Expenditure
(AIE).
ii. Preparation of Fiscal Account: This deals with the fiscal
operations of the Federation and the Federal Government.
It is compiled from the monthly FAAC distribution data,

summary of CRF Account statement and the annual
budget. It provides information on budget performance
and variances. The report is prepared monthly and upon
approval by the AGF, circulated to key stakeholders like
the Minister of Finance, Budget Office, CBN, International
Monetary Fund (IMF), World Bank, National Bureau of
Statistics and National Planning Commission.
iii. Preparation of Daily Summary of Consolidated Revenue
Fund Account: This is a summary of movements in the
CRF account through the various receipts and payments.
This serves as a form of reconciliation of Consolidated
Revenue Fund balance with Central Bank Nigeria
statement.
iv. Monthly Reconciliation of Mandates:The mandates issued
by the Expenditure Division are reconciled daily with
the Consolidated Revenue Fund account statement at the
analysis unit.
v. Preparation of Cash Flow Projection (CFP): This is
prepared monthly and rolled over monthly to provide
guidance to the Technical Sub-committee of Federal Cash
Management on expected inflows, outflows and deficits.
This is also used by the Cash Management Committee
in reaching decisions on budget releases and issuance of
warrants.
vi. Liaison with Development Partners: The Division liaises
with International Monetary Fund (IMF), World Bank,
African Development Bank, Rating Agencies on fiscal
matters.
vii. CBN Fiscal Liquidity Assessment Committee: This
Division represents the Office of the Accountant-General
at the weekly meeting. The committee is provided with the
analysis of mandates issued for payments in the previous
week to ensure that errors or mistakes were not made.
viii. Monetary Policy Co-ordinating Committee of DMO: The

division represents the Office of the Accountant-General at
the quarterly meeting. The Committee is provided with the
analysis of the Federal Government Budget Performance
and any issues on reforms being considered by the Office
of Accountant-General of the Federation.
ix. CBN/OAGF Consultative Forum: This forum was
established between Funds Department of the OAGF and
Banking and Payment Systems Department of CBN to
discuss operational issues with a view to improving service
delivery. The meeting is held quarterly and sponsored by
the CBN. Many stakeholders are involved, especially
NNPC, DPR, FIRS, NCS, Ministry of Foreign Affairs,
and representative of Deposit Money Bank (DMB).
27.6.3 Public Debt Management

Public debt is the loan raised by the federal government and not yet
paid off at the end of the financial year. Public Debt is the amount of
money owed by government to institutions, governments and other
bodies either resident or outside Nigeria. It is the responsibility of the
Accountant-General to seek for short-term loan to meet government
expenditure needs pending the receipts of revenue especially at the
beginning of the year. The limit of overdraft or short-term loan that
he can obtain is fixed at 25% of projected Federal Revenue for the
year.
27.6.4 Fiscal Report

In view of the various schedules prepared by the division, user-
specific needs would determine the kind of analysis that will be
made of the fiscal data and the reports that will be generated. Such
reports will provide opportunity to evaluate budget performance
and its macro-economic impact. The analysis can be in terms of:
• Absolute relationship between budgeted and actual and even
between the components by comparing figures.
• Budget performance using variances (absolute and percentage).

• Relative performance of each component.
• Other statistical analysis.
27.6.5 Benefit of Fiscal Reporting

- Demonstrates accountability, transparency and fiscal discipline.
- Facilitates country economic assessment and international
comparison and country rating by World Bank, IMF, Standard
and Poor’s.
- Serves as a tool for decision making.
- Provides global picture of revenue receipts and its distribution.
- Provides information on fiscal risk, which needs to be regularly
monitored, disclosed and managed.
- Facilitates assessment of budget performance and evaluation.
- Facilitates trend analysis.
- Facilitates planning and policy formulation especially cash
flows, resource gap management, prioritisation.
- Serves as a means of monitoring the CRF Account balance.
27.7 Revenue and Investment Directorate

The Revenue and Investment Department, which is headed
by a Director; was created as a result of the restructuring of the
Ministry of Finance Incorporated (MOFI) and the entire office of
the Accountant-General of the Federation. Setup on 2nd March,
1959 by the Ministry of Finance Incorporated Act 1959, the MOFI
was previously a special division in the Office of the Accountant-
General of the Federation.
It was established for the sole purpose of taking charge of all federal
government investments in accordance with federal government
policies on such matters. As a legal entity, the MOFI can sue and
be sued. MOFI is in charge of Special and Trust Funds that usually
appear in Assets and Liabilities Statement. i.e., statement No.2.
It keeps the records and invests the credit balances of the various
Funds. With the Accrual-basis, the Trust Funds will appear in the
Financial Position Statement.
There are four sections:

a. Investments;
b. Loans;
c. Funds; and
d. Administration.
With the restructuring, revenue was added to its functions while funds
was removed and stand as a department as discussed. Therefore, the
department is responsible for revenue, investment and loans. See
Figure 27.1 for the new organogram.
Figure 27.1 Organogram of the Revenue and Investment Directorate
954
DIRECTOR
REVENUE &
INVESMENT
DEPUTY DEPUTY
DIRECTOR DIRECTOR
(INVESMENT) REVENUE
ASST.
DIRECTOR AD. FED AD.
(INVESTMENT) REVENUE 10 INDEPENDENT
REVENUE
EQUITY EQUITY
SOLID DPR OIL & CUSTOM FIRS MDA (MOFI
INVESTMENT 7 INVESTMENT 8 REVENUE REVENUE)
MINERAL GAS
a. Investments: This comprises financial experts who analyse the

audited accounts, assess the performance of the organisations
and monitor federal government investments on a regular basis.
b. Loans: This is also made up of analysts who assess and
appraise the organisations that apply for loans. The purpose is
to determine the suitability of such organisations for the loans
being applied for and to make recommendations accordingly.
General Functions of Revenue and Investment Directorate

i. To manage all FGN Special Accounts (Revenue) maintained
and operated by the CBN. Each of the accounts has a purpose,
beneficiary as well as sources of the fund as prescribed by their
respective enabling Acts. The special accounts are categorised
into two as follows:
• Those that derive their income directly from Revenue
collection sources.
• Those that derive their income from funds set aside from
the FGN share of the Federation.
ii. To hold in trust for the federal government equity investments
in parastatals, corporations and companies both in Nigeria and
abroad.
iii. To grant loans as well as act as a depository of instruments
and documents relating to government loans to parastatals,
corporations and companies both in Nigeria and abroad as well
as to ensure repayment of principals and interests.
iv. To act as guarantor of loans on behalf of the federal government
where such loans were made to parastatals, corporations and
companies in Nigeria and/or abroad by financial institutions
based in Nigeria and overseas.
v. To represent the Federal Government on the Boards of the
parastatals, corporations and companies in which it has
substantial shareholding.
vi. To document all grants, subventions and subsidies.
vii. To safeguard the interest of the federal government in respect of

all investments (equity and loans) grants, subsidies, subventions
and guaranteed loans.
The following are some of the special accounts revenue being
managed by the department:
• 7% Port levy
• 5% Sugar levy
• 2% National Automotive council levy
• 1% Comprehensive Import Supervision Scheme levy (CISS)
• 0.5% ECOWAS Travel Liberalisation Scheme levy (ETLS)
• 10% Rice Levy
• 1% Nigeria Export Supervision Scheme levy (NESS)
• 100% Cigarette levy
• 10% Iron/steel
• 30% Textile levy
• 30% Wine & spirit levy
• 30% Sanitary wares levy
• Cement levy
Accounting Books and Maintenance of Record

Investment Section
Functions
Investment section carries out the following duties that affect the
accounting records:
• It keeps and maintains all investments in ordinary and
preference shares. Payments for these investments are usually
made through either the supervisory ministries, directly from
Funds department or conversion of loans to equity. Any such
investment, however, requires the approval of the Council of
Ministers (Federal Executive Council).
• It keeps and maintains records of bonus issue of shares
attributable to revenue and investment declared by organisations
in which revenue and investment has share capital.
• It co-ordinates all government revenue receipts.
• It is responsible for keeping records of any divestment of

investment e.g., sale of Federal Government shares in a
corporation.
• It monitors the amount of dividends paid by organisations to
ensure that the correct amount is received and that it is not net
of withholding tax.
• It is responsible for reconciling all revenue receipts with the
CBN Statements.
• It is also responsible for the safe custody of share certificates,
which are usually kept with the Sub-treasurer of the Federation
(STF). The Sub-Treasurer in return informs Revenue &
Investment of the security number under which each share
certificate is kept.
Accounting Books and Records

Source Document Files
Two types of files are maintained in the investment branch for each
organisation and they are: SI and S2.
S1 files are for correspondence and they provide the source of
information for all dividends, directors’ fees, miscellaneous income
received as well as AIEs for equity contributions and the receipt of
bonus issue of share.
S2 files are used to maintain all Annual Audited Accounts. The
analysis of the audited accounts by Revenue and Investment
directorate staff and the reports of the Annual General Meetings
(AGM) that subsequently follow are also kept in S2 files.
Ledgers and Registers
Three ledgers and two registers are kept for records. The ledgers in
use are the Investment Ledger, the Dividend Ledger and the Share
Certificate Ledger. One register is used to record all revenue receipts
in a serial form while the other is the paper Money Register.
i. The Investment Ledger: This contains records of all local
and external equity investments. Particulars of records in the
investment ledger are as follows:
• Name of company/corporation.
• Description of initial and additional investments
including bonus issues.
• Amount of Investments.
• Percentage equity holding.
• Details of share disposal (if any).
The Investment ledger is usually updated with fresh information from
SI file, i.e., source document. The operation should be computerised
such that, at the press of a button, the ledger will be out.
ii. The Dividend Ledger: This contains details of dividends
received. Particulars of records in the Dividend Ledger are:
• Name of company/corporation
• Date of dividend receipts
• Gross dividends
• Net dividend received and the withholding tax thereon.
(This part may no longer be applicable as it is now
established that the federal government is not required
to pay withholding tax on dividends and director’s fees).
• Accounting year of dividend received and whether it is
final or interim dividends.
The dividend ledger is usually updated with information from the
Revenue Receipts Register.
iii. The Share Certificate Ledger: This contains details of share
certificates received. Particulars of records in the share
certificate ledger are:
• Name of company/corporation.
• Description of investment to which share certificate
relates.
• Security number of share certificate as provided by the
Sub-treasurer of the Federation.
• Value of share certificate.
iv. The Paper Money Register: This contains particulars of
cheques, credit notes and dividend warrants received, dates of
receipt and dates such receipts were acted upon and the name
and signature of the officer that acted on these receipts.
v. The Revenue Collection Register: This is divided into 5 parts

namely Dividends, Director’s Fees, Loan Repayments, Interest
Payments and Miscellaneous Income. Records are kept in each
part in serial order and in a manner that would make it possible
to ascertain the total amount of revenue collected.
vi. Treasury Receipt Books (TBK 6A): These are used for
acknowledging receipts of lodgment or transfer made and
dividend warrants received from various organisations.
vii. Bank Tellers/Transfer slips: These are used for the lodgment/
transfer made and dividend warrants received into Central
Bank.
viii. Treasury Form 15 (Pay-in Form): Evidence of payment must
be made available for proper documentation. With the TSA/
GIFMIS platform, this is increasingly falling into disuse.
Loan Section
Functions
i. To consider applications for loans from organisations,
make recommendations and prepare AIE for those
whose applications are eventually approved by the
Permanent Secretary of the Federal Ministry of Finance.
ii. To keep and maintain records of all loans directly
released to organisations by either their supervising
ministries or department’s revenue and investment.
iii. To prepare loan agreements and amortisation schedules
for all organisations seeking loans.
iv. To act as a depository of instruments and documents
such as loan agreements and amortisation schedules
relating to organisations that provide loanable funds.
v. To prepare bi-annual statements of principal repayments
and interest due on all loans released to organisations by
Revenue and Investment Directorate and supervisory
ministries.
vi. To keep and maintain records of all guaranteed loans,
both internal and external. Both the Home Finance and
External Finance Departments of the Federal Ministry

of Finance presently give guarantees.
vii. To ensure that proper records are kept for all repayments
of loans and interests.
viii. To ensure that all organisations repay the loans and the
interests thereon according to the terms of repayments
drawn out in the amortisation schedules.
Accounting Books and Records

Source Document Files
Files used in this branch are mainly Al and A2. Separate files are
used for the retention of loan agreements and amortisation schedules
although a copy of each is usually retained in the A1 file.
The A1, like the S1 of the investment branch, is used for
correspondence and is, therefore, the source of applications for
loans, loan agreements, amortisation schedules and AIE.
The A2 files are used to maintain the Annual Audited Accounts which
are usually delivered along with applications for loans. Analyses of
the Accounts made by Department of Revenue & Investment staff
are usually retained in the A2 file as well.
Ledger and Registers
The ledgers and registers maintained are for loans and repayments,
amortisation (both ledgers), AIE Register and Vote Book.
a. Loans Ledger contains the particulars of loans released
including:
• Name of company/corporation
• Amount of loan principal
• Date of loan release
• Interest rate
• Moratorium period
• Principal repaid and date of repayment
• Interest paid and date of payment
• Balance outstanding
b. Amortisation Ledger is expected to contain details of principal

and interest due on all loans on a monthly or quarterly basis.
So in its place, bi-annual statements of dues are prepared
for purposes of seeking repayments and providing special
information whenever needed.
c. AIE Register contains particulars of all AIEs released for loans.
The entries are usually made in a serial order on the basis of the
dates of issue.
d. Vote Books are also used to keep a check on all releases from
Code 42010134 (MOFI Operation Account for Parastatals and
Government-owned companies).
e. Records kept for guaranteed loans still need to be looked into
as the records kept by Debt Management Office (DMO) are not
always in agreement with records kept in the department. This
challenge is currently receiving the attention of the appropriate
authority. In view of this, it is recommended that in the interim,
Loans Guarantee Register and various statements on guarantee
loans should be maintained.
27.8 Revenue Division

The Revenue Division is empowered to monitor all sources of
Revenue both to the Federation Account and Consolidated Revenue
Fund (which also contains the federally collected independent
revenue), Value Added Tax, etc. In order to carry out its mandates,
the division attends or hosts the following meetings to obtain first
hand information concerning the revenue monitoring to ensure that
revenues are accurately reported before sharing:
i. FAAC Meetings
ii. Federation Revenue Reconciliation Committee (FRRC):
This meeting is held monthly in the Office of the Accountant-
General of the Federation. The Director (Revenue and
Investment) presides over the Committee as Chairman.
Members of the Committee are representatives of:
a) Nigeria National Petroleum Corporation (NNPC)
b) Department of Petroleum Resources (DPR)
c) Federal Inland Revenue Services (FIRS)
d) Revenue Mobilisation and Fiscal Commission

(RMAFC)
e) Central Bank of Nigeria (CBN)
f) Nigeria Extractive Industries Transparency Initiative
(NEITI)
g) Budget Office of the Federation (BOF)
iii. Presidential Revenue Monitoring and Reconciliation
Committee (PRMRC): This is a Technical Sub-committee
on the Federation Revenue Reconciliation Committee. Its
meetings are held monthly at the CBN Office, Lagos with the
representatives of the following organisations:
a. Nigeria National Petroleum Corporation (NNPC)
b. Department of Petroleum Resources (DPR)
c. Federal Inland Revenue Services ( FIRS)
d. Revenue Mobilisation and Fiscal Commission
(RMAFC)
e. Central Bank of Nigeria (CBN)
f. Nigeria Extractive Industries Transparency Initiative
(NEITI)
g. Budget Office of the Federation (BOF)
iv. Import Duty Collection Committee (IDC): This committee

is usually held quarterly at Abeokuta with all the collecting
banks, CBN, NCS and OAGF Federal Ministry of Finance.
v. Presidential Revenue Monitoring and Reconciliation
Committee (PRM &RC): This is another committee hosted
by the Budget Office of the Federation. It is purely on
Budget performance where comparisons of Revenue with
Expenditure are made with a view to taking corrective action
where necessary.
vi. Monetary and Fiscal Policy Coordinating Committee
(MFPCC): This committee meets under the purview of
the Debt Management Office (DMO). The Committee is
responsible for effective co-ordination and harmonisation of
Monetary, Fiscal and Debt Management Policy and Strategies
for stable financial system in the country.
vii. Fiscal Liquidity Committee: The meeting of this committee

is convened on a weekly basis by the CBN and the division
usually attends to assess the liquidity of the nation. It entails
assessing the economy through measurement of the amount
of money released into the economy, the purposes as well as
the expenditure patterns to enable CBN assess the economic
trend of the nation.
viii. Bi-Monthly Meeting of OAGF: At the bi-monthly meeting of
the OAGF, the division is expected to discuss issues relating
to revenue generation, distribution, returns among other
reports to be presented at the meeting.
Note: Despite the establishment and activities of these
committees, Public Financial Management has not achieved
the desired results not only because the processors of the
reports and users are undefined but also, the time of use is
rarely known.
With these various committees in place, it is unbelievable that the

committees could not diagnose the problem of public financial
management. One key issue that is yet to be explained is the users
or the processer of the committee findings and at what time the
findings are used.
For instance, Federation Revenue Reconciliation Committee
(FRRC) and Presidential Revenue Monitoring and Reconciliation
Committee (PRMRC) comprising the key revenue agencies. Most
of the issues that the Technical Sub-committee of FAAC could not
discover or find solutions to ought to be addressed by the these two
committees with Revenue and Investment Directorate in attendance.
27.9 Identified Challenges in Revenue to Federation Account

and Independent Revenues.
i. Poor Tracking of Independent Revenues
A huge amount of projected revenues are hardly realised due
to poor budgeting as no targets were set for each MDAs.
In addition, the issue of comparing budgeted with actual
revenues to determine variances for remedial actions were
not done. Since supervision of MDAs was not properly

carried out, there was no basis for sanctioning any MDAs.
This is reinforced by the fact that no performance targets
were set for them. Persons with governance responsibilities
should view the inadequate monitoring of MDAs by the
Department of Revenue and Investment seriously. This
is because the department serves in many committees and
thus, has first hand information about their activities. Its
membership of various committees should positively impact
the output of the department.
ii. Lack of Technical Information and Expertise for Effective

Monitoring of Oil Revenue
Lack of technical knowledge of oil and gas accounting is one
of the causes of the inadequate result from the work of the
department and Federation Account Department.
In addition, the practices of NNPC including accounting
transactions are opaque and fall short of the level of
transparency that would have assisted the committee to
report adequately. For instance, there is lack of expertise to
carry out detailed analysis of production quantities, sales
values, sales receipts, Joint Ventures and Production Sharing
Contract operations.
Besides the fact that, in most of the NNPC reports, some
subsidiary incomes are often excluded, NNPC, unlike
other agencies, appears to be the only revenue agency
that determines the amount to be released for sharing per
month. This situation is compounded by the fact that a lot
of deductions are made at source without the approval of
FAAC. Without appropriate knowledge and expertise, no
relevant question can be asked. More anomalies observed
in the NNPC monthly report to FAAC will be discussed in a
subsequent chapter.
iii. Revenue Leakages by Collusion

Under the custom, although its annual target was understated,
the Customs and Excise Department could not achieve
the set target for 2010. This was mostly pronounced with
import duty. Incidentally, the agency was neither queried nor
sanctioned for poor performance or low revenue collection.
The only institution that has the constitutional power to
ask question is the Public Accounts Committee (PAC).
This report of poor performance has been in the domain
of the PAC without any action taken. This inaction is now
encouraging others to do the same.
It is an irony that predetermined revenue targets cannot be
met by the Customs and Excise when about 70-80% of what
we consumed in Nigeria are imported. Despite the report
of the Auditor-General for the Federation on this subject
matter, nothing serious has been done till date. For instance,
the Import Duty Revenue for the year 2010 is reproduced.
Table 27.6 Import Duty Revenue for the year 2010
Month Estimated Revenue Actual Revenue Variance % of the

N N N Variance
January 30,000,000,000.00 19,283,977,463.07 (10,716,022,536.93) 0.36

February 30,000,000,000.00 18,964,706,897.04 (11,035,293,102.96) 0.37
March 30,000,000,000.00 22,153,690,213.22 (7,846,309,786.78) 0.26
April 30,000,000,000.00 18,342,838,912.53 (11,657,161,087.47) 0.39
May 30,000,000,000.00 17,739,762,572.69 (12,260,237,427.31) 0.41
June 30,000,000,000.00 22,338,404,284.40 (7,661,595,715.60) 0.26
July 30,000,000,000.00 22,935,672,766.79 (7,064,327,233.21) 0.24
August 30,000,000,000.00 22,885,130,187.45 (7,114,869,812.55) 0.24
September 30,000,000,000.00 23,997,101,687.32 (6,002,898,312.68) 0.20
October 30,000,000,000.00 26,934,167,618.24 (3,065,832,381.76) 0.10
November 30,000,000,000.00 24,671,852,520.93 (5,328,147,479.07) 0.18
December 30,000,000,000.00 28,390,972,674.23 (1,609,027,325.77) 0.05
TOTAL 360,000,000,000.00 268,638,277,797.91 (91,361,722,202.09) 0.25
Note: N30 Billion import duty monthly is under-estimated; therefore, failure to

meet the target is questionable.
27.10 The Federal sub-Treasury Directorate

i. The Head of Department, Federal sub-Treasury is referred to as the
sub-Treasurer of the Federation.
ii. The importance of this office is not based on status or rank but in
relation to the strategic nature of the responsibility of the Head of
Department within the financial administration structure.
iii. While the Accountant-General is the Financial Adviser and Treasurer,
the sub-Treasurer is the Chief Cashier of the Government.
iv. He maintains the Federation’s Current Account with the Central Bank
of Nigeria and keeps the Consolidated Revenue Fund that enjoys
the Ways and Means (Overdraft) granted by CBN whenever there
is insufficient cash in the account. The maximum Ways and Means
Advance that can be enjoyed is 12.5% of the expected revenue in a
year and this must be cleared before the end of the year and
the Federation’s Accounts Cash Book.
v. He receives public moneys, pays from public funds, supplies
receipts books, stock registers, safes and cash tanks to
ministries/departments on demand and cash to Federal Pay
Offices.
vi. He gives cash backing to the AIE sent by a ministry in
favour of its outstation for payment through the Federal Pay
Office.
vii. The pay offices in the states are funded by the sub-Treasurer
based on the forecast made or based on the AIE’s to be paid
by the Federal Pay Office.
viii. The sub-Treasury also services non-self-accounting units
and agencies in Abuja.
27.11 Federal Pay Office

This is the Federal Government’s cash office in each state capital. It
is, therefore, a mini sub-Treasury. The offices are located in all the
36 states of the federation. A Federal Pay Officer who is appointed
by the Accountant-General of the Federation heads each Federal Pay
Office. The Federal Pay Offices should be seen as sub-Accounting
Unit in the various states. As Sub-accounting Units, they are
entrusted with receipts, custody and disbursement of public moneys
in the states and are required to keep the treasury cash books.
a. Function of a Federal Pay Office
i. He maintains proper system of accounts as prescribed
by the authority.
ii. Each Federal Pay Officer is expected to keep a standard
cash book and prepare a bank reconciliation statement
periodically.
iii. He exercises supervision over the receipt of Public
Revenue and ensures its punctual collections and
prompt recording under the proper Chart of Account or
other approved classifications.
iv. He ensures that proper provision is made for the safe

keeping of public moneys, securities, stamps, receipts,
licences and valuable documents.
v. He exercises supervision over all revenue collectors
under the authority that are entrusted with the receipt
and expenditure of public money.
vi. He supervises the expenditure of the Government, by
making sure that no payment is made which is not
covered by proper authority.
vii. He renders his account to the Accountant-General
through trial balance and full set of financial statement
in line with IPSAS 34 under Separate Entity Reporting
b. How Federal Pay Offices Are Funded

The Central Bank of Nigeria allocates account numbers to
the Federal Pay Offices. Fund Department authorises cash
remittances to the Federal Pay Officers on the basis of
their requests, which are required to be supported by cash
forecasts.
The Federal sub-Treasurer would carry out the order
of remitting the amount authorised through the Fund
Department to the Federal Pay Offices. As soon as the credit
advice is received, the amount would be debited to the cash
book of the Pay Office. The forecast of the Federal Pay
Officer would be based on the AIE submitted by the federal
ministries/departments that are paid from the Federal Pay
Office.
c. Operations of the Federal Pay Officer
The Federal Pay Office operates like any Central Pay Office.
Non-self-accounting ministries conduct their payment and
receipt transaction through the Federal Pay Office. The
Federal Pay Officer keeps two current accounts with Central
Bank of Nigeria.
• Recurrent and Capital Receipt and Expenditure

The state offices of the Federal Ministries/Departments raise
vouchers in their offices against their AIEs and transfers
made to the Federal Pay Office. The vouchers submitted
would go through the normal payment procedures.
Note: The voucher schedule must accompany the vouchers
as it moves from one section to another in the Federal Pay
Office. These vouchers move in these ways:
Federal Pay Officer
Control Section
Checking Section
Internal Audit Section
Cash Office
The Federal Pay Officers are required to submit their monthly

accounts by the 6th day of the following month. He transmits his
monthly account to the Accountant-General of the Federation
through trial balance. The following items always accompany the
control sheet:
(i) Original cash book folio arranged in strict data and numerical
order with cash specification on the last page.
(ii) Original and duplicate receipt and payment vouchers.
(iii) Cash and bank balance statement.
(iv) Voucher schedule.
(v) List of outstanding vouchers.
(vi) Bank reconciliation statement.
Practice Questions
1. Enumerate and discuss the various funds that exist in the

Public Sector.
2. Explain the purpose of each of the funds established.
3. Discuss the differences between the Federation Account and
the Consolidated Revenue Fund.
4. Discuss the various sources of revenue of the Consolidated
Revenue Fund.
5. Explain the functions of sub-Treasury and Federal Pay Offices
in the various states.
6. Discuss the roles of FAAC and the Technical Committee.
7. What are the collections challenges of revenue to Federation
Account and independent revenue of Government?
8. Enumerate the source documents required in Investment and
Loan Section of Revenue and Investment Department.
9. What are the functions of S1 & S2 and A1 & A2 files in
Investment and Loan section of Investment Department?
Chapter Twenty Eight
Revised Treasury Cash Book in Public Sector under IPSAS

Accrual Accounting Basis, E-Payment and Bank Reconciliation
Learning Outcomes
i. discuss the key features to note in posting the cashbook;
ii. specify the source documents for treasury cash book;
iii. enumerate and discuss the objectives of e-payment;
iv. explain the purpose of reconciliation;
v. discuss the challenges and concerns of e-payment;
vi. discuss the macro and micro benefits of e-payment; and
vii. state the types and explain the transcript preparation processes
28.0 Introduction
The revised treasury cash book in Public Sector is fallout of the
adoption of the accrual-basis of the International Public Sector
Accounting Standards (IPSAS). The double entry principle
underlies accrual basis of accounting; which implies that, any debit
entry must have a corresponding credit entry. This is different from
the cash basis that is done on memorandum book keeping.
Prior to the adoption of IPSAS in July 2010, the Nigeria President,
in September 2008, caused treasury circular No TRY/A8&B8/2008
dated 22nd October, 2008 to be written to the effect that all
payments from all funds of the Federal Government of Nigeria
should be made electronically with effect from 1st January, 2009.
This directive effectively abolished the use of cheques for payment
by the federal government. As a result, the mandate replaced the use
of cheques. Accordingly, in the preparation of bank reconciliation,
this development must be noted.
971
The treasury cash book is an account, which shows cash transactions

over a period of time. It is a book of prime entry. The treasury cash
book is the main accounting book of original entry and a very
important component of the ledger accounts. It is used to record
all receipts and payments. It should be noted that the conventional
double column cash book is still a correct cash book, but the Nigerian
government is trying to operate cashless environment where no
provision will be made for cash payment. Although the advantages
of electronic payment are numerous, some states are still operating
cheque transactions. These states should be encouraged and support
to embrace the emerging new order.
28.1 The Nature of the Cash Book

The Cashbook is divided into two parts:
• Receipt/Debit side; and
• Payment/Credit side.
With a total of 12 columns (6 on each side)
28.1.1 Analysis of the Cash Book…1

Receipts/Debit Side
Column 1: Date;
Column 2: From whom received;
Column 3: Descriptions;
Column 4: NCOA (Line Item/Activity Code);
Column 5: Authority Document Ref. No. (RV No); and
Column 6: Amount Received.
Amount Received Column

This Column deals with all Cash receipts.
The revenue section is usually advised through a copy of the debit
notes issued, conveying details of the expected revenues. These
debit notes are to be properly entered into a revenue day book,
from where each customer’s detail will be debited to their personal
ledgers, awaiting the receipt from this column to credit such ledgers.
973 Revised Treasury Cash Book in Public Sector under IPSAS Accrual ...
For all cash-backed receivables, the following Economic Code

(Revenue in Arrears) 31060401 should be used. Any other receipts
as may occur should be properly analysed and journalised using the
revised NCOA by the cash office, as part of their report, for onward
transfer to the Final Accounts for posting into the general ledger.
28.1.2 Analysis of the Cash Book …2

a. Payment/Credit Side
Column 7: Date;
Column 8: To whom Paid;
Column 9: Description;
Column 10: NCOA (Line Item/Activity Code);
Column 11: Authority Document Ref. No. (PV No)/mandate;
and
Column 12: Amount Paid.
b. Amount Paid Column

This column will accommodate all payments made. The other
charges, which deal with overhead expenses, and Capital
Section with capital expenditures will collect their applicable
Cash Book analysis from the Pay Office and debit the Personal
Ledgers of the Suppliers under their control.
Use Economic Code (Other Payables) 41040101 – 41040106
for all payables settled.
c. Amount Paid Column (2)

This column will accommodate all payments made against all
payrolls prepared by the salaries and wages section. It will
also take care of any allowances paid during the month that
are wages related. All payments made to staff of the MDA
concerned, all advances granted and paid, all imprest granted
and paid; all revenue transfer to CRF, are all included here.
d. Amount Paid Column (3)

Any other payment as may occur, such as bank charges,
Interest paid, etc. All these are to be properly analysed using
the revised NCOA by the cash office as part of their report for
onward transfer to the final accounts.
28.2 Key Features to Note in Posting the Cash Book

i. Each bank account maintained should have its own treasury
cash book.
ii. The name of MDA maintaining the cash book must be on
the top of the page.
iii. It must be prepared in duplicate.
iv. Posting into the treasury cash book is at Net.
v. Where more than one cash book is maintained for bank
transactions, one of the cash books should be the main one
into which the total of all the transactions in the other cash
book will be transferred for balancing.
vi. A payment voucher with a deduction on it must be properly
scrutinised to ascertain the arithmetical correctness of the
gross amount, the deduction and the net figure.
vii. The daily total figures of receipts and payments are to be
extracted into a register. At the end of the month, the total
of all the daily receipts entries in the register will be added
to the balance brought forward and that of the total payment
will be deducted to obtain the closing balance as at the end
of that month. The statement is referred to as Certificate of
Cash and Bank Balance.
28.3 Source Documents Used in the Posting of the Treasury

Cash Book
i. Payment Voucher;
ii. Receipt Voucher (Pay-in Form)
iii. Treasury Receipt (Treasury Book 6)
iv. Salary Payroll (Summary) etc.
Note: The role of MDAs regarding salary has not changed even
though the IPPIS is the one that finally made the payment.
28.4 Computation of Cash and Bank Balance

At the end of the month, a statement is to be extracted which is
referred to as Certificate of Cash and Bank Balance.
Format of Certificate of Cash and Bank Balance:
N
Opening Balance for the month xx
Add: Total Receipt for the month xx
xxx
Less: Total Payment for the month xx
Balance C/F xxx
This certificate will be sent to the final account for posting into the
general ledger as closing balance.
28.5 Maintenance of Cash Book

All government entities are expected to maintain a cash book for
every source of fund available to it as follows:
i. Revenue Cash Book (and/or Retained IGR)
ii. Personnel Cash Book
iii. Overhead Cash Book
iv. Capital Cash Book
v. Service Wide Cash Book
vi. Aid and Grants Cash Book.
28.6 Other things to Note on Cash Book Posting

28.6.1 Advances
All advances granted and paid out should be posted under the
Amount Column and classified to below-the-line expenditure using
NCOA (31060201). It is not to be charged to any expenditure line
item/sub-head. All advances are not expenditure. Therefore, all
advances must be entered into the advance register before payment.
28.6.2 Retirement of Advances

Three cases of retirement of advance would be discussed here:
(i) Exact amount granted was spent.
(ii) Amount spent exceed amount granted.
(iii) Amount spent less than amount granted.
a. Scenario One (exact amount granted was spent)
On retirement, a journal is raised by the advances section,
debiting all expenditure line items as reported in the retired
vouchers, using an analyses sheet and crediting advances
for the full retirements. The approving officer shall sign
this journal after satisfying that it really represents the true
position.
Journal Voucher
Description Dr (N) Cr (N)
Local Travel & Transport other 1,000,000.00
Advance 1,000,000.00
Being actual expenditure
undertaking with the advance
earlier granted now retired
b. Scenario two: Where the Sum Granted as Advances is not

Fully Expended and a Refund is Made.
The journal will indicate the amount actually paid back and
credit advance with the full amount taken. This treatment is
applicable to the final retirement of an imprest at the end of
the year.
Journal Voucher
Description Dr (N) Cr (N)
Local Travel & Transport other 800,000.00
Amount Refunded (Bank) 200,000.00
Advance 1,000,000.00
Being actual expenditure
undertaking with the advance
earlier granted now retired
Where the Sum Granted as Advance is Less Than Amount

Actually Spent
Journal Voucher
Description Dr. (N) Cr. (N)
Local Travel & Transport other 1,200,000
Amount claimed 200,000
Advance 1,000,000
Being amount retired and
claimed made being amount
above the amount granted
28.6.3 Drawing of Cash from Bank/Contra Entries

When it is necessary to draw cash from bank, where two-column
cash book is used, a cheque should be issued for the amount after
due authorisation processes but without raising a payment voucher.
This being a contra entry, the cheque will be posted as payment in
the bank column of the cash book, the contra entry will be recorded
on the cash column of the debit side of the cash book. Also where
there is a substantial amount of physical cash which needs to be paid
to the bank, a teller will be completed and posted on the credit side
of the cash column of the cash book and the teller will be posted as
receipt in the bank column in the cash book. No payment or receipt
voucher is to be raised for a contra entry.
28.6.4 Posting of Treasury Cash Book

Posting of treasury cash book is the same as that of the traditional
Cash Book, but the only areas that require explanations are in the
treatment of some transactions such as:
(i) Salary Vouchers
It is important to note that there must be deductions from the
gross salary and only the net will be paid to the employee
while the deduction at source will be paid to the beneficiaries
at the end of the month. Therefore, on the Summary Payment
Voucher all the analysis must have been stated.
The fact that, salary is handled by Integrated Payroll and
Personnel Information System (IPPIS) does not take away the
responsibility of recording the salary in the individual entity’s
book. Therefore, adjustment voucher will need to be used to
record the transaction in the book of the entity.
With the present reporting channel, each entity is expected to
prepare it’s own financial statement for consolidation to the
Accountant-General of the Federation and his equivalent at
the state level. Each entity has access to the IPPIS monthly
payment and the deduction made therein.
Where the agency has not joined the IPPIS and salary is paid
by the agency, the payment will be recorded in the cash book
with all the deductions. All the deduction vouchers (i.e., TF
209) will now be posted to the credit side of the cash book
separately in the payment provided the mandate will be issued.
However, if only the net is paid, all the deductions should be
recorded in payable register e.g. CTCS, Union due, PAYE
Pension contribution, etc.
(ii) Advances
Advance is a below-the-line item. Therefore, it is the below-
the-line expenditure at the time of granting. Note also that
it has not been charged to any recurrent head and sub-head
or classified into any economic code. This must have been
recorded in the advance register before getting to the Central

Pay Office for the payment.
The amount granted will be recorded in the payment column
and the advances ledger will be debited. With the abolition of
the use of cheque, the payment can be by the use of mandate
for agencies that have not migrated to Government Integrated
Financial Management Information System (GIFMIS) and
GIFMIS platform for agencies that have migrated to GIFMIS.
(iii) Contract Vouchers

These are vouchers for the payments of contracts or supplies
from which Withholding Tax and VAT must be deducted at
source. Therefore, with all contract vouchers, Pay-in Form TF
15 must accompany the voucher for the Tax and VAT. The
net contract sum will be recorded on the credit side of the
payment column and tax and VAT recorded also separately
which means that Tax and VAT are paid along the net payment.
Schedule of VAT and WHT should be produced; but when
payments are not made, this must be recorded in the payable
register. Whenever they are paid, they will be removed from
the payable register.
28.6.5 Settlement of the On-Payment Vouchers

At the end of the month, the analysis of the entire on-payment
withdrawal voucher would be made in order to settle all the
authorities concerned. Each voucher and cheque/mandate will then
be raised and issued for each authority e.g. Internal Revenue Board
for all PAYE etc.
28.6.6 Other things to be known

(i) Cheque Summary Register: This register should be maintained
in the cash office by a different officer other than the one
recording the cash book. It is used for the balancing of bank
transactions in the Cash Book. All cheques issued and all
receipts into the bank account, all vouchers raised to cover

bank advices, tellers of all payments to bank and any other
bank transactions as recorded in the cash book are to be
posted into the cheque summary register. It is used to carry
out the bank reconciliation statement.
(ii) Cash Order Form: This can be described as a temporary
voucher kept by the central pay office pending the time when
the original vouchers are returned. It is also used to introduce
the name and signature of the person authorised to collect the
cheque/cash on the voucher. It is used to cover a payment
voucher to the pay office, which is to be signed by the officer
controlling the vote. Acquitted payment vouchers must
be returned within seven days so that the cash order form
can be released. This has, however, been overtaken by the
introduction of cashless and E-Payment systems. The purpose
of retaining this is to take care of those states that are yet to
migrate.
(iii) Payment at an Outstation: The amount, which is expected to
be spent at the outstation, is transferred to the branch of the
designated bank account.
(iv) Staled Cheques: Unclaimed cheques become stale six months
after date of issue and should be credited back to chest either
to the classification of original payment in the same financial
year or to revenue, if in the following financial year.
(v) Bank Advices: There are two types of bank advice. Debit
Advice and Credit Advice.
(a) Debit Advice are issued to the customer informing
him that his account has been debited with the amount
on the debit advice. Examples: bank charges, C.O.T.,
cheque book charges, transfer of funds, charges etc.
(b) Credit Advice is to inform the customer that his
account has been credited with the amount stated
on the advice e.g. remittance, dividend, etc.
i. A register is to be maintained to record all
bank advices and particulars of disposals
made.
ii. Receipts are to be issued for all bank credit

advice and these receipts must be posted
into the appropriate cash book and the
cheque summary register/mandate.
iii. All bank debit advices must be checked
to ensure that such debits have been
authorised and payment vouchers raised
for the transaction before posting them
to the cash book and cheque summary
register/mandate.
28.7 E-Payment System

E-payment is a payment system, which involves the application of
electronic means to carry out financial transaction between customers
and business entities like banks. As a subset of e-governance, it
entails any kind of non-cash payment that does not involve the
use of a paper cheque. It is the application of electronic process
in the settlement of financial transactions between government and
citizens or between government and businesses. It involves the
use of computer systems and communication facilities devoid of
manual interventions. It can also be described as a cashless, online,
real time banking system, which eliminates the use of cheque books
and bank cheque. When it comes to payment options, nothing is
more convenience than electronic payment. You do not have to
write a cheque, swipe a credit card or handle any paper money. All
you have to do is enter some information into your web browser
and click your mouse. Because of its ease of use, more and more
people are turning to electronic payment as an alternative to sending
cheques through the mail.
Electronic payment system is a very important component of
electronic commerce. It drives all e-commerce business models
and serves as an integral part of financial supply chain. Without
electronic payment systems, e-commerce is not complete or at least
not practical as a revenue source or expenditure channel for an
organisation.
This section of the chapter introduces the basic concepts of electronic

payment systems; it goes further to discuss the application of
e-payment to the Nigerian local environment and the resulting socio-
economic benefits to the country at both the macro and micro levels.
It also discusses the changes in public sector financial transactions.
For Nigeria to take its true position in today’s global market,
electronic payment methods MUST be fully embraced at all levels.
The utilisation of “electronic money” will drive the growth of the
Nigeria economy by streamlining operations across the multiple
sectors of the country as well as enhance the efficiency and
productivity of both the private and public sectors of the country.
28.7.1 Objectives of E-payment

The use of e-payment has the following objectives:
i. To promote efficiency in public financial management.
ii. To promote financial inclusion.
iii. To eliminate wastes and curb sharp practices in public sector.
iv. To minimise human intervention in transactions and delays.
v. To benchmark public sector practices on global best practices.
vi. To enhance transparency and accountability in public
governance.
vii. To facilitate the socio-economic development of Nigeria.
28.8 Methods of Electronic Payment

28.8.1 Manual E-payment processing/ Bank Assisted E-payment
This is a method of electronic payment in which the MDA processes
its data/information and forward both the hard and soft copies of
its schedules to its domicile bank. With this option, the bank will,
on behalf of the MDA, make electronic payments to beneficiaries
stated in the schedules (such as staff, individuals, corporate bodies
and agencies) via inter-bank transfers to the designated parties
irrespective of the bank with which they maintain their accounts.
Payment schedules may be forwarded to the bank via compatible

electronic storage devices or via e-mail in a pre-determined format.
These must be accompanied by duly authenticated and signed
confirmation schedules that correspond to the information on the
storage device.
The banks will process the quasi-electronic payments as instructed
by the MDA. A critical factor to the effective processing of the
payments is the correctness of the beneficiary bank details forwarded
to the bank.
28.8.2 End-to-End E-payment Processing

This can also be called bank-to-bank vendor’s payment. For instance,
a bank offers a service called online bill pay. It installs software
package for this purpose and trains the MDAs’ personnel on how
to use it. The designated staff log on to the bank’s website, enters
the vendor’s information and authorise the bank to electronically
transfer money from the specified account to pay bill. In most cases,
the entity can choose whether to do this manually for each billing
cycle or have its bills automatically paid on the same day each
month.
However, the use of end-to-end processing requires four major
steps and each of the steps is assigned to a responsible officer of the
agency who is allocated with a code and password for access and
authorization to the bank web. These include:
• Uploading: This process entails input of correct data into the
system by a schedule officer known as uploader. The data
include account number, soft code, etc. The officer ensures that
all necessary data are fed into the system. He signs out when
the assignment is completed after which an alert is received by
a verifier.
• Validation/Verification: The assigned officer (verifier) logs in
with his password to verify accuracy of information inputted
into the system and makes necessary adjustment if any.
• Authorization: The next stage is to forward to the approving

officer, who confirms the total number of beneficiaries with
the amount stated against each with the cumulative total stated
on the mandate, thereafter, he gives his approval.
• Approval: The final stage is to forward to the Chief Executive
Officer for Final Approval. He confirms each name of the
beneficiaries with net-pay and ensures arithmetic accuracy
of the total sum indicated in the mandate and gives his
approval. Once this is done, the agency/institution’s bank
account is debited with the total amount while corresponding
beneficiaries’ accounts will automatically be credited within
seconds.
28.9 Statutory Authority on E-payment

i. In accordance with the September 2008 directive of Mr.
President (i.e., Late President Umar Musa Yar’dua), payments
from all funds of the Federal Government of Nigeria are done
electronically. The statement was consequently supported
with Federal Government Treasury Circular Ref. No. TRY/
A8&B8/2008 dates 22nd October, 2008 issued by the
Accountant-General of the Federation.
ii. From 1st January, 2009, all forms of payment from all
Government funds will be effected through any of the deposit
money banks or Central Bank of Nigeria.
iii. Commencing from 1st January 2009, all organs of government,
ministries, departments and agencies shall stop using cheques
to make payment to contractors. Contractors of government
must indicate the particulars of their bank accounts on the
invoice submitted for payment under their corporate seal.
iv. Mandates containing details of payment shall be issued to the
deposit money banks or Central Bank of Nigeria authorising
them to pay into the contractor’s designated Bank Accounts, the
net proceeds of the contract sum. In addition to existing monthly
financial returns, every organisation of Government, Ministry,
Department or Agency must forward copies of mandates issued
to the Office of the Accountant-General of the Federation.

Henceforth, all employees of the Federal Government of Nigeria
must each open an account with a deposit money bank into which
all payments due to him/her can be paid. On no account should
Central Pay Officers (CPO) collect cash from the bank for the
purpose of disbursement to any government official.
Format of instruction to CBN/Commercial Banks
EPT/NO.
OH/2010/000A…………
Date…...........…………
The Manager,
Naira Bank, Plc,
Oluwambe Avenue, Ikeja,
Lagos State.
Please credit the account(s) of the underlisted beneficiaries and debit our
Account Number WXYZ0001234568 accordingly;
S/N Beneficiary Bank Sort Code Account Amount Purpose of

Number N Payment
i.. Money
ii. Kudi
iii. Owo
Total
Authorised Signatory_____________ Authorised Signatory_____________
Name:______ Thumb print______ Name:______Thumb Print_______
28.10 Characteristics of E-payment

A web-based electronic solution also runs by Inter Switch. It runs
on a multi-bank platform integrating various banking applications.
Transactions are online, real-time. E-payment provides a single
payment and reporting source for all payment types. It monitors
collection, sweeping and funds remittance by all lead and collecting

banks.
28.11 Data Required to Effect Payment

Information in the Mandate Schedule forwarded to the Bank should
contain the following:
i. Unique mandate number
ii. Beneficiary’s Name
iii. Bank account number
iv. Date
v. Bank and Branch
vi. Sort code
vii. Amount (in figures and words)
viii. Purpose of payment
ix. Authorise signatory name and thumb print
Note: the thumb print is part of the security introduced as thumb
print can not be forged. It is mandatory that thumb print must be
inserted.
28.12 Benefits of E-payment

i. It eliminates unacceptable delays in the payment to government
contractors, FIRS, BIRS and staff. It minimises interaction
between contractors and government officials who have roles
to play in the payment process.
ii. It fast tracks the process of implementation of government
activities and removes unnecessary bottlenecks and abuses in
the use of cheques and cash.
iii. It is a starting point to complete e-governance in Nigeria, which
is the use of information and communication technologies to
support good governance.
iv. It facilitates audit trails of all payments to the relevant bank
accounts of individuals or companies that paid or received the
funds.
v. Electronic payment lowers costs for businesses.
vi. It is convenient for the customer.
vii. The status of all payments can be monitored online real time
via Internet banking.
viii. It enhances transparency and accountability.
28.13 Macroeconomic Benefits

a. Increased Domestic Activities in the Economy
i. The adoption of electronic payment system by the
government, the largest employer of labour in Nigeria,
would stimulate economic activities based on increased
security, convenience, speed and overall efficiency. It
will also bring about renewed confidence in the national
currency, the naira, which may ultimately result in greater
spending, higher industrial capacity utilisation, create
more jobs and increased tax revenue for the government.
ii. In a study conducted in the US by Global Insight, it was
discovered that growth in electronic payments has added
an additional US$6.5 trillion to real consumer spending
over the last two decades. The cumulative gain was almost
10 million new jobs. It has been demonstrated that these
cumulative benefits are applicable to every country that
implements such systems.
b. Increased Global Economic Activity
The use of credit/debit cards like VISA/MasterCard has the
capacity to stimulate economic activities in such key areas
as tourism, hospitality, travel, etc. A Global Insight study
commissioned by VISA in 2003 showed that, on an analysis
of a cross-section of 50 countries, increasing the existing share
of electronic payments in a country by a margin of just 10 per
cent will generate an increase of 0.5 per cent in consumer
spending. This has implications for more productivity and
investments.
c. Cost Savings
The cost savings associated with this concept are huge
particularly in terms of the reduced cost of handling paper-
based payment systems; the reduced cost of security for
payment transactions and the overall reduced cost “in the use
of cash”. Electronic payment networks have the potential to
provide cost savings of, at least, 1 per cent of GDP annually
over paper-based systems through increased efficiency and
lower costs.
d. Capital Accumulation Banking the Unbanked

Electronic payment systems facilitate capital accumulation.
The introduction of such a platform in Nigeria will increase
the number of banked citizens. Inclusion in the banking
system helps improve money management and leads to
enhanced financial empowerment. The net result is the
creation of powerful engine for growth – drawing cash into
bank accounts where it can provide low-cost funds for on
lending and investment. In a simulation of the U.S. economy,
a 10 per cent shift of currency into deposits of other reserves
that can be used for loans increased GDP by more than 1 per
cent annually. Although only the U.S statistical data is used in
this paper, this multiplier effect is applicable in any market.
e. Increase in GDP Through Higher Consumer Spending

In its report for VISA presented at the High Level Regional
Conference for Transitional Economies recently held in
Geneva by the United Nations Conference on Trade and
Development (UNCTAD) and the United Nations Economic
Commission for Europe, Global Insight estimated that a 10
per cent shift in total expenditure on payment cards can lead
to a half of one per cent increase in consumer spending which
in turn fuels GDP growth.
f. Maximisation of Tax Revenue: Reduction of the Nigerian

Shadow Economy
The E-payment will go a long way in reducing the informal
economy or shadow economy in Nigeria. Government will be
able to benefit from increased revenue from taxation and other
revenue sources.
g. Promotion of Accountability and Transparency

E-payment will promote accountability and transparency thus
helping to reduce corruption in the country.
28.14 Microeconomic Benefits

a. Elimination of “ghost workers/ghost transactions.”
b. Cost reductions.
c. Streamlining of accounting procedures.
d. E-payment will facilitate the introduction of controls and
protocols for the disbursement of money, which will go a long
way in minimising the threats of fraud and theft.
e. E-payment systems automate payroll and general account
administration and management. It facilitates centralised
management and administration of the finance, audit and
accounting functions.
28.15 E-payment Instruments

i. Personal computers
ii. Telephones for IVR
iii. Mobile phone
iv. Internet
v. Automated Teller Machines (ATM)
vi. Point-of-Interaction Terminals
28.16 Transactions Covered by the E-payment

i. All payments to contractors.
ii. Payments to service providers.
iii.
All payments to staff, both salaries and advances.
iv. Payments to other Government Agencies, e.g., FIRS, SBIR,
etc.
v. Payments for the supply of store items either contract or cash
advance.
28.17 Medium of Sending Instructions

(i) Soft copy in form of non-rewritable CD with a hard copy
conveying the approval.
(ii) Hard copy will act as a confirmation letter as it contains the
authorised signatures of officers in the MDAs.
(iii) MDAs are to appoint bank relationship officers and forward their
identification particulars (signature and passport photograph).
(iv) Monthly Bank Statements must be ready for collection by the
MDAs on or before the end of the first week of the following
month.
(v) MDAs are to subscribe to online banking facilities offered by
banks to enable them access their statement online.
28.18 Use of Operational Account

This is a bank account opened on behalf of the agency for its
departmental imprest. A staff should be introduced by the agency to
the bank, authorising such officer be the signatory to the account for
office use. The account is domiciled in the name of the agency/the
name of the nominated signatory. The office has a total control on
the account and can call for its statement at its discretion. In case of
any eventuality, the office writes to the bank for further directives in
the interest of the public.
28.19 Concerns about Electronic Payment

The main drawback of electronic payments is concerns over privacy
and the possibility of identity theft. Fortunately, there are many
safeguards available to protect your sensitive personal information
from falling into the wrong hands.
• A user can defend himself against identity theft by using virus
protection software and firewall on his computer.
• A user should also make sure that he sends credit card
information over a secured server. The Internet browser will
notify the user when a server is secure by showing a lock or
key icon.
• In addition, the URL on a secure site is usually designated
by the prefix “https.” Retailers do their part by using data
encryption, which codes information in such a way that only
the key holder can decode it.
Private concerns aside, some people simply dislike making electronic
payments. They find the set up too time-consuming and do not want
more log ons and passwords to remember. Others simply prefer
the familiarity of writing cheques and dropping envelopes in the
mail. Regardless of these concerns, electronic payment will likely
continue to rise in popularity.
28.20 Financial Reporting Requirements

i. Mandates reference numbers are to take the place of cheque
numbers. All mandates issued must accompany the forwarded
financial returns, bank reconciliation, etc.
ii. Where the mandates consist of a number of payments, each
individual payment must have a unique reference number in
posting the transaction.
iii. The payments so marked with the reference number must be
entered in the column for cheque number for now.
iv. In case of reconciliation of the account, the bulk amount, which
will be debited in the bank statement as per the particular
mandate number, must have all the unique reference numbers
ticked against the bulk payment.
28.21 Challenges
(i) It is often very difficult to reconcile the individual credit
entry in the cash book with debit figure in the bank statement
especially when bulk debits are made by the bank.
(ii) There is difficulty in identifying the unique numbers used
in posting to facilitate the reconciliation of bank statement.
(iii) The issue of when beneficiaries should sign receipt column
in the payment voucher is not yet settled.
(iv) Inability to stop processed payments — Non-repudiation.
(v) Issue of data integrity and confidentially.
(vi) Management Support.
(vii) Risks — Cyber security issues need to be addressed.
(viii) Technology — System downtime.
(ix) Non-availability of backup devices.
(x) System crash.
(xi) Operations — Wrong authorisation, reversal of mandates,
creation of omnibus account.
(xii) Financial — delay in funding leading to overdrawn accounts
or excess liquidity leading to inflationary economy.
28.22 Critical Success Factors

i. Availability of working tools.
ii. Continued top management support.
iii. Operations support.
iv. Reliable banking application and interface.
v. Reliable communication links online, real time.
In compliance with rules and regulations of the Federal Government,

all public institutions are to align with the government directive
on the electronic payment in pursuance of the administration
policy on probity, transparency and accountability. The use of
E-payment in the disbursement of claims to staff and suppliers has
become mandatory to all government agencies/establishments and
institutions and therefore, MDAs should discard the use of cheque/
cash in the settlements of bills.
Worked Example on Treasury Cash Book

The following are the financial transactions that took place during
the month of April 20x7 at the Central Pay Office of the Ministry of
Education in Lagos where only one treasury cash book is maintained
and other books.
Date Details N
1/4/20x7 Balance b/f 130,500
3/4/20x7 2nd Quarter Allocation for the Recurrent expenditure
TRY. No. 540201 was issued 300,000
3/4/20x7 PV/45/x7 Gross Salary for Mr. Adeyemi and others with
Mandate No. AB 14861 45,000
The following deduction vouchers were attached but not paid
until the end of month:
Rent of Quarters 12/2 2,500
-Union due 35/1 2,000
-Income Tax 35/1 2,750
-CTCS 35/1 4,500
11,750
6/4/20x7 Receipt No. 540202-issued to Ayoola for the school fees paid to
Treasury Account after he generated RRR 2,500
6/4/20x7 The Principal of Ijanikin Federal Government College had
paid into the Treasury Account and submitted Tellers and
TRV No. 540203 was issued to him. Economic code; (12020456) 28,000
8/4/20x7 PV/46/x7 was raised in favour of Jatto for the Advance
(310602) Mandate No. AB 14862 4,000
10/4/20x7 Unclaimed wages (210101) from Samuel and TRV No. 540204
issued for unclaimed salary. 2,500
15/4/20x7 Advance to Segun procure stationery for the office
Vide PV/51/x7 (310602) and mandate No. 14863 3,000
17/4/20x7 PV/52/x7 for payment of stationery supplied by
D. Olu & Sons Subject to Tax & VAT (22020301)
and Mandate No. AB14864 issued 5,000
20/4/20x7 PV/53/x7 in favour of Akin for refund of
petrol (22020401) with Mandate No 14865 3,500
22/4/20x7 PV/55/x7 was raised in favour of A. Ajayi & Others for
the April Salary and Mandate No. AB14866 issued for
the Net (210101) 55,000
The following deduction vouchers were attached.
- PAYE 35/1 4000
- Rent 12/2 1000
- CTCS 35/1 2500
- Union due 35/1 2000

- MV Loan 15/3 1500
11,000

22/4/20x7 PV/56/x7 was raised in favour of Mr. Jatto and
TRY No. 540205 issued to him and he has
submitted the receipt and SRV of the stationery
procured and Mandate No. AB 14867 for the excess
of the advances granted Economic code (220203) 4,800
22/4/20x7 Receipt No. 540206 for the receipt after the RRR
generated and payment to the Treasury Account received
from Mr. Bassey for the refund of overpayment on his salary 1,800
22/4/20x7 Contractors Registration fee paid by Alhaji Salami
Vide Receipt No. 540207 after payment into Treasury
Account (120204) 2,500
23/4/20x7 Receipt No. 540208 issued to Abike for Tenders’ fee (120204) 2,000
23/4/20x7 PV/60/x7 for utility Service in favour of NEPA
by Mandate No.14868 and Economic code; (220202) 1,000
23/4/20x7 PV/61/x7 for maintenance in favour of SCOA by
Mandate No.14869 and Economic code (220204) 3,000
23/4/20x7 PV/62/x7 for stationery in favour of Mr. Ojo by mandate
No.14870, Economic code; (220203) 1,500
24/4/20x7 Receipt No. 540209 issued to Segun for the refund of
unspent Advance 500
24/4/20x7 PV/65/x7 and mandate No.AB 14871 raised in favour of
Mrs. Olusola for Advance for the maintenance of the official
vehicle and Economic code (2202040) 4,500
25/4/20x7 PV/66/x7 raised in favour of Ariori & Others for April
salary (210101) and Mandate No. AB14867 was issued for 32,300
The following deduction vouchers attached:
i. Union due 2500
ii. PAYE 35/1 1500
iii. CTCS 35/1 2000
iv. Rent of Quarters 12/2 1000
v. MV Loan 15/3 1800
8,800
25/4/20x7 PV/67/x7 was raised for the repair of vehicle in favour of
Abass subject to VAT & WTH (220204) and Mandate
No. AB14873 issued 8,000
26/4/20x7 PV/68/x7 for the payment of refund of N1000 to
Mrs. Edun for the advance granted for the maintenance
of vehicle after her submission of all the receipts and job
cortication by the Head driver. The N4000 advance
granted in February 20x7 which she has just retired.
Mandate No. AB 14874 1,000
26/4/20x7 Receipt No. 540212 issued to Ayoola for the

school fee (120204) 1,000
30/4/20x7 PV/69/x7 was raised in favour of Internal Revenue for the
total tax deducted for the month. Mandate No. AB14875 issued
30/4/20x7 PV/70/x7 was raised in favour of CTCS for the month-
Mandate No. AB 14876 issued
30/4/20x7 PV/71/x7 was raised in favour of Union due for the month.
Mandate No. AB14877 issued.
Required
You are required to post these into the treasury cash book and the
relevant journals.
Note: RRR (Remitta Retrieval Reference Numbers:
This is 12-digit code that is generated electronically
and it is used for marking financial payment on the
Remitta platform).
Solution:
TREASURY CASH BOOK
NAME OF MDS:... Ministry of Education Lagos TRY NO. 001 996

SOURCE OF FUND CODE: Appropriation
CASH BOOK (TO BE USED FOR REVENUE, RECURRENT EXPENDITURE, CAPITAL EXPENDITURE AND OTHER BANK ACCOUNTS)

RECEIPT SIDE OF CASH BOOK PAYMENT SIDE OF CASH BOOK
DATE RECEIVED DESCRIPTIONS NCOA CODE AUTHORITY AMOUNT DATE PAID TO DESCRIPTION NCOA CODE AUTHORITY AMOUNT
FROM /DETAILS OF (ECONOMIC DOCUMENT RECEIVED /DETAILS OF (ECONOMIC DOCUMENT PAID
RECEIPT CODE) REF No. (RV) N PAYMENT CODE) REF No. N
(PV) Mandate

1/4/x Balance B/F 130,500.00 3/4/x Adeyemi April, 20x7 salary 210101 45/x7/14861 33,250.00
& Others
3/4/x Accountant- 2nd Qtr Recurrent 2202 540201 300,000.00 8/4/x Jatto Advance for 310602 Pv/46/x7/ 4,000.00
General Allocation procurement of AB14862
stationery
6/4/x Ayoola School fee 12020456 540202 2,500.00 15/4x Segun Advance for 310602 Pv/51x7/ 3,000.00
procurement for AB14863
stationery
6/4/x Principal of School fee 12020456 540203 28,000.00 17/4 D. Olu & Stationery Supplies 310602 Pv/52/x7 4,5000.00
Ijanikin Sons AB14864
10/4/x Samuel Unclaimed Salary 210101 540204 2,500.00 17/4 SIR WHT Pv/52A/x7 250.00
AB14865
22/4 Mr. Bassy Refund of Over- 210101 540206 1,800.00 17/4 FIRS VAT Pv/52B/x7 250.00
payment of Salary AB14866
22/4 Alhaji Salami Registration fees 120204 540207 2,500.00 20/4 Akin Refund of Petrol 22020401 Pv/53/x7 3,500.00
AB14780
23/4 Abike Tenders fees 120204 540208 2,000.00 22/4 Ajayi & Salaries & Wages 210101 Pv/55/x7 44,000.00
Others AB14665
24/4 Segun Refund of unspent 2202 540209 500.00 22/4 Mr. Jatto Refund of excess 220203 Pv/57/x7/14866 800.00
Advance Advance granted
26/4 Ayoola School fees 12020456 540212 1,000.00 23/4 NEPA Utility service 220202 Pv/61/x7 1,000.00
AB7648
23/4 SCOA Maintenance of 220204 Pv/61/x7 3,000.00
vehicle AB7649
23/4
Ojo Stationery 310602 Pv/62/x7
1,500.00
AB7560
24/4
Mrs. Olusola
Maintenance of
220204 Pv/65/x7
4,500.00
Vehicle AB14869
NOTE: AT PERIOD END (E.G MONTH END) RAISE A JOURNAL ENTRY FOR RECEIPT AND
PAYMENT SIDE OF THE CASH BOOK EACH
Revised Treasury Cash Book in Public Sector under IPSAS Accrual ...

DATE RECEIVED DESCRIPTIONS NCOA CODE AUTHORITY AMOUNT DATE PAID DESCRIPTION NCOA CODE AUTHORITY AMOUNT PAID
FROM /DETAILS OF (ECONOMIC DOCUMENT RECEIVED TO /DETAILS OF (ECONOMIC DOCUMENT
RECEIPT CODE) REF No. (RV) N PAYMENT CODE) REF No. N

24/4 Ariori & April Salaries 210101 Pv/66/x7/ 23,500.00
Others AB148690
25/4 Abass Repair of Vehicle 220204 Pv/67/x7 4,200.00
AB14870
25/4 SIR WHT Pv/67A/x7 400.00
AB14872
25/4 FIRS VAT Pv/67B/x7 400.00
AB14872
26/4 Mrs. Maintenance of 220204 Pv/68/x7 1,000.00
Edun Vehicle AB14873
30/4 SIR PAYE Pv/69/x7 8,250.00
AB14875
30/4 Treasurer CTCS Pv/70/x7 9,000.00
AB14876
30/4 Treasurer Union Due Pv/71/x7 6,500.00
AB14877
Treasurer Balance C/D 314,500.00
471,300.00 471,300.00

314,500.00
997
Analysis of On-Payment Vouchers
Date VAT WHT PAYE CTCS Union REVENUE

Rent M/V
3/4/x7 2,750.00 4,500.00 2,000.00 2,500.00
17/4/x7 250.00 250.00
22/4/x7 4,000.00 2,500.00 2,000.00 1,000.00 1,500.00
25/4/x7 1,500.00 2,000.00 2,500.00 1,000.00 1,800.00
25/4/x7 200.00 200.00
Total 450.00 450.00 8,250.00 9,000.00 6500.00 4,500.00 3,300.00
Important Things to Note:

• VAT and WHT were paid along the payment of the
contractors
• PAYE, CTCS and UNION Due were paid at the end of the
year.
• Rent and recovery of the loan, adjustment vouchers are
required to transfer the fund to income in the account of the
month.
• The attached deductions to the salary should be deducted to
arrive at the net payment for the month.
• General Note: The union due, income tax and CTCS are to
be paid to other organisations while that of rent and motor
vehicle recovered will be remitted to sub-Treasurer as
revenue for the month.
Note: It is important to stress that motor vehicle

recovery should not have been treated as revenue.
Only the interest on the advance granted should have
been so treated. However, since it was not separated
in the estimate, it has to be treated together.
Certificate of Cash and Bank Balance

This is a statement to certify that the actual cash balance agrees with
what is indicated in the cash book.
The opening balance at the beginning of the month is taken, to which
total receipts for the month is added and from which total payments
for the month are deducted to give closing balance for the month i.e.
(opening balance + total receipts) - total payments = closing balance.
Specimen of monthly Cash and Bank Balance
Cash Balance:
Opening cash balance as at 1st ....... 20..... xxx
Add total receipt for the month xxx
xxx
Less total payment for the month (xxx)

Closing balance for the month xxx
Bank Balance:
Opening bank balance as at 1st ....... 20.... xxx
Add total receipt for the month xxx
xxx
Less Total payment for the month (xxx)
Closing Bank Balance for the month xxx
Note: In calculating the cash receipt and cash payment, only

the actual cash movement should be picked; all deduction and
retirements of advances recorded in the cash book should he
ignored. The certificate of cash and bank balance for the month of
April 20x7 is as follows using worked example from the cash book.
Bank Balance N
Opening balance 1st April 20x7 130,500
Add total receipt 340,800
471,300
Less total payment (156,800)
Closing balance as at 30/4/x7 314,500
28.23 Reconciliations
Reconciliation is the process of resolving the differences between
the balances of the accounts kept in respect of the same transaction
at different points by different parties. In government accounting
generally, there are many forms of reconciliation. Some of them
include:
(a) Departmental Vote: This is the process of reconciling the

treasury records and the departmental vote account book on a
monthly basis.
(b) Loan Account: This is the process of resolving the differences
in the loan balance in the book of the creditor and that of
debtors book balance.
(c) Service Account: This is the process of agreeing the actual
consumption of a service with the billing statement produced
by the relevant agency e.g. NEPA, Water Corporation.
(d) Inward and Outward Current Accounts: This is the process
of agreeing the balances in the Accountant-General of the
Federation records with that of various state government
accounts.
(e) Below-the-line Accounts: This is the process of agreeing
the balances in the treasury with that of various ministries/
departments. You will recall that below-the-line account is
the Accountant-General’s fund. Therefore, as individual
ministries are keeping their account, the treasury will also be
keeping its own and at the end of the year, reconciliations have
to be carried out to ensure that there are no disagreements.
(f) Cash Reconciliation: This is the process of agreeing the cash
book balance with the cashier. Therefore, where there are
two cash books: petty and main. Reconciliations have to be
carried out in order to ascertain the true position of cash.
(g) Bank Reconciliation: This is the process of matching the
organisation’s cash book balance with the bank statement.
It is also the means of finding the differences between the
cash book balance and the bank balance. It is true that both
balances would never be the same. It is, therefore, very
important that every department is duty bound to keep close
watch on its bank account to guard against fraud. Failure to do
this may not only result in heavy loss of funds, but sometimes
in embarrassing and unpleasant situations like indictment of
staff. However, bank reconciliation is prepared to reconcile
the bank column of the cash book with that of bank.
28.24 Types of Book/Document to Be Kept by MDAs

(i) Cash Book
(ii) Control/Vote Book
(iii) Payment Voucher Register
(iv) Procurement Planning Committee Minutes
(v) Tender Board Minutes
(vi) Bank mandates file
(vii) Bank statement file
(viii) Bank Reconciliation Statement file
(ix) Payment Voucher file
(x) Credit Advice file
(xi) Contract/Project Register
28.25 Duties of the Desk Officer

a. The desk officer shall ensure that all duly approved payment
vouchers for which mandates have been duly issued and
signed by the authorised signatories are credited into the
cash book and are properly analysed into the respective
economic code to which they relate.
b. The desk officer shall ensure that all entries into the Cash
book are balanced, ruled off and summarised monthly under
each economic code before being posted into the respective
ledger account in the general ledger.
c. The desk officer shall sign the cash book at the end of every
month. He shall append his signature as a certification of
the correctness of the entries and balance.
d. It is compulsory for the desk officer to update the cash
book once the allocation is received. In case credit advice
is not given, photocopy of the bank statement page where
the allocation sent is reflected should be used to raise the
receipt voucher to update the cash book.
e. Under the description, you can just write “From AGF” and
record the amount.
f. The date recorded or the date of payment should be stated.

The payment voucher should be serial, the NCOA or the
sub-head on the payment voucher should be indicated on
the cash book.
g. The Bank mandate number must be stated on the cash
book and the name on the mandate should correspond
with the payee. The purpose of the payment, which is the
description, should be clearly stated, and the amount paid
should be stated on the amount column.
28.26 Bank Reconciliation Statement

a. It is compulsory for the desk officer to prepare bank
reconciliation statement of the MDAs’ accounts, .i.e.,
reconcile the cash book balance with the bank balance at
the end of each month.
b. Unapplied mandates after six months should be written
back in the cash book.
Note: Unapplied mandates are those names on the
mandates schedules to the bank that were not paid
due to one reason(s) or the other.
c. Charges in the bank statement made by the bank are checked

for authenticity and correctness, before being posted to the
MDAs cash book.
d. Discrepancies in the bank statement are taken up in writing
with the bank and effectively followed up until reversed by
the bank, with an advice to that effect.
e. Prompt action are always taken to obtain bank advices to
confirm the various entries in the bank statement as the
effectiveness of bank reconciliation statement lies in the
prompt clearance of outstanding items. Such advices file
and a copy must be attached to the entry.
28.27 Practical Approach to Reconciling the Bank Statement

with the MDAs Cash Book Balance
a. The desk officer should ensure that bank statement is
collected from the bank within the first five working days
after the month end.
b. Cross check that the opening balance on the current bank
statement agrees with the closing balance in the previous
month’s statement. The two must agree or the difference
taken up with the bank.
c. In case the bank statement contains transactions that split
over after the 30th of the month, a red biro should be used
to rule exactly the last working date of the month he intends
to carry out the bank reconciliation. This action will prevent
him/her not to pick transactions on the bank statement after
the end of the month.
d. The uncleared items in the last month reconciliation
schedules should be treated first.
The schedules are:
i. Schedule “A” – Unapplied mandate or unpresented
cheques.
Lists out the un-applied items from the mandate that
have not been paid.
ii. Schedule “B”– Credit in bank not in cash book: These
are direct payment made either by a student or any
other person and the teller had not been presented for
official receipt and record in the cash book.
iii. Schedule “C” – Uncredited lodgement: These are lodgements
made to the bank which were not reflected in the Bank
statement. Date of lodgement should be noted, because
most of the lodgements are automatic, where it is not so,
investigation should be made.
iv. Schedule “D” Debit in bank not in cash book;
Generally, any amount debited into the bank statement
without the acknowledgement of the agency need

to be investigated. Though COT is one of the items
in these categories, the correctness of the COT still
need to be confirmed.
e. All the items in the schedule must be ticked into the current
bank statement and extract out others that have not been
reflected in each schedule.
f. Debit entries in the bank statement are ticked against the
credit entries in the MDAs cash book.
g. Credit entries in the bank statement are ticked against the
debit entries in the MDAs cash book.
h. The unticked debit and credit entries in the bank statement
and unticked debit and credit entries in the MDAs cash
book are listed out into the schedule each belongs, e.g.,
unapplied items in the mandate that have been credited in
the MDAs cash book which have not been paid by the bank
will fall into schedule “A” unapplied mandates. (Former
Unpresented cheques).
Format of Schedule A – D
Schedule ‘A’ Unapplied Mandates
Date Mandate No Description Amount N Remarks

2/3/2010 CAP/Uni/Ilorin/
2/2010 Olusola A.A. 230,000.00
2/3/2010 CAP/Uni/Ilorin/
2/2010 Ajayi S.A. 40,000.00
Total 270,000.00
Schedule ‘B’ Credit in Bank Not in Cash Book
Date Teller No. Description Amount N Remarks

5/7/2010 74750 A.O. Ajayi 5000.00
10/7/2010 74789 G.O. Ogunsola 5000.00
15/7/2010 Transfer from
Tetfund 1st Tranche 5,500,000.00
Total 5,510,000.00
Schedule ‘C’ Unaccredited Lodgement
Date Receipt No. Description Amount N

4/7/2010 47470 E.O. Mary 50,000.00
8/7/2010 47480 B. Gbenga 100,000.00
Total 150,000.00
Schedule ‘D’ Debit in Bank Not in Cashbook
Date Mandate No. Description Amount N

20/7/2010 Transfer F.O. Banni 500,000.00
21/7/2010 Charges COT 5,000.00
23/7/2010 - B.O. Sola 100,000.00
24/7/2010 - VAT 5,000.00
25/7/2010 - Cheque Book Charges 10,000.00
Total 615,000.00
i. The list of unticked debit entries in the bank statement shall

consist of the following:
i. Charges in the bank statement not taken up in the
MDAs cash book
ii. Wrong debit entries by the bank (if any), to be taken
up in writing till reversed by the bank. E.g. cheque
books charges cannot be, as there has not been any
cheque in use in the era of e-payment. Cheque book
charges are wrong debit.
j. The list of unticked credit entries in the bank statement

shall consist the following:
i. Direct transfer from MDAs for which the beneficiary
is yet to receive an advice.
ii. Direct payment of school fee, which the student had
not presented the teller at bursary for official receipt.
iii. Wrong credit entries by the bank.
k. The list of unticked debit entries in the MDAs cash book
shall include:
i. Lodgements made into the bank but which were not
reflected in the bank statement.
l. The list of unticked credit entries in the MDAs cash book
would also include:
• Unapplied mandate, i.e., the names in the mandate
that were not yet paid by the bank or returns mandates.
28.28 Preparing Bank Reconciliation Statement

Bank reconciliation statement will be prepared as follows:
University of Ajaokuta
Bank Reconciliation Statement for the month of

February, 2010
N N
Balance as per TETFUND
Project Cash Book xxxxxxx
Add Unapplied mandates
Schedule ‘A’ xxxxxxx
Add Credit in Bank not in CB

Schedule ‘B’ xxxxxxx xxxxxxx
Less Uncredited lodgement
Schedule ‘C’ (xxxxxxx)
Less Debit in Bank not in CB

Schedule ‘D’ (xxxxxxx) (xxxxxxxx)
Balance as per Bank
Statement xxxxxxxxx
(The balance must agree with the bank statement for the month)
28.29 Monthly Bank Schedule Mandates

The desk officer shall maintain a monthly bank schedule mandate
file in respect of e-payment made during the month. All mandates
issued must be recorded into the TETFUND Project Cash Book.
28.30 Cheque Received/Credit Advice Register

It is still possible to collect cheque in one way or the other. Therefore,
there is need to maintain this register and credit advice register to
record all the credit received from the bank. The desk officer shall
enter the particular of the cheques received for lodgement.
The entries in the register shall be made as follows:
S/No. Date Name of Cheque Amount Date Collected

Issued Drawer Number

28.31 Documents Required for Bank Reconciliation

(i) Cheque Summary Register/Cash Book
(ii) Bank Statement
(iii) Cheque stubs (where the figure in the cheque Summary
register needs some clarification or confirmation)
(iv) Last bank reconciliation statement
(v) Mandate file
28.32 How to Carry out the Bank Reconciliation

i. Pick or extract the cash book balance at the end of month.
ii. The previous month’s bank reconciliation statement should
be made available in order to treat the outstanding items
such as unpresented cheque and uncredited lodgement.
iii. Tick debit entries in the cash book against credit entries
in the bank statement and credit entries in the cash book
against the debit entries in the bank statement.
iv Extract the unticked items into their various schedules
including outstanding items in the previous month bank
statement.
Schedule “A” = Unpresented cheque/unapplied
mandates
Schedule “B” = Credit in bank not in cash book
Schedule “C” = Uncredited lodgement.
Schedule “D” = Debit in bank not in cash book.
v. Prepare the bank reconciliation based on the format given.
28.33 Importance of Bank Reconciliation

(a) It reveals all cheques debited to the account by the bank.
(b) It reveals any form of unauthorised cheque issued and
cashed.
(c) It reveals any unauthorised transfer.
(d) It reveals any dishonoured cheque for which receipt have
been issued on the cheque or draft.
(e) It reveals some cash pretended to have been paid in through
the presentation of forged stamped teller.
(f) It reveals some lodgements not credited by the bank either
by omission or commission.
(g) It reveals unapplied amount in the mandates.

Worked Example
You went on an audit inspection visit to the Federal Ministry of
Education, Lagos on 6th March, 2016. The minister of the ministry
was very happy to see you, saying that you came just in time to
solve his problem.
He narrated how he had been on war path with his director for
Finance since he received the bank statement for the ministry on 3rd
March, 2016 for the two months ended 28th February, 2016 which
showed his account balance as N1,845,326.00 Credit as against
N1,536,000.00 said by the Director to be his cash book balance.
The minister believed that the director has been fiddling with the
ministry’s account and was about to inform the Accountant-General
of the Federation to convene board of enquiry when you just arrived.
The minister gave you the bank statement in question and ordered
the director to surrender the cash book to you, requesting you to do
a thorough audit of the cash account to determine the true position
of ‘the account.
You are required to:
(a) Prepare the bank reconciliation statement in a standard format
as stipulated by the Finance (control and management) Act
1958.
(b) Explain likely problem to cheque No. 398 appearing on 28th
February, 2016 on the bank statement.
A copy of the bank statement as well as the summary of cash
and bank transactions for the period are attached.
Summary of Cash and Bank Transactions
Date Details Cheque No. N

Jan. 7, 2016 Received Grant 2,000,000
Jan. 9, 2016 Paid Food contractor by cheque 305 28,000
Jan. 9, ‘2016 Withdrawal of cash for office use 306 30,000
Jar. 10, ‘2016 A patent bought draft No. 1476 and receipt
was issued and paid into bank 4.000
Jan. 14, ‘2016 Paid school fees into Bank 250,000
Jan. 14. ‘2016 Ijanikin Bursar submitted teller and receipt
issued 100,000
Jan. 14, ‘2016 Paid for Food contractors by Cheque 307 38.000
Jan. 14, ‘2016 Odogbulu Bursar submitted teller for school
fee paid and receipt issued 120,000
Jan. 15, ‘2016 Paid for purchase of books by cheque 308 45.000
Jan. 15, ‘2016 Paid the Junior Staff by cash 9.500
Jan. 16, ‘2016 Paid supplier of school desk by cheque 309 40,000
Jan. 17, ‘2016 Paid for Games Equipment by cash 8,000
Jan. 20, ‘2016 Paid for Laboratory Specimen by cash 2,200
Jan. 25, ‘2016 Paid Senior Officer salary by cheque 310 35.000
Jan. 28, ‘2016 Paid school fee collected to bank 21,000
Feb. 3, ‘2016 Osogbo Bursar submitted teller for
payment of school fee and receipt issued 45,000
Feb. 4, ‘2016 Paid Food Contractor by cheque 311 137,000
Feb. 6, ‘2016 Paid for new classroom built by cheque 312 250,000
Feb. 8, ‘2016 Sold unserviceable item for cash 8,000
Feb. 15,‘2016 Paid Junior Staff Salaries by cash 16,500
Feb. 17,2016 Paid for Laboratory Machines by cheque 313 125.000
Feb. 21, ‘2016 Paid Senior Staff Salaries by cheque 314 90,000
Feb. 22, ‘2016 Paid Food Contractor by cheque 315 138,000
Feb, 22, ‘2016 Withdrew cash for office use 316 20,000
Feb. 22, ‘2016 Ijanikin Bursar submitted teller and
receipt issued 40.000
Feb. 23. ‘2016 A patent brought draft No. 0401 and
receipt was issued and paid into Bank 4,500
Feb. 24. ‘2016 Paid for Inter-House Sports Expenses
by cheque 317 70,000
Feb. 25, ‘2016 Bought stationery items by cheque 318 47,000

Feb. 25, ‘2016 Odogbolu submitted teller and receipt
issued to him 28.000
Fed. 26, ‘2016 Hire of vehicle for Football by cash 21,000
Feb. 26, ‘2016 Osogbo Bursar submitted teller paid on
13/1/94 and receipt issued 14,000
Feb. 26, ‘2016 Credit Advice No. 25 on Dividend paid
directly to the bank dated 25/1/94 2,500
Bank Statement
1994
Date Details Dr (N) Cr (N) Balance (N)
Jan. 7 Lodgement T/N 1481 2,000,000 2,000,000Cr
9 Cheque No. 305 28,000 1,972,000Cr
9 Cheque No. 306 30,000 1,942.000Cr
13 Cheque No. 307 38,000 1,904.000Cr
13 Lodgement T/N 942 14.000 1.918.000Ct
14 Lodgement T/N 1432 250,000 2,168,000Cr
15 Lodgement T/N 950 120,000 2,288,000Ci
25 Cheque No. 310 35,000 2,253,000Cr
25 Credit Advice No. 25 2,500 2,255,000Cr
25 C.O.T 393 2,255,107Cr
25 Cheque Book charges 250 2,254,857Cr
Feb. 3 Lodgement T/N 1010 45,000 2,299,857Cr
4 Cheque No. 308 45,000 2.254,857Cr
5 Lodgement T/N 1433 21,000 2,275,857Cr
6 Cheque No. 312 250,000 2.025.857Cr
17 Cheque No. 313 125,000 1,900,857Cr
21 Cheque No. 314 90,000 1,810,857Cr
22 Cheque No. 316 20,000 1,790,857Cr
23 Lodgement T/N 1434 100,000 1,890,857Cr
23 Lodgement T/H 1.436 4,000 1,894,857Cr

23 Lodgement T/N 1435 4,500 1,895,357Cr
23 Lodgement T/N 210 22,000 1,921,357Cr
24 Cheque No. 318 47.000 1,874,357Cr
26 C.O.T 1,731 1,872,626Cr
26 Bank charges 8000 1,872,326Cr
28 Cheque No. 398 25,000 1,847.326Cr
28 DM4018 2.000 1,845,326Cr
Solution:
Cash Book
Date Particulars Cash Bank Date Particulars Che No. Cash Bank
Jan. 7 Grant 2,000,000 Jart. 5 Food
Contractor 305 28,000
BANK 30,000 9 CASH 306 30,000
10 School fees 4,000 13 Food
14 Sch. Fees 15 Purchase
Books 308 45,000
14 Ijanikin
School fees 100.000 15 Salary 9,500
15 Odogbolu
School Fees 120,000 16 Game; 8,000
28 School Fees 11.000 17 Desk 309 40,000
20 Laboratory 2,200
25 Salaries 310 35,000
Balance c/f 10,300
30,000 2,495,000 30,000 2,495,000

Feb Balance b/d 10,300 2,279,000 Feb. 4 Food
3 Osogbo School
Fees 45,000 6 Building 312 250,000
8 Unserviceable
items 8,000 15 Salary 16,500
22 BANK 20,000 17 laboratory 313 125,000
22 Ijanikin
School Fees 40,000 21 Salaries 114 30,000
11 School Fees 4,500 22 Food
25 Odogbolu
School Fees 28,000 22 CASH 316 20,000
26 Osogbo
School fees 14,000 24 Inter House
Expenses 317 70,000
26 Dividend 2,500 25 Stationery 318 47,000
26 Hire Vehicle 21,000
Balance c/d 800
38,300 2,413.000 38,300 2,413,000
Balance b/d 800 1,536,000
Bank Reconciliation Statement as at 31st Jan. 2016

N N
Balance as per Cash Book 2,279,000
Add Unpresented cheque/unapplied mandates

Schedule ‘A’ 85,000
Add Credit in Bank not in CB:

Schedule ‘B’ 16,500
Less Uncredited lodgement: 101,500

Schedule ‘C’ 125,000
Less Debit in Bank not in CB:

Schedule ‘D’ 643
Balance as per bank statement (125,643)
2,254,857

Workings for January Reconciliation:

(i) Unpresented Cheque (Schedule ‘A’)
Date Cheque No. Amount
15/1/2016 308 45,000
17/1/2016 309 40,000
85,000

(ii) Credit bank not in cash book (Schedule ‘B’

Date Teller No. Amount
13/1/2016 T/N 942 14,000
25/1/2016 CRA No. 25 2,500
16,500

(iii) Uncredited lodgement (Schedule ‘C’)
Date Details Amount
10/1/2016 School fees 4,000
28/1/2016 Ijanikin 100,000
14/1/2016 School fees 21,000
125,000

(iv) Debit in bank not in cash book (Schedule ‘D’)
Date Details Amount
25/1/2016 C.O.T 393
25/1/2016 Cheque Book charges 250
643

Workings for February Reconciliation:
(i) Unpresented cheque (Schedule ‘A’)
Date Cheque No Amount
17/1/2016 309 40,000
4/2/2016 311 137,000
22/2/2016 315 138,000
24/2/2016 317 70,000
385,000

(ii) Credit in bank not in cash b (Schedule ‘B’):
Date Teller No. Amount
23/2/2016 T/N 0210 22,000

(iii) Uncredited lodgement: (Schedule ‘C’)

Date Amount
22/2/2016 40,000
23/2/2016 28.000
68,000

(iv) Debit in bank not in CB (Schedule ‘D’):
Date Details Amount
Balance b/f 643
26/2/2016 1,731
26/2/2016 300
28/2/2016 Cheque No. 398 25,000
28/2/2016 D/N No. 18 2,000
Details 29,674
Bank Reconciliation Statement as at 28th February, 2016
N N
Balance as per cash book 1,536,000
Add unpresented cheque
Schedule ‘A’ 385,000
Add credit in b and not in CB:
Schedule ‘B’ 22,000
Less uncredited lodgement: 407,000
Schedule ‘C’ 68,000
Less debit in bank not in CB:
Schedule ‘D’ 29,674 (97,674)
Balance as per bank statement 1,845,326

(The cheque No. 398 must have been stolen, as the last cheque
number on the cash book was 318).
28.34 Transcripts
Transcripts are the mechanisms with which self-accounting ministry/
department transmit to the treasury department their statement of
financial transactions during a particular period, which is usually at

the end of every month.
Transcript is simply the summary of the total payments and receipts
as posted into the cashbook.
There are two types of transcript namely:
(a) Main Transcripts
(b) Supplementary Transcripts.
(a) Main Transcript: Contains an analysis of all the payment

and receipt transaction as recorded in the cash book of the
ministry during the accounting period.
The transcript should indicate the following items;
(i) Opening balance.
(ii) The head total for the month of recurrent expenditure
of the ministry.
(iii) The sub-head totals of revenue for the month.
(iv) The sub-head totals of capital expenditure for the
month.
(v) The account totals of receipts into and payments
from the below-the-line account for the month.
(vi) The head and sub-head totals of transaction made
during the month on behalf of other ministries/
departments.
(vii) Closing balance.
(b) Supplementary Transcript: Contains an analysis of various
inter-departmental transactions which are normally
accepted into the relevant ministries accounts by means of
adjustment vouchers.
Similarly, the self-accounting ministry will also receive schedules

and vouchers for all transactions through the federal sub-treasury and
federal pay offices. These are all to be linked to the total appearing in
the account currently (head cards and monthly summary) received
from the Treasury. The transactions are then to be classified to the
appropriate recurrent expenditure votes, revenue votes, capital

expenditure vote or below-the-line accounts. Adjustment of these
transactions is thus reflected in the supplementary transcripts
submitted to the Treasury on monthly basis.
Please Note: These adjustments, which will not affect the Cash
Balance as total receipt, will equal total payment.
28.34.1 How to Prepare Monthly Transcripts

This explanation is for those states that are still on cash basis.
(a) Obtaining Cash Book Folio
The first step is to obtain the cash book folios and all the
receipts and the payment vouchers that have been posted into
the cash book in the previous day. Remember that cash book
must also be balanced on daily basis.
These will be checked into the cash book to ensure that all the
documents received agree with the figures posted in the cash
book. This initial checking is very important and must be
assigned to an experienced and dedicated staff to eliminate
errors or irregularities, which may later create problems
during balancing.
(b) Pre-listing
Pre-listing means arranging the vouchers according to the
head and sub-head to obtain the total of each classification
and the ground total of all, which would provide a check on
the balance for the day.
(c) Posting into the Analysis Book
The amounts in the daily analysis are posted into the analysis
book, which is ruled to contain the totals for each day in
accordance with various heads of accounts.
At the end of the month, the daily pre-list as posted in the
analysis book would have produced the total for the month for
each head and sub-head (based on NCOA) and the additions
would give the figures of the total transactions for the month.
Specimen of Analysis Book

Revenue Head
HEAD 1 2 3 4
Sub-head 1 2 3 1 2 1 1 1 2
1/3/94 2,500 4,000 4,800 7,800 - 7,000 280 400
2/3/94 - 450 1,000 500 - 4,500 8,000 2,000 500
30/3/94 3,000 2,500 - 1,750 800 730 - 480
Total 5,500 2,950 13,000 5,000 9,250 5.300 15,750 2,250 1,350
Expenditure Head
Sub-head 1 2 3 4 5 6 7
1/3/ 94 2,800 4,700 3,000 - - 4,500 8,000
2/3194 - 1,500 7,500 1,000 500 60C 1,000
30/3/94 1,500 1,000 3,000 - - 1,000 800
Total 3,300 8,200 13,500 1,000 500 9,800
(d) Scheduling
Scheduling means recording the various vouchers pre-listed i.e. vouchers
are arranged according to classification into the prescribed forms
indicating the voucher numbers in serial order with gross amount for
each voucher which is to be transferred to the treasury department.
Separate schedules are prepared for each head and sub-head or each
classification and the monthly total of transaction for each head and sub-
head are obtained. The correctness of the total on the schedules can be
ascertained by comparison with the totals in the analysis book.
(e) Writing of the Transcript
This is to be written from the figures in the analysis book and the vouchers’
schedules. The balance brought forward from the previous month should
be the opening item and close with the balance carried to the following
month, which should also agree with the cash book closing balance for
the month.
28.34.2 Statements to Accompany the Transcript

(a) Certificate of cash and bank balance
(b) Bank reconciliation statement
(c) Vouchers
(d) Schedules
(e) List of outstanding vouchers
(f) Original detachable copies of cash book (in cases of FPOs).
Specimen of Transcript
FEDERAL MINISTRY/DEPARTMENT OF…………………………………………………………….……
Transcript for the month ended…………………………………………………………………………………
RECEIPT PAYMENT
Head Sub-
head Description Amount Sub-Total Total Head Subhead Description Amount Sub-Total Total
x xx Balance b/f xxx x xx xx
xx xxx xx xx xxx
xx xxx xxx xxx
xxx xxx xx xxx
x Below-the- Below-the-
Line x xx Line
Total below Total below
the line xxx the line xx
Receipts xxx xxx expenditure xx xxx
Balance c/d xxx
xxx xxx
Balance b/d xxx xxx
Example of Transcript Preparation

Note: The worked example on Treasury Cash Book will be used to
illustrate the preparation of transcripts.
Receipt Analysis
Head/Sub-head 10/3 10/4 12/7 1513 17/1 1801 35/1 35/5 35/7
28,000 2,500 2,500 1,500 1,800 4,000 2,000 125 200
1,000 2,000 1,000 1.800 - 500 2,750 - -
2,500 - 1,000 - - 2,500 4,000 - -
- - - - - - 4,500 4,500
- - - - - - 2,500 - -
- - - - - - 2,500 - -
- - - - - - 2,000 -
- - - - - - 1,000 - -
- - - - - - 1,500 - -
31,500 4,500 4,500 2,300 1,800 11,500 24,750 125 200
Expenditure Analysis
Head/Sub-head 35/1 35/2 35/3 35/5 35/7 1801

45,000 4,800 1,000 5,000 1,500 4,000
66,000 2,500 - 1,500 3,000 3,000
32,300 4,500 - - 5,000 4,500
8,575 - - - - -
9,000 - - - - -
5,000 - - - - -
165,875 11.800 1,000 6,500 12,500 11,500
Federal Ministry of Finance and Economic Development

Transcript for the Month Ended 30th April, 1994
RECEIPTS PAYMENTS
Head Sub- Description Amount Total Head Total Description Amount Exp. Net
head Credit
Balance b/f 130,500 35 1 Personal
Emolument 165,875 24.750
141,125
10 3 Company & Travel and
Business Name 31,500 35 2 Transport 11,800 - 11,800
10 4 Fee 4,500 36,000 35 3 Utility 1,000 - 1,000
12 2 Quarters 4,500 35 5 Stationery 6500 125 6.375
15 3 Aviation 3,300 35 7 Maintenance
of Vehicle 12,500 200 12,300

1 Refund 1,800 197,675 25,075 172,600

BELOW-THE BELOW-THE
-LINE -LINE
1801 Retirement of
Towing Touring
Advance 11,500 1801 Advance 11,500
184,100
2000 Remittance 3,003,000 Balance c/d 3,003,500
3,117,100 3,187,600

Balance b/d 3,003,500
Note: Another approach to the preparation of certificate

of cash and bank balance is to combine both the
cash and bank balance.
It is sometimes advisable to use this method as it is easier to understand.
Certificate of Cash and Bank Balance
N N
Opening Balance 1st April 1994 5,500
Cash 125,000
Bank 3,082,175
Add Total Receipt 3,212,675
209,175
Less total Expenditure 3,003,500
Balance as at 30th April 1994

Analysis: 36,800
Cash 2,966,700
Bank 3,003,500

Practice Questions
1. Discuss the key features to note in posting the cash book.

2. Specify the source documents for treasury cash book.
3. Enumerate and discuss the objectives of e-payment.
4. Explain the purpose of reconciliation.
5. Discuss the challenges and concerns of e-payment.
6. Discuss the macro and micro benefits of e-payment.
7. State the types and explain the transcript preparation processes.
Chapter Twenty Nine
Financial Reporting under IPSAS Cash Basis of Accounting
Learning Outcomes
i. discuss the statement of the cash basis of accounting standard;
ii. specify the sectorisation of the MDA’s;
iii. enumerate the expected financial statement and report
Accountant-General is expected to produce;
iv. discuss the concept of public debt; and
v. state the sources of receipt into development fund.
29.0 Introduction
The Consolidated Account Department (CAD) is charged, among
other things, with the responsibility for the production and
publication of the accounts of the Federal Government of Nigeria in
a manner that will show a true and fair view of the financial position
of the federal government.
In accordance with Section 130 and 14(1) of the Audit Act (CAP.
17 Laws of the Federation of Nigeria 1958) and Section 21 of the
Finance (Control and Management) Act (1958), the Accountant-
General of the Federation is required to prepare and submit General
Purpose Financial Statements consisting of five statements and notes
to the account in line with the International Public Sector Accounting
Standards (IPSAS) Cash and Accrual bases of Accounting.
29.1 General Functions of the Directorate

i. Prepares Treasury Accounts, incorporates the accounts of
ministries, extra-ministerial offices, departments and agencies
(MDAs).
1022
1023 Financial Reporting under IPSAS Cash Basis of Accounting
ii. Prepares monthly, quarterly and annual Consolidated

Financial Statements of Accounts and Reports of the Federal
Government.
iii. Prepares the Annual Report of the Accountant-General of the
Federation.
iv. Collation of responses to the Auditor-General’s report and
taking overall charge of the Treasury’s Public Accounts
Committee Matters.
v. Serves as secretariat for the monthly tripartite meetings
between Office of the Accountant-General of the Federation,
Central Bank of Nigeria and ministries on the reconciliation
of bank accounts with cash book.
vi. Serves as secretariat for sub-committee of Federation Account
Allocation Committee (FAAC) that anchors the International
Public Sector Accounting Standards (IPSAS).
vii. Formulates, interprets and reviews the Financial Regulations
and the Finance (Control and Management Act).
viii. Issues treasury circulars.
ix. Provides financial services to ministries and agencies
including choice of accounting equipment.
x. Provides financial management services for federal ministries,
e.g., conduct of management audit of the Accounts and
Internal Audit Divisions.
xi. Formulates financial and accounting policies.
xii. Co-ordinates changes in existing policies including accounting
system design and professional accounting matters.
29.2 Divisions of the Department

In order to meet the mandate of the Directorate, the department
was divided into four divisions. Deputy Director heads each of the
divisions.
- Consolidated Financial Statement: This division handles the
preparation of the financial statements.
- Financial Services, Rules and Regulations/IPSAS (FCR &R/
IPSAS): This division handles all forms of circulars and all
issues relating to implementation of IPSAS.
- External Assistant/Other Public Funds: All external aid/

grants is the responsibility of the division.
- Asset Management: All assets of government need to
be compiled for the purpose of reporting in the financial
statement in line with accrual basis of accounting, which is
the responsibility of the division.
29.3 Financial Reporting under the Cash Basis of Accounting

29.3.1 Structure of the Cash Basis of Accounting Standard
The preparation of Cash Basis General Purpose Financial Statement
is guided by the only standard on cash basis IPSAS. Cash basis of
accounting standard is sub-divided into two parts: Part 1 is mandatory
while Part 2 is not mandatory but encouraged to be disclosed since
the ultimate goal is for all public sector entities to migrate to accrual
basis of accounting.
29.3.2 Part 1 Is Mandatory

It sets out the requirements which are applicable to all public `sector
entities preparing General Purpose Financial Statement GPFS under
the cash basis of accounting. It
- establishes requirements for the disclosure of
information in the financial statement and supporting
notes; and
- deals with a number of specific reporting issues.
The requirements in this part of the standard must be complied with
by public sector entities, which claim to be reporting in accordance
with International Public Sector Accounting Standards.
29.3.3 Part 2 Is Not Mandatory

It identifies additional accounting policies and disclosures that a
public sector entity is encouraged to adopt to enhance the usefulness
of its financial statements for accountability and decision making
purposes and to support its transition to the accrual basis of
accounting.
Such information are:

i. Receivable, payable, borrowing and other liabilities.
ii. Non-cash assets and accruing revenues and expenses.
iii. Commitment and contingency liabilities.
iv. Performance indicators and the adherent of service delivery
objectives.
v. External assistance and other assistance received during the
accounting period should be disclosed.
vi. Undrawn external assistance and other assistance available to
the entity at the reporting date.
29.3.4 Objectives of the Cash Basis of IPSAS

The cash basis IPSAS was first issued in January 2003 and was
updated with additional requirements and encouragement in respect
of presentation of budget information in 2006 and external assistance
in 2007. Finally in 2017, a revised cash basis IPSAS was issued.
The focus of the amendments were on
i. Preparation of Consolidated Financial Statements.
ii. Disclosure of information about external assistance.
iii. Third party payment.
The cash basis IPSAS has not been widely adopted but has a role
to play in enhancing the quality of financial reporting by entities
reporting on cash basis of accounting and supporting those entities’
transition to the accrual basis IPSAS. The challenge observed in
the adoption of cash basis IPSAS is the inclusion of Consolidated
Financial Statement, disclosure of information about External
Assistance and Third Party Payment in Part 1. These are better
included in Part 2 which encourages entities rather than make them
mandatory.
For the implementation of IPSAS, the FAAC IPSAS sub-committee
has specified a National Chart of Accounts (NCOA) and standard
formats for General Purpose Financial Statements (GPFS),
sometimes referred to as ‘Final Accounts’ or ‘the Accountant
General’s Report’.
Since the objective of the International Public Sector Accounting

Standards is to have a Consolidated Financial Statement, without
a National Chart of Accounts (NCOA) it will be a mirage. This
is because, it is important to identify the applicable codes while
recording and posting transactions in order to be able to generate
reports. The National Chart of Accounts has replaced the head and
sub-head which were previously used.
29.3.5 The National Chart of Accounts (NCOA)

The National Chart of Accounts may be defined as a complete
list of budget and accounting items where each item is uniquely
represented by a code and grouped into tables of related data for
the purposes of tracking, managing and reporting budgetary and
accounting items in an orderly, efficient and transparent manner.
The emerging issues that will come to light in the current General
Purpose Financial Statements (GPFS) that is, IPSAS format
compliant, is the new structure of the National Chart of Accounts,
which provides for segments, codes and the sectorisation of the
MDAs. Note that segment is defined as divide (something) into
separate parts or sections. The six segments are:
i. Administrative Segment
The administrative segment assigns responsibility for
each transaction whether revenue centres (receipt) or cost
centre (payment). It addresses the “Who” element of each
transaction.
ii. Economic Segment
The economic segment answers the “What” question of every
transaction. Every receipt must be from a particular source
e.g. Contractor Registration Fee. Likewise, every expense
must be on a particular item or object e.g. purchase of drugs
and medical supplies.
iii. Functional Segment
Functional classification categorises expenditure according
to the purposes and objectives for which they are intended.
It is especially useful in analysing the allocation of resources

among sectors.
iv. Programme Segment

The programme segment answers the “Why” question of
every transaction according to the purpose or objective. Does
the transaction relate to a specific project and if so, what type
of activity? Is it designed to meet specific policy objectives
of the government?
v. Fund Segment
The fund segment addresses the “Financed by” element of a
transaction. Fund refers to the various pools of resources
for financing government activities.
vi. Geographic Code Segment

The geographic code segment addresses the “Where”
(location/station) element of every transaction. It is for
location or physical existence of transaction so that an analysis
of government budget and expenditure along the various
geo political zones, states and local government councils in
the country can be done. The use of geo codes will make it
easier for agencies with oversight function like monitoring
and evaluation (M&E) mandates to locate projects across the
country.
29.3.6 Sectorisation of MDAs

The ministries, departments and agencies (MDAs) are divided into
five sectors for the purpose of proper analysis of both income and
expenditure. The sectors are: Administrative, Economic, Social,
Law and Justices and Regional.
i. Administrative Sector is for MDAs that carry out administrative
functions such as Presidency, Nigeria Immigration Service,
Federal Civil Service, Office of the Secretary to the Federal
Government, House of Assembly, etc. to ensure that there is
smooth running of government policy.
ii. Economic Sector is for MDAs that produce something that

can be felt and seen not only by all, but also, that affects
the nation’s economy such as Ministry of Agriculture,
Federal College of Produce Inspection and Stored Products
Technology, National Institute of Animal Science, Institute
of Agriculture Research and Training, etc. For instance,
research in agriculture and training will have positive effects
on the Nation’s GDP. Therefore, any MDA whose output can
influence and have positive effects on the nation’s economy
is grouped under economic sector.
iii. Social Sector is for MDAs that are involved in building
human capacity or training as well as health care of the
citizens which can increase their social life. It is a known
fact that the societal value of an educated person cannot be
compared to that of an illiterate. His values and attitude will
be different. Similarly, the quality of life of a person that has
access to good health care facilities will obviously be better
than those of persons who do not have such access. His social
life and the society at large will be affected. This explains why
MDAs involved in these activities are classified under social
sector. Examples of such MDAs are Ministry of Education,
universities, polytechnics and federal medical centres.
iv. Law and Justice Sector is for MDAs that handle issues of law/
judiciary in the country such as National Judiciary Council,
Supreme Court of Nigeria, Customary Court of Appeal, and
Legal Aid Council.
v. Regional Development Sector: is for MDAs that are
established to handle issues relating to regions with certain
peculiarities that require special attention. Examples of such
MDAs are Federal Capital Territory Administration and
Federal Ministry of Niger Delta.
Observation: The National/State Houses of Assembly are classified
as part of administrative sector. Given that there are three arms of
government, it would have been expedient to have a Legislative
Sector, so that the total allocation to the legislature can be easily
identified.
29.3.7 Documents to Be Submitted by Self Accounting Units

under CashBasis
Having understood the importance and the structure of the NCOA
and the sectorisation of the MDAs, we shall now consider how the
financial statements are compiled. Many ministries/departments
within the federal set-up are expected to be self-accounting units.
The documents are as follows:
i. Monthly transcripts.
ii. Schedule in support of the debits and credits appearing on the
transcripts.
iii. A list of outstanding original vouchers, where applicable.
iv. Duplicate vouchers.
29.3.8 Documents to Be Submitted by Federal Pay Offices in the

States
These are transactions of the federal government in the states that
must be consolidated into the GPFS.
- Control sheets
- Schedule vouchers
- Certificate of cash and bank balances
- Original and duplicate vouchers
- List of outstanding vouchers
- Bank reconciliation statements.
29.3.9 Expected Financial Statements and Other Reports to Be

Produced
The following are the expected financial statements and other
reports the Accountant-General is expected to render annually for
the use of stakeholders taking into consideration the objective of
the 2017 revised cash basis which focuses on the Preparation of
Consolidated Financial Statement, Disclosure of Information about
External Assistance and Third Party Payment.
- Main Financial Statements
- Performance Reports
- Statistical Reports
- Statement of Accounting Policies.
29.3.10 Main Financial Statements

The main financial statements consist of:
- Statement 1 – Cash Flow Statement
- Statement 2 – Statement of Assets and Liabilities
- Statement 3 – Statement of Consolidated Revenue Fund
- Statement 4 – Statement of Capital Development
- Note to the Financial Statement
29.3.11 Performance Report

The expected performance reports to produce are:
i. Revenue Performance Report
ii. Recurrent Expenditure Performance Report
iii. Capital Expenditure Performance Report
29.3.12 Statistical Report

• Statistical report is used to analyse the annual total
expenditure broken down into functional categories of general
public service, defence, public order and safety, economic
affairs, environmental protection, housing and community
development, health, recreation, culture and religion.
• Statistical report is equally used to analyse the total expenditure
according to programme like power, transportation, etc.
• Statistical report segments are the total capital expenditure
into the six geo-political zones.
29.3.13 Statement of Accounting Policies

There are important accounting policies that must be stated which
will be the basis on which the financial statement is prepared.
These are specific principles, conventions and rules adopted in the
29.4 Main Financial Statements

Statement No 1 – Cash Flow Statement
Cash flow statement is divided into three sections:
• Operating Activities: Operating activities consist of all actual
movements of income and expenses for the period under
review.
• Investment Activities: Investment activities consist of actual
investment made during the period. In most cases, investment
relates to capital expenditure which are segmented in line with
the sectorisation of the capital expenditure. For instance:
• Administrative sector
• Economic sector
• Law and Justice sector
• Social service sector
• Regional development sector
• Capital expenditure funded from aid and grants
From the above sectorisation, the total amount invested in each
sector can be identified immediately without much problems which
is good for analysis.
• Financing Activities: Financing activities consist of all sources
of inflow and outflow of funds from the entity for the period
under review. For instance, inflow from aid and grant, loans
both external and domestic and outflow which may be in the
form of repayment of loans, bonds and external loans. There
must be detailed information about the external assistance,
aid, grant or loan.
• Movement of Other Cash Equivalent: The net cash will be
arrived at which is the liquidity of the government or entity.
Note: In the preparation of cash flow statement, the
direct method should be adopted in line with the financial
regulation of the Nigerian government on the preparation
of cash flow statement. In addition, all cash movement
for the period must be reflected in the statement with
appropriate notes, for details and cross-reference. For
instance, any additional Property, Plant and Equipment (PPE)

purchased or invested in, should be reflected in the cash flow
statement. It should be noted that the comparative figure must be
provided. On no condition should cash flow be presented without
comparative figure of the immediate past year. However, in
line with IPSAS 24; “Presentation of Budget Information in the
Financial Statement”, it is not out of place to provide a column to
make it a full statement.
Statement No. 1
Federal Government of Nigeria

Cash Flow Statement for the Year Ended 31st December, 2015
ANNUAL CASH FLOW FROM OPERATING NOTE ACTUAL 2015 ACTUAL 2014
BUDGET ACTIVITIES (N) (N)
2015
Receipts:
Statutory Allocation: FAAC 1 2,426,016,647,945.69 2,735,598,769,426.61
Value Added Tax Allocation 2 104,661,035,354.09 106,743,764,228.50
Share of Excess Crude Oil Account 3 0 170,058,565,533.75
License 5 5,583,595,856.38 2,426,402,460.62
Mining Rents 6 809,929,098.05 1,496,623,432.86
Royalties 7 0 21,914,538.08
Fees General 8 25,273,285,949.15 21,547,334,702.78
Fines 9 2,661,432,109.28 1,327,815,103.89
Sales General 10 29,514,217,497.62 73,333,462,005.59
Earnings 11 13,358,183,054.95 3,436,755,473.44
Rent of Government Building 12 163,206,729.11 93,216,095.00
Rent on Land and Others 13 1,579,488,628.46 1,239,008,173.52
Repayment – General 14 231,512,466,820.29 1,233,012,611.22
Investment Income ( Including
Operating Surplus) 15 298,916,102,027.72 221,136,206,785.86
Interest Earned 16 47,097,219.74 28,614,107.36
Re-imbursement 17 72,003,966,625.40 15,481,644.20
Other Revenue Sources of
the Government 18 0 122,681,281,488.85
Total Receipts 3,212,100,645,915.93 3,462,418,227,812.16
Payments:
Personnel Cost (Including Salaries
on CRF Charges) 19 2,050,080,350,036.02 1,982,268,617,482.21
Federal Govt. Contribution
to Pension 20 78,776,312,731.02 57,015,611,526.50
Overhead Charges 21 537,917,487,132.28 408,912,093,179.41
Other CRF Charges
(Incl. Service Wide Vote) 22 514,300,464,669.98 359,082,608,612.47
Total Payments: 3,181,074,614,569.40 2,807,278,930,800.59
Net Cash Flows from Operating
Activities 31,026,040,346.53 655,139,297,011.57

Note: All items have notes where details of the transactions are
disclosed.
Statement No. 1 cont’d

Cash Flow Statement for the Year Ended 31st December, 2015
ANNUAL CASH FLOW FROM INVESTING NOTE ACTUAL 2015 ACTUAL 2014
BUDGET ACTIVITIES (N) (N)
INFLOW:
CASHFLOW FROM INVESTMENT
ACTIVITIES:
OUTFLOW:
CAPITAL EXPENDITURE:
ADMINISTRATIVE SECTOR 23 69,151,530,454.94 159,719,967,285.55
ECONOMIC SECTOR 24 248,050,291,311.72 247,929,302,667.61
LAW AND JUSTICE 25 15,679,523,564.27 19,786,201,860.45
REGIONAL DEVELOPMENT 26 14,482,772,321.68 34,203,672,014.85
SOCIAL SERVICE SECTOR 27 134,568,197,960.29 71,326,057,891.98
FUNDED FROM AID AND
GRANTS 28 22,142,472,757.04 1,696,294,224.03
EXTERNAL LOANS 29 273,014,420,000.00 342,703,050,000.00
GENERAL RESERVE (PYA) 30 856,613,427,425.39 601,339,004,160.56
TOTAL OUTFLOW: 1,633,702,635,795.33 1,478,703,550,105.03

NET CASHFLOWS FROM
INVESTMENT ACTIVITIES: -1,633,702,635,795.33 -1,478,708,550,105.03
CASHFLOWS FROM FINANCING
ACTIVITIES:
INFLOW:
PROCEEDS FROM AID AND
GRANTS 31 21,269,429,407.32 2,006,589,629.20
PROCEEDS FROM EXTERNAL
LOAN 32 273,014,420,000.00 342,703,050,000.00
PROCEEDS FROM DOMESTIC
LOANS: FGN BONDS 33 1,550,862,000,000.00 570,243,511,000.00
PROCEEDS FROM DOMESTIC
LOAN: NTBS ETC. 34 0 602,519,135,060.46
OTHER CAPITAL RECEIPTS 35 1,248,750.00 201,500.00
TOTAL INFLOW: 1,845,147,098,157.32 1,517,472,484,189.66
OUTFLOW:
REPAYMENT OF EXTERNAL
LOANS 36 74,679,041,429.59 84,822,837.17
REPAYMENT OF FGN BONDS 37 831,222,902,000.00 19,170,000,000.00
REPAYMENT OF INTERNAL
LOAN NTBS 38 42,656,715,000.00 0
TOTAL OUTFLOW 948,558,658,429.59 103,992,787,837.17
NET CASHFLOW FROM
FINANCING ACTIVITIES: 896,588,439,727.73 1,413,479,696,352.49
MOVEMENT IN OTHER CASH
EQUIVALENT ACCOUNTS
FEDERAL GOVERNMENT
INVESTMENT 84,602,802,659.90 -666,398,715,025.60
DEPOSIT 2,558,412,461.29 703,573,784.13
TRUST AND OTHER FUNDS
OF FGN -346,287,643,060.26 52,463,622,599.61
NET (INCREASE) /DECREASE
IN OTHER CASH EQUIVALENTS 783,616,469,691.21 -21,788,488,208.38
524,490,041,752.14 -635,020,006,850.24
NET CASH -181,598,113,968.93 -45,104,563,591.21
CASH & ITS EQUIVALENTS
OPENING BALANCE 480,649,885,886,.89 525,754,449,478.10
CASH & ITS EQUIVALENTS
CLOSING BALANCE 299,051,771,917.96 480,649,885,886.89

THE ACCOMPANYING NOTES
FROM PART OF THIS STATEMENTS
Statement No. 2 - Statement of Assets and Liabilities

Statement of Assets and Liabilities is the balance sheet of
government. It shows the cash assets and liabilities of the federal/
state government as prepared from the ledger of the Accountant-
General of the States/Federation. It is one of the encouraged
disclosures in the cash basis GPFS which will not be required if the
government migrates to accrual basis IPSAS. It will be taken over
by consolidated statement of financial position.
It does not show fixed assets or non-current asset (such as buildings,
roads, etc. as government accounts is operated on cash basis),
trade receivables (debtors) and trade payable (creditors).Under this
practice, assets acquired are written off immediately and the issue of
depreciation does not arise.
The Assets Side of the Statement

This is divided into two major groups: liquid assets and investment
and other assets
i. Liquid Assets: These consist of bank balances in various
banks in respect of the MDAs, in a schedule to be numbered
and indicated in the asset and liabilities statement, note
column for cross reference. In other words, these are the
balances left in the accounts of all the cash offices extracted
by the Board of Survey for cash and bank balances. Such
offices are: Sub-Treasury, Federal Pay Offices, All Cash
Offices, Remittance Nigeria Army, etc. They are normally
carried out on first working day of the new financial year.
ii. Investment and Other Cash Assets: These consist of
all investments made, advances, bail out for the states,
Treasury Clearance Fund, completed projects and work
-in-progress, with appropriate schedules and numbers for
cross references. Investments are divided into two: General
and Special & Trust Funds. General investments are those
invested from public funds while those on special and trust
fund are the investments held against the fund shown on the
liabilities side of the statement.
Note: Treasury Clearance Fund was established to provide for

acceptance and repayment of deposit and non-personal advances
and to provide for payment on behalf of other administrations.
Assets are usually arranged in order of liquidity as normally done
by banks and other financial institutions, while the statements are
prepared in vertical form.
Liabilities Side of the Statement

These are grouped under three main heads: Public Fund; External
and Internal Loans; and Other Liabilities.
i. Public Fund: This is the money meant for the state or federal
government that can only be spent through Appropriation
Act. It also refers to money held by any officer in his official
capacity whether temporarily or otherwise that can only
be spent with the approval of the parliament. Public fund
consists of Federation Account, Consolidated Revenue
Fund, Development Fund, Contingencies Fund, Trust and
other public funds. It also includes special and trust fund
which are funds that the Accountant-General keeps in trust.
It is not part of federal or state government Consolidated
Revenue Fund as they are guided by special regulation and
specific or special purpose. Examples of such funds are
Police Reward Fund, Ecological Fund, and Stabilisation
Fund, etc.
ii. External and Internal Loans: This consists of external
loans, FGN Bonds and Treasury Bonds, Nigeria Treasury
Bills, development loan stock, internal loans from other
source, state bonds, bank debts, and World Bank Support
Loan. It is important to state that there should be schedules
given full detail of the loans with number to be indicated
under the note column for cross reference purposes.
iii. Other Liabilities: Deposit is one of the items to appear under
this heading. Normally, deposits in government accounting
language are those funds set aside by some government
agencies, which are kept by the Accountant-General. It
is instructive to mention that no agency of government

is permitted to set aside or save funds privately or on its
own without disclosing to the Accountant-General of the
Federation. In all cases, full disclosure is required because
it must be accounted for and included in the financial
statement of the federal government. Examples of agencies
that have such special deposits are police, prison, court,
ICPC and EFCC.
For instance, no convict or potential prisoner is allowed to
go to jail with physical cash or any item. Whatever he has,
will be deposited at the gate, recorded in the register and
paid into government account under “Deposit” and prisons
officials are not allowed to keep the money in-house, it
must be lodged in the bank. At the end of financial year, the
amount in that such account will be classified as deposit.
The same thing happens to court deposits. All amounts for
surety and seizures should be paid into a deposit account
of the government for safekeeping. When it is forfeited, it
becomes revenue. This also applies to deposit made by the
police, ICPC and EFCC.
The Concept of Public Debt

Nations are differently endowed and hence there exists disparities
in the resources at the disposal of a country. At some point in time,
some countries have resources more than they require while some
others have less than their needs. Deficit countries often borrow
from surplus countries while government may also borrow from
the public to finance its economic development activities. These
external and internal borrowings collectively make up the public
debt. Essentially, public debt arises as a result of the unevenness in
the receipts and payments of the government.
Public debt is the loan raised by the federal government that is
not yet paid-off at the end of the financial year. It may be owed to
the citizens or foreign interests. The case for public debt is often
justified by the need to attain a more superior development target for

the economy. In such a situation, government has to decide whether
to abandon development projects or to borrow to cover the financial
gap. The allure of borrowing is often irresistible. Obviously, the
sooner the conditions favourable for a takeoff into self sustaining
growth can be produced, the better for the present generation and
for future generations.
(a) Public Debt Can Be Grouped into External and Internal
Debt
External debts are those owed to foreign lenders
while internal debts are those arising from the issue of
government stocks to residents. Public debt can be sub-
divided into three parts: funded, unfunded and floating.
(i) Funded: This is where a statutory fund has been
set up to redeem the loan when it is due for
repayment.
(ii) Unfunded: This is where no sinking fund has
been set up, i.e., where no provision has been
made for the repayment of the loan, e.g. Treasury
Certificate.
(iii) Floating: This is where no provision has been
made for the repayment and where the maturity of
the loan is very short, e.g., Treasury Bills.
Note: The term, “On lent to state” refers to loans borrowed

by federal government and then lent to the state governments.
What is commonly seen under external debt, are funded and
unfunded loans because they are loans obtained to finance
capital projects. External loans cannot be obtained to pay
salaries. Indeed, it will be difficult to find a willing lender
for this.
Statement No. 2
Statement of Assets and Liabilities

for the Year Ended 31st December, 2015 Financial Year
ANNUAL NOTE ACTUAL 2015 ACTUAL 2014

BUDGET (N) (N)
ASSETS
LIQUID ASSETS:
CRF BANK BALANCE (CBN) 39 -856,330,289,025.85 -342,015,309,243.04
PENSION ACCOUNT (CBN) 40 20,039,312,807.60 13,943,576,960.25
CASH BALANCE OF TRUST
AND OTHER FUNDS OF
THE FGN 41 972,499,403,215.52 626,211,760,155.26
CASH BALANCE WITH
FEDERAL PAY OFFICE AND
SUB-TREASURY 42 175,832,784.02 7,447,580.90
CASH HELD BY MINISTRIES,
DEPARTMENT AND AGENCIES 43 155,190,686,014.74 182,077,213,001.94
CASH HELD FROM AID &
GRANTS BY MINISTRIES,
DEPARTMENT AND AGENCIES 45 7,476,826,121.93 425,197,431.58
SUB-TOTAL LIQUID ASSETS: 299,051,771,917.96 480,649,885,886.89
INVESTMENT AND OTHER
CASH ASSETS:
FEDERAL GOVERNMENTS 46 1,127,180,992,109.07
1,211,783,794,768.97
IMPREST 47 192,949,228.59 -58,888,763.60
ADVANCES 48 2,152,221,852.43 2,553,025,608.07
REVOLVING LOANS
GRANTED 49 50,002,924,178.41 49,260,499,92014
SUB-TOTAL INVESTMENT
AND OTHER CASH ASSETS: 1,179,529,087,368.50 1,263,538,431,533.58
TOTAL ASSETS 1,478,580,859,286.46 1,744,188,317,420.47
LIABILITIES
FUND BALANCE
CONSOLIDATED REVENUE
FUND -12,583,737,767,090.90 -11,827,509,521,314.40
CAPITAL DEVELOPMENT
FUND 1,910,544,350,321.10 2,717,327,783,265.65
TRUST & OTHER PUBLIC
FUNDS: 972,499,403,215.52 626,211,760,155.26
SUB-TOTAL FUND
BALANCE -9,700,694,013,554.30 -8,183,969,977,893.58
EXTERNAL AND INTERNAL
LOANS:
EXTERNAL LOANS: FGN 51 2,111,473,580,000.00 1,631,532,440,000.00
FGN BONDS 52 5,808,140,820,000.00 5,088,501,722,000.00
NIGERIAN TREASURY
BILL (NTB) 53 2,772,867,038,000.00 2,815,523,753,000.00
INTERNAL LOANS FROM
OTHER FUNDS 54 487,039,552,656.92 390,288,085,668.92
SUB-TOTAL EXTERNAL
AND INTERNAL LOANS: 11,179,520,990,656.90 9,925,846,000,668.92
OTHER LIABILITIES:
DEPOSITS 55 -246,117,816.16 2,312,294,645.13
SUB-TOTAL OTHER
LIABILITIES: -246,117,816.16 2,312,294,645.13
TOTAL LIABILITIES 1,478,580,859,286.46 1,744,188,317,420.47
THE ACCOMPANYING NOTE

FROM PART OF THIS
STATEMENT

Statement No. 3 – Statement of Consolidated Revenue Fund (CRF)

The Consolidated Revenue Fund is an account created by Section 80
and 120 of the Nigerian 1999 Constitution (as amended) for federal and
state governments respectively. The sections state that all revenues or
other money(s) raised or received by the federal government or state
government shall be paid into the Consolidated Revenue Fund of the
various states and federal government including their shares of the
Federation Account Revenue.
The Constitution further stipulates that no money shall be withdrawn
from this Account except:
• To meet expenditure that is charged upon the fund by the
constitution.
• Where an Appropriation Act or Supplementary Appropriation
Act of the National/State Assembly has authorised the issue of
the money.
The revenue inflows into and outflows from the Consolidated

Revenue Fund are from various sources of income and expenditure,
which include:
• Statutory Allocation from Federation Account (FAAC)
• Other statutory and Excess Crude Account
• Value Added Tax Allocation
• Other revenue sources:
 Direct taxes
 Licences
 Mining rent
 Royalties
 Fees
 Fines
 Sales
 Earnings – General including parastatals revenue
 Sales/rent of government building
 Sales/rent of land and others
 Repayment–General
 Investment income (operating surplus)
 Interest earned
 Re-imbursement
 Other source
Expenditure:
i. Personnel costs
ii. Pension contribution
iii. Overhead charges
iv. Consolidated Revenue Fund charges
v. Subvention to parastatals
vi. Repayment of external loans
vii. Repayment of bonds
viii. Repayment of Nigeria Treasury Bills (NTB)
ix. Appropriations transfer; transfer to Development Fund
Note: that there is always opening and closing balances. The note
column is very important for cross-referencing the details of the
items listed. This is to ensure proper disclosure.
It is important to state that all the deductions at source must be

brought into the Federation Account for proper accountability (via
the note to the accounts), before the statutory allocation by FAAC
is done at any point in time.
In respect of the CRF, there are always six columns excluding the
variance:
i. Column 1 - Actual income and expenditure for the previous
year
ii. Column 2- Details of the items
iii. Column 3- Note indicating cross-references of activities to
ensure proper disclosures.
iv. Column 4- Actual for the year
v. Column 5- Final budget
vi. Column 6- Initial/original budget
Statement No 3
Consolidated Revenue Fund
Federal Government of the Federation
For the Year Ended 31st December, 2015

Actual Previous year 2014 Details Note Actual 2015 Final Budget 2015 Initial/Original Budget
-11,643,722,687,721.20 OPENING BALANCE -11,527,509,521,314.40
REVENUE
STATUTORY ALLOCATION
2,735,598,769,426.61 STATUTORY ALLOCATION : FAAC 1 2,426,016,647,945.69 2,695,010,000,000.00 2,695,010,000,000.00
106,743,764,228.50 VALUE ADDED TAX ALLOCATION 2 104,661,035,354.09 172,529,000,000.00 172,529,000,000.00
170,058,565,533.75 SHARE OF EXCESS CRUDE OIL ACCOUNT 3 0 - -
3,012,401,099,188.86 TOTAL STATUTORY ALLOCATION 2,530,677,683,299.78 2,867,539,000,000.00 2,867,539,000,000.00
INDEPENDENT REVENUE ALLOCATION
0 PERSONAL TAXES 4 0 0 0
2,426,402,460.62 LICENSE 5 5,583,595,856.38 695,886,391.45 695,886,391.45
1,496,623,432.86 MINING RENTS 6 809,929,098.05 429,228,001.93 429,228,001.93
21,914,538.08 ROYALTIES 7 0 6,285,036.83 6,285,036.83
21,547,334,702.78 FEES GENERAL 8 25,273,285,949.15 6,179,723,782.43 6,179,723,782.43
1,327,815,103.89 FINES 9 2,661,432,109.28 380,814,179.08 380,814,179.08
73,333,462,005.59 SALES GENERAL 10 29,514,217,497.62 21,031,860,573.63 21,031,860,573.63
3,436,755,473.44 EARNINGS 11 13,358,183,054.95 985,653,206.14 985,653,206.14
93,216,095.00 RENT OF GOVERNMENT BUILDING 12 163,206,729.11 26,734,151.91 26,734,151.91
1,239,008,173.52 RENT ON LANDS AND OTHERS 13 1,579,488,628.46 355,344,564.98 355,344,564.98
1,233,012,611.22 REPAYMENTS GENERAL 14 231,512,466,820.29 353,625,052.13 353,625,052.13
221,136,206,785.89 INVESTMENT INCOME (INCLUDING
OPERATING SURPLUS) 15 298,916,102,027.72 351,602,198,504.00 351,602,198,504.00
1043
28,614,107.36 INTEREST EARNED 16 47,097,219.74 8,206,457.19 8,206,457.19

15,481,644.20 RE-IMBURSEMENT 17 72,003,966,625.40 4,440,098.33 4,440,098.33
327,335,847,134.45 TOTAL INDEPENDENT REVENUE 681,422,971,616.15 382,060,000,000.00 382,060,000,000.00
Statement of Consolidated Revenue Fund
For the Year Ended 31st December 2015 Financial Year 1044
Actual Previous Year 2014 Details Note Actual 2015 Final Budget 2015 Initial/Original Budget
OTHER REVENUE SOURCE
122,681,281,488.85 OTHER REVENUE SOURCES OF THE

GOVERNMENT 18 0 0 0
122,681,281,488.85 TOTAL OTHER REVENUE SOURCES 0 0 0
3,462,418,227,812.16 TOTAL REVENUE 3,212,100,654,915.93 0 0
EXPENDITURE
OPERATING EXPENSES
1,982,268,617,482.21 PERSONAL COST (INCLUDING SALARIES
ON CRF CHARGES) 19 2,050,080,350,036.02 2.294,898,005,497.51 2.294,898,005,497.51
57,015,611,526.50 FEDERAL GOVERNMENT CONTRIBUTION
TO PENSION 20 78,776,312,731.02 81,856,551,688.00 81,856,551,688.00
408,912,093,179.41 OVERHEAD CHARGES 21 537,917,487,132.38 582,897,857,420.48 582,897,857,420.48
359,082,608,612.47 OTHER CRF CHARGES (INCLUDING
SERVICE WIDE VOTES) 22 514,300,464,669.98 1,603,365,820,742.18 1,088,960,311,329.00
2,807,278,930,800.59 3,181,074,614,569.40 4,563,018,235,348.17 4,048,612,725,934.99

84,822,787,837.17 36 74,679,041,429.59 80,661,415,472.89 0
19,170,000,000.00 37 831,222,902,000.00 831,222,902,000.00 0
0 38 42,656,715,000.00 42,656,715,000.00 0
0 0 - 0
0 0 - 0
103,992,787,837.17 948,558,658,429.59 954,541,032,472.89 0.00
2,911,271,718,637.76 4,129,633,272,998.99 5,517,565,,038.09 4,048,612,725,934.99
-11,092,576,178,546.80 -12,445,042,139,397.50 -5,517,537,656,038.09 -4,048,612,725,934.99
434,933,342,767.69 TOTAL OPERATING EXPENSES
-11,527,509,521,314.40 REPAYMENT OF EXTERNAL LOANS -12445,042,139,397.50
TRANSFER TO CAPITAL DEVELOPMENT
FUND 138,695,627,693.46 541,174,565,449.30 541,174,565,449.30
CLOSING BALANCE -12,583,737,767,090.90
THE ACCOMPANYING NOTES FROM PART OF
THIS STATEMENT
Statement No 4 – Statement of Capital Development Fund

This is one of the statements that must be published monthly. The
Statement of Capital Development Fund provides information about
the sources of receipts and uses of the funds which are to finance
capital projects of the federal and state governments.
Sources of Receipt to Development Fund

a. Contribution from Consolidated Revenue Fund
b. External aid and grant
c. Internal loan (Treasury Bonds)
d. External loan tied to a specific project
e. Development loan Stock
f. External loan on lent to states
g. Special fund from emergency measures
h. Sales of government shares.
No expenditure may be incurred unless on the authority of a warrant

duly signed by the minister of finance. Separate cash book is used
for capital expenditure. Balance in the vote does not lapse unlike
recurrent expenditure.
Capital Expenditure from Development Fund

The report of the Expenditure of Development Fund is categorized
according to sectors including the expenditures funded from aid and
grants and external loans. The sectors are:
i. Administrative Sector: This includes Presidency, National
Assembly, Nigerian Navy, Nigerian Prison Service, Police
formations.
ii. Economic Sector: This includes Ministry of Agriculture,
Veterinary Council of Nigeria, Federal College of
Animal Health and Production Technology, Office of the
Accountant- General of the Federation.
iii. Law and Justice: This includes Court of Appeal, National
Industrial Court, Federal Ministry of Justice
iv. Social Sector: This includes tertiary institutions like

University of Lagos, Federal College of Education Kano,
Federal Polytechnic Bida, University of Benin Teaching
Hospital.
v. Regional Development: This includes Ministry of Niger
Delta, Ministry of FCT.
vi. Expenditure funded from aid and grant.
vii. Expenditure funded from external loans.
Statement No. 4
Statement of Capital Development Fund
for the Year Ended 31st December 2015
1047
Actual Previous year 2014 Details Note Actual 2015 Final Budget 2015 Initial/Original Budget
3,655,180,762,473.79 OPENING BALANCE 2,717,327,783,265.65
PRIOR YEAR ADJUSTMENT
1,411,555,256,060.46 INTANGIBLE ASSETS (PYA) 56 1,156,923,523,000.00 1,156,923,523,000.00 0
601,339,004,160.56 GENERAL RESERVE (PYA) 30 856,613,427,425.39 856,613,427,425.39 0
2,012,894,260,221.02 TOTAL PRIOR YEAR ADJUSTMENT 2,013,536,950,425.39 2,013,536,950,425.39 0.00
REVENUE
434,933,342,767.69 TRANSFER FROM CONSOLIDATED REVENUE FUND 57 0.00 541,174,565,449.30 541,174,565,449.30
2,006,586,629.20 PROCEEDS FROM AID AND GRANTS 31 21,269,429,407.32 0 0
342,703,050,000.00 PROCEEDS FROM EXTERNAL LOAN 32 273,014,420,000.00 0 0
570,243,511,000.00 PROCEEDS FROM DOMESTIC LOANS: FGN BONDS 33 1,550,862,000,000.00 0 0
602,519,135,060.46 PROCEEDS FROM DOMESTIC LOANS: NTBs etc. 34 0 0 0
0 PROCEEDS FROM LOANS – DEVELOPMENT
OF NAT. RESOURCES 0 0 0
0 PROCEEDS OF LOANS FROM OTHER FUNDS 0 0 0
201,500.00 OTHER CAPITAL RECEIPTS 35 1,248,750.00 0 0
1,952,405,826,957.35 TOTAL REVENUE 1,845,147,098,157.32 541,174,565,449.30 541,174,565,449.30
CAPITAL EXPENDITURE
159,719,967,285.55 CAPITAL EXPENDITURE: ADMINISTRATIVE SECTOR 23 69,151,530,454.94 172,499,126,077.20 172,499,126,077.20
247,929,302,667.61 CAPITAL EXPENDITURE: ECONOMIC SECTOR 24 248,050,291,311.72 549,868,334,248.52 369,946,209,089.23
19,786,201,860.45 CAPITAL EXPENDITURE: LAW AND JUSTICE 25 15,679,523,564.27 21,014,120,137.39 20,813,927,911.91
34,203,672,014.85 CAPITAL EXPENDITURE: REGIONAL DEVELOPMENT 26 14,482,772,321.68 33,190,133,380.53 21,740,000,000.00
71,926,057,891.98 CAPITAL EXPENDITURE: SOCIAL SERVICE 27 134,568,197,960.29 63,029,190,686.63 57,057,986,485.64
1,696,294,224.03 CAPITAL EXPENDITURE: FUNDED FROM AIDS
AND GRANTS 28 22,142,472,757.04 22,142,472,757.04 0
342,703,050,000.00 CAPITAL EXPENDITURE: EXTERNAL LOANS 29 273,014,420,000.00 273,014,420,000.00 0
877,364,545,944.47 TOTAL CAPITAL EXPENDITURE 777,089,208,369.94 1,134,757,797,287.31 642,057,251,563.98
0 TRANSFER CRF 0 0 0
2,717,327,783,265.65 CLOSING BALANCE 1,771,848,722,627.64
THE ACCOMPANYING NOTES FROM PART OF
THIS STATEMENT
Structure of the Notes

The notes to the financial statements of an entity should:
i. present information about the basis of preparation of the
financial statements and the specific accounting policies
selected and applied for significant transactions and other
events; and
ii. provide additional information, which is not presented on the
face of the financial statements but is necessary for a fair
presentation of the entity’s cash receipts, cash payments and
cash balances.
Notes to the financial statements should be presented in a systematic
manner. Each item on the face of the statement of cash receipts and
payments and other financial statements should be cross-referenced
to any related information in the notes.
Worked Example 1
From the following information of Ogun State Government, you
are required to prepare the State Consolidated Revenue Fund for the
year ended 31st December, 2015.
(N)
a. The closing balance for the year
2014 was 23,699,200.00
b. The Gross statutory allocation from FAAC 28,146,750,000.00
c. Value Added Tax Allocation 8,569,000,000.00
d. Excess Crude Oil Account 9,000,000,000.00
e. The state internal revenue service was able to collect the following
revenue for the year ended 31st December, 2015:
(N)
i. Direct Taxes 12,746,100,100.00
ii. Licences 5,176,000.00
iii. Interest 6,765,000.00
iv. Fees 8,176,000.00
v. Fines 1,867,000.00
vi. Sales 2,790,000.00
vii. Earnings 4,767,250.00
viii. Rent of govt. building 1,000,000.00

ix. Investment income 4,760,000.00
x. Interest earned 1,460,100.00
f. From the Accountant-General records, the following expenditure were made:

a. Personnel cost including salaries on CRF 8,950,800,000.00
b. State Govt. contribution to pension 9,145,450.00
c. Overhead 6,479,000.00
d. Other operating activities 4,750,000.00
g. Other payment made during the year 2015
are as follows:
i. Repayment of external loans 4,500,900.00
ii. Repayment of bonds 8,500,700.00
iii. Repayment of internal loans 5,760,000.00
iv. Repayment of other contractual
obligations 10,000,000,000.00
Solution: Worked Example 1

Ogun State Government of Nigeria
Statement of Consolidated Revenue Fund for the Year Ended 31st
December, 2015
Details Notes 2015 Actual (N) 2015 Final Budget

Balance b/f 23,699,200.00
Gross Statutory Allocation
from FAAC 28,146,750,000.00
Value Added Tax Allocation 8,569,000,000.00
Excess Crude Oil Account 9,000,000,000.00
Sub-Total-Statutory Allocation 45,739,449,200.00
Direct Taxes 12,746,100,100.00
Licences 5,176,000.00
Interest 6,765,000.00
Fees 8,176,000.00
Fines 1,867,000.00
Sales 2,790,000.00
Earnings 4,767,250.00
Rent of govt. building 1,000,000.00
Investment income 4,760,000.00

Interest earned 1,460,100.00
Sub-Total-Independent
Revenue 12,782,861,450.00
TOTAL REVENUE 58,522,310,650.00
Less expenditure
Personnel cost including
CRF charges 8,950,800,000.00
State govt. contribution
to pension 9,145,450.00
Overhead 6,479,000.00
Other operating activities 4,750,000.00
Total over-head expenditure 8,971,174,450.00
Other payment/expenditure
Repayment of external loans 4,500,900.00
Repayment of bonds 8,500,700.00
Repayment of internal loans 5,760,000.00
Repayment of other contractual
obligations 10,000,000,000.00
Total Repayment of Loans 10,018,761,600.00
TOTAL EXPENDITURE 18,989,936,050.00
OPERATING BALANCE 39,532,374,600.00
Worked Example 2
The following information was extracted from the book of the Accountant
General of the Federation relating to the cash movement for the year ended
December 2015.
i. The Gross Statutory Allocation from FAAC 28,146,750,000.00
ii. Value Added Tax allocation 8,569,000,000.00
iii. Excess Crude Oil Account 9,000,000,000.00
The other independent revenue collected is as follows:

 Direct taxes 12,746,100,100.00
 Licenses 5,176,000.00
 Interest 6,765,000.00
 Fees 8,176,000.00
 Fines 1,867,000.00
 Sales 2,790,000.00
 Earnings 4,767,250.00
 Rent of govt. building 1,000,000.00
 Investment income 4,760,000.00
 Interest earned 1,460,000.00
The following payment was made from the income:

 Personnel cost including
salaries on CRF 8,950,800,000.00
 State govt. contribution to pension 9,145,450.00
 Over-head 6,479,000.00
 Other operating activities 4,750,000.00
The following capital expenditure was made in categories according

to sectors
• Administrative Sector 717,120,763.00
• Economic Sector 1,463,592,860.00
• Law and Justice Sector 46,965,714.00
• Social Service Sector 115,670,000.00
• Regional Development 56,000,000.00
• Funded from Aid and Grants 50,000,000.00
During the year under review, the following funds were sourced
to finance the year budget due to the decrease from the Federation
Account allocation;
(a) The United Kingdom gave
Aid and Grant of; 200,785,000.00
(b) External Loans 9,250,450,000.00
(c) Internal Loan Nigeria
Treasury Bill 10,450,000,000.00
(d) Proceed from sale of
Government Building 5,000,000,000.00
Repayment made on the loans and other obligations for the year
under review are:
v. Repayment of External Loans 4,500,900.00
vi. Repayment of Bonds 8,500,700.00
vii. Repayment of Internal Loans 5,760,000.00
viii. Repayment of other Contractual
Obligation 10,000,000,000.00
From the above information, you are required to prepare the

consolidated cash flow statement for the year ended 31st December,
2015.
Practice Questions
1. Discuss the structure of the cash basis of accounting standard.

2. Specify the sectorisation of the MDAs.
3. Enumerate the expected financial statement and reports the
Accountant-General is to produce.
4. Discuss the concept of public debt.
5. State the sources of receipt into development fund.
Chapter Thirty
Financial Reporting under IPSAS Accrual-Basis of Accounting
Learning Outcomes
i. discuss the components of financial statement in line with
IPSAS 1;
ii. enumerate the minimum requirement of line items to be on the
statement of financial position;
iii. enumerate the line items to be on the statement of financial
performance;
iv. discuss the categorisation of cash flow statement; and
v. enumerate the other minimum disclosures in the financial
statement.
30.0 Introduction
In line with the Circular Ref. No TRY/A5 & B5/2014 of 23rd
October, 2014 issued by the Accountant-General of the Federation,
the implementation of the International Public Sector Accounting
Standard (IPSAS) Accrual-Basis of Accounting, effectively commenced
in the public sector. Captioned as “Successful Implementation of
International Public Sector Accounting Standards (IPSAS) Accrual-
Basis in Nigeria by 2016”, the circular enjoined all Public Sector
Entities (i.e. ministries, departments and agencies, MDAs) in the
federal and state governments as well as local government councils
(LGC) to set up IPSAS implementation committee for the purpose of
implementing IPSAS Accrual-Basis of Accounting.
1053
30.1 Composition of Financial Statement IPSAS 1

According to IPSAS 1, a complete set of Financial Statement
comprises:
a. statement of financial position;
b. statement of financial performance;
c. statement of changes in net assets/equity;
d. cash flow statement;
e. a comparison of budget and actual amounts either as a
separate additional financial statement or as a budget column
in the financial statements (for entities that make their
approved budget publicly available; and
f. notes, comprising a summary of significant accounting
policies and other explanatory notes.
30.2 Statement of Financial Position

This is also known as balance sheet. It is a statement that shows
assets, liabilities and net assets/equity of an entity. Both assets and
liabilities are categorised as current and non-current in the statement
of financial position. As a minimum requirement, the statement of
financial position shall include line items that are present in the
following:
30.2.1 Assets Divided into Current and Non-Current Assets

i. Current Assets
(a) Cash and Cash Equivalents: Cash and its equivalents
comprise cash at hand, at bank and cash invested in
easily convertible instruments.
(b) Receivables from Exchange Transactions: These
are outstanding collections arising from exchange
transactions.
(c) Inventories: These are assets in the form of materials
or supplies to be consumed in the production process
as materials or supplies to be consumed or distributed
in the rendering of services; held for sale or distributed
in the ordinary course of operations.
ii. Non-Current Assets

• Long -term Loan: These are long term loan receivables
that the duration is more than one year. For instance,
housing and vehicle loans granted to public officers.
• Investments: Investment must be accounted for using
the equity method. If there are any investments,
IPSAS 7 guidelines and equity method should be
used to account for the investment.
• Property, Plant, and Equipment (PPE): These are
tangible items held for use in the production or supply
of goods or services and are expected to be used for
more than one reporting period.
• Investment Property: These are cash generating assets
held by an entity. These are asset owned to generate
income to the entity.
• Intangible Assets: Intangible assets are identifiable
non-monetary asset without physical substance.
In other words, there are assets that can generate
economic benefits but cannot be seen physically or
felt, e.g. software though it cannot be seen physically,
it is a known fact that it generates economic benefit.
30.2.2 Liabilities: These Can Be Divided into Current Liabilities

and Non-Current Liabilities
i. Current Liabilities
a. Deposits: This is one of the items of current liabilities.
Normally, deposits in government accounting language
are those funds kept for safe keeping by some
government agencies which are kept by Accountant-
General. In this case, no money is expected to be kept by
any government agency without disclosure. All moneys
must be accounted for and included in the consolidated
financial statement of the federal government. Agencies
that keep such deposits include police, prison, courts,
ICPC and EFCC.
b. Short-term Loans and Debts: These are domestic

loan stock such as Nigeria Treasury Bills.
c. Unremitted Deductions: These are unremitted
deduction from Salaries PAYE, Value Added Tax,
WHT, Union dues, etc.
d. Payables under Exchange Transactions: These are
debtors which are mandatorily line items on the
financial statement.
e. Current Portions of Borrowing: This is the portion of
the borrowing that is due for the year.
ii. Non- current Liabilities

• Public Fund: This consists of government funds and
other trust funds such as Consolidated Revenue Fund,
Police Reward Fund, Rice Levy Fund, Ecological
Fund, Stabilisation Fund, Development of National
Resource, Tertiary Education Fund, Steel Pool Fund.
From the notes to the account, details of each fund will
be stated with explanatory note. From experience and
contrary to the existing rules, most of the notes to the
government financial statement are not explanatory
notes.
• Long-term Borrowing: This is the external loans includes
the multilateral World Bank, Africa Development Bank,
European Investment Bank, etc. This information is
always obtainable from the Debt Management Office.
30.2.3 Net Asset/Equity

i. Capital Grant: These are capital grants to MDAs and
they are arranged according to sectors.
ii. Reserve: Reserve consists of various types and they
include Transitional Reserve, Revaluation Reserve,
Foreign Exchange Translation Reserve and others.
iii. Accumulated Surplus: These are the accumulated
funds of the MDAs.
Consolidated Statement of Financial Position as at 31st December, 2016

1057
Description Actual 2016 Final Budget 2015 Supplement Budget Initial Budget 2016 Variance Budget
2016
N N N N N
A B(-D) C D E(B-A)
Revenue
Government Share
of FAAC (Statutory
Revenue) 1,864,122,413,551.29 2,695,008,000,000.00 2,695,008,000,000.00 830,895,588,448.77
Government Share
of VAT 108,997,999,612.48 198,240,000,000.00 198,240,000,000.00 89,242,000,387.52
Tax Revenue 5,824,575,171.65 - (5,824,575,171.65)
Non-Tax Revenue 95,460,002,736.60 32,995,936,783.43 32,995,936,783.43 62,464,065,953.17
Investment Income 158,730,832,737.44 368,370,000,000.00 368,370,000,000.00 209,639,167,262.58
Interest Earned 319,879,804.98 4,063,216.57 4,063,216.57 (315,816,588.41)
Aid & Grants 37,981,565,438.69 - - (37,981,866,436.69)
Debt Forgiveness 1,448,363,633,741.47 - - (1,446,363,633,741.47)
Other Revenues 578,931,582.10 - - (578,931,562.10)
Transfer from Other
Government Entities - -
Total Revenue (A) 3,718,370,135,354.70 3,294,618,000,000.00 3,294,618,000,000.00 (423,752,135,354.70)
Expenditure
Salaries & Wages 1,988,002,931,916.23 1,999,706,859,003.73 40,032,560,751.99 1,959,674,298,251.74 (11,703,927,087.50)
Social Benefits 262,480,236,941.23 188,214,155,793.63 188,214,155,793.63 (74,265,081,147.99)
Overhead Cost 670,827,528,970.26 1,107,554,994,925.78 93,409,308,421.30 1,014,145,686,504.48 (436,727,465,955.53)
Grants & Contributions 488,451,449,713.38 - - (488,451,449,713.38)
Subsidies 74,789,413,705.67 - - (74,789,413,705.67)
Depreciation Charges 58,074,816,675.34 - - (58,074,816,675.34)
Impairment Charges 6,520,313.00 - - (6,520,313.00)
Amortisation Charges 169,686,368.56 - - (169,686,368.56)

Bad Debts Charges 108,095.95 - - (108,095.95)
1058
Public Debt Charges 1,297,009,110,138.06 - - (1,297,009,110,138.06)

Transfer to Other
Government Entities 2,284,673,060,916.84 - - (2,284,673,060,916.84)
Total Expenditure (B) 7,124,484,863,754.90 3,295,476,009,723.14 133,441,869,173.29 3,162,034,140,549.85 (3,829,008,854,031.76)
Description Actual 2016 Final Budget 2015 Supplement Budget 2016 Initial Budget 2016 Variance on Final Budget
N N N N N
A B(+D) C D E(B-A)
Capital Expenditure
Based on Sectors
Administrative Sector 368,909,321,755.55 329,843,328,047.12 329,843,328,047.12 (59,065,993,708.42)
Economic Sector 253,314,093,167.49 1,183,807,844,046.83 1,183,807,844,046.83 (930,493,750,879.34)
Law and Justice Sector 80,307,753,676.71 22,301,221,199.48 22,301,221,199.48 (58,006,532,477.23)
Regional Sector 44,901,507,036.17 48,737,451,423.20 48,737,451,423.20 3,835,944,387.03
Social Sector 375,528,280,629.84 152,379,660,310.16 152,379,660,310.16 (223,148,820,319.68)

Total Capital
Expenditure = C 1,142,960,956,265.76 1,737,069,505,026.79 1,737,069,505,026.79 594,108,548,761.04
Total Expenditure:
D=B+C 8,267,445,820,020.65 5,032,545,514,749.93 133,441,869,173.29 4,899,103,645,576.64
Budget Surplus Deficit (4,549,075,654,665.96) (1,737,927,514,749.93) (133,441,869,173.29) (1,604,485,654,576.64)
30.2.4 Statement of Financial Performance

This is also known as statement of revenue and expenses, income
statement, operating statement and profit or loss account. The
statement shows the income which accrued to the entity from all
sources and expenditure incurred during the period. As a minimum
requirement, the statement of financial performance should include
the following line items:
• Revenue from Operating Activities
 Government’s share of FAAC statutory allocation
 Government’s share of VAT
 Tax revenue
• Non-Tax Revenue
i. Investment income
ii. Interest earned
iii. Aid and grants
iv. Debt forgiveness and other capital receipts to CRF
• Expenditure
a. Salaries and wages
b. Social benefits
c. Overhead
d. Grants and contributions
e. Subsidies
f. Depreciation charges
g. Amortisation charges
h. Bad debt charges
i. Public debt charges
j. Transfer to other government entity
Surplus or Deficit from Operating Activities;
FEDERAL GOVERNMENT OF NIGERIA

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31ST DECEMBER, 2016
Previous Year Actual NCOA CODES Notes Actual 2016 Final Budget 2016 Supplementary Initial/ Original Budget Variance on Final
(2015) Budget 2016 2016 Budget
1060
A B(C+D) C D E(B-A)
N N N N N N
REVENUE
2,426,016,647,945.69 Government Share of 110101&110103 1 1,864,112,413,551.29 2,695,008,000,000.00 2,695,008,000,000.00 830,895,586,448.71
FAAC(Statutory Revenue
104,661,035,354.09 Government Share of VAT 110102 2 108,997,999,612.48 198,240,000,000.00 198,240,000,000.00 89,2424,000,387.52
Tax Revenue 120101 3 5,824,575,171.65 (5,824,575,171.65)
382,459,772,368.69 Non-Tax Revenue 120201-120210 &120213 4 95,460,002,736.60 32,995,936,783.43 32,995,936,783.43 (62,464,065,953.17)
298,916,102,027.72 Investment Income 120211 5 158,730,832,737.44 368,370,000,000.00 368,370,000,000.00 209,639,167,262.56
47,097,219.74 Interest Earned 120212 6 319,879,804.98 4,063,216.57 4,063,216.57 (315,816,588.41)
Aid & Grants 130101-130204 7 37,981,866,436.69 - (37,981,866,436.69)
Debts Forgiveness/ other Capital 140401-140402 8 1,446,363,633,741.47 - (1,446,363,633,741.47)
Receipts to CDF
Other Revenue 140701 9 578,931,562.10 - (578,931,562.10)
Transfer from other Government 150101 10 -
3,212,100,654,915.93 Total Revenue 3,718,370,135,354.70 3,294,618,000,000.00 3,294,618,000,000.00 (423,752,135,354.70)

Entities
EXPENDITURE
2,050,080,350,036.02 Salaries and Wages 210101-210202 11 1,988,002,931,916.23 1,999,706,859,003.73 40,032,560,751.99 1,959,674,298,251.74 11,703,927,087.50
78,776,312,731.02 Social Benefits 210301 12 262,480,236,941.62 188,214,155,739.63 188,214,155,793.63 (74,266,081,147.97)
537,917,487,132.38 Overhead Cost 220201-220208,220210 & 13 670,827,528,970.26 93,409,308,421.30 1,014,145,686,504.48 436,727,465,955.53
230501
Grants & Contributions 220401-220402 14 488,451,449,713.38 1,107,554,994,925.78 (488,727,465,955.53)
Subsidies 220501 & 220502 15 74,789,413,705.67 - (74,789,413,705.67)
Depreciation Charges 240101-240201 16 58,074,816,675.34 - (58,074,816,675.34)
Impairment Charges 260101-260301 17 6,520,313.00 - (6,520,313.00)
Ammonization Charges 250101 18 169,686,368.56 - ()169,686,368.56
Bad Debts Charges 270101 & 270102 19 108,095.95 - (108,095.95)
Public Debts Charges 230209 20 1,297,009,110,138.06 - (1,297,009,110,138.06)
514,300,464,669.98 Transfer to other Government 220701-220801 21 2,284,673,060,916.84 - (2,284,673,060,916.84)
3,181,074,614,569.40 Total Expenditure (b) 7,124,484,863,754.90 3,295,476,009,723.14 133,441,869,173.29 3,162,034,140,549.85 (3,829,008,854,031.76)

Entities
31,026,040,346.53 Surplus/(Deficit) from Operation (3,406,114,728,400.20) (858,009,723.14) (133,441,869,173.29) 132,583,859,450.15 3,405,256,718,677.06
X Gain/loss on Disposal of Assets 140501-140503 & 140801- 22 (158,325,553,854.69) X X X X

140901 (280101-280105)
X Gain/loss on Foreign Exchange 141001 (20901) 23 1,576,171,191,512.79 X X X X
Transaction
X Share of Surplus (Deficit) in N/A 24 X X X X
Associate & joint Ventures
XX Total Non-Operating Revenue 1,417,845,637,658.10 XX XX XX XX
(Expenses)(d)
X Surplus (Deficit) from Ordinary (4,823,960,366,058.30) X X X X

activities c=(c+d)
(X) Minority Interest Share of Surplus 140501 25 (4,823,958,366,058.30) (x) (X) (X) (X)
(Deficit) (f)
XX Non-Surplus (Deficit) for the period XX XX XX XX

g=(e-f)
30.2.5 Statement of Changes in Net Assets/Equity

This statement explains the changes in net assets of an entity. In
other words, it shows the change between the current and prior
periods net asset balances. Net assets/equity refers to the residual
measure in the statement of financial position (assets less liabilities).
It may be positive or negative. These changes may be caused by
many factors including:
a. Surplus/Deficit during the period.
b. Significant changes in accounting policies.
c. Correction of prior year errors.
d. Assets revaluation.
e. Effect of translation of foreign exchange transactions, etc.

STATEMENT OF CHANGES IN NET ASSETS/EQUITY FOR THE YEAR ENDED 31ST DECEMBER, 2016
1062
NCOA CODES NOTES CAPITAL GRANT REVALUATION EXCHANGE ACCUMULATED TOTAL

RESERVE TRANSLATION SURPLUSES/
RESERVE (DEFICIT)

Balance as at 1st January, 2016 Bal. of CRF & CDE
(i.e Stat. 3 & 4)as at
31/12/2015 (10,673,193,416,769.80) (10,673,193,416,769.80)
Changes in Accounting Policy As adjusted -
Restated Balances - - - (10,673,193,416,769.80) (10,673,193,416,769.80)
-
Surplus on Revaluation of
properties 43030101 -
Deficit on Revaluation of
investment 43030101 (Closing
less Beginning Bal.) - - - (10,673,193,416,769.80) (10,673,193,416,769.80)

Net Gains and loses not
recognised in the statement
of financial performance 1,066,296,866,444.10 1,066,296,866,444.10
Net surplus for the period - - - (9,606,896,550,325.73) (9,606,896,550,325.73)
Balance at 31st December, 2016 1,025,786,888,795.55 - (4,823,960,366,058.30) (3,798,173,477,262.75)
Deficit on Revaluation of
Property -
Surplus on Revaluation of
Investments -
Net gains and loses not
recognised in the Statement
of Financial Performance -
Net deficit for the period - - (4,823,960,366,058.30) (4,823,960,366,058.30)
Balance at 31st December, 2016 1,025,786,888,795.55 - - 14,430,856,916,384.00 (13,405,070,027,588.50)
Illustration of a Statement of Changes in Net Assets/Equity

The following was extracted from the records of Owa State
Government of Nigeria for the year ended 31st December, 2015.
• The Statement of Financial Performance for year ended 31st
December, 2015 shows a Net Surpluses of N4,550,000.00
• The Statement of Financial Position for the year ended 31st
December, 2015 shows the following balances:
Date Reserves (N) Accumulated Surpluses/

Deficit (N)
1/1/2015 3,765,000.00 6,500,000.00
31/12/2015 5,565,000.00 16,550,000.00
• The Ministry of Agriculture revenue N2,000,000.00 was

omitted in 2014 financial year which was brought into 2015
Account.
• Investment worth N1,420,000.00 were revalued at
N1,220,000.00 at the year end.
• Motor vehicle with carrying value of N4,000,000.00 was
revalued at N5,000,000.00 at the end of the year.
• Decision was made to transfer N1,000,000.00 to Reserves
at the end of the year.
• The fluctuation of the foreign exchange during the year
under review had an effect on the exchange with a sum of
N4,500,000.00 at the year ended 31st December, 2015.
Required
You are required to prepare statement of Net Asset/Equity for the
year ended 31st December, 2015.
Solution
Owa State Government of Nigeria
Statement of Changes in Net Assets/Equity for the Year
31st December, 2015
Details Reserve Accumulated Total

(N) Surpluses/ (N)
Deficits
(N)
Opening Balance 3,765,000.00 6,500,000.00 10,265,000.00
Net Surplus for
year 2015 - 4,550,000.00 4,550,000.00
Omission Revenue - 2,000,000.00 2,000,000.00
Deficit on
Revaluation
of Investment -200,000.00 - (200,000.00)
Surplus on
revaluation of
Motor vehicle 1,000,000.00 - 1,000,000.00
Transfer to Reserve 1,000,000.00 -1,000,000.00 -
Foreign exchange
effect - 4,500,000.00 4,500,000.00
Total 5,565,000.00 16,550,000.00 22,115,000.00
30.2.6 Cash Flow Statement

This is a statement that reports inflows and outflows of cash and cash equivalent
during a reporting period. It serves to analyse the changes in cash and cash
equivalents.
30.2.7 Method of Preparing Cash Flow Statements

The IPSAS 2 has identified two methods of preparing cash flow under Accrual
Basis of Accounting – direct and indirect. The Standard also provides that cash
flows of entities should be categorised into three activities as follows:
• Operating Activities
• Investing Activities
• Financing Activities
Note: that Nigeria Government has adopted direct method. It is,

therefore, mandatory for all Public Sector entities to use direct
method in all their cash flow statements.
a. Operating Activities
Cash flows from operating activities are primarily derived from the
principal cash-generating activities of the entity. Examples of cash
flows from operating activities include:
i. cash receipts from taxes, levies, and fines;
ii. cash receipts from charges for goods and services provided
by the entity;
iii. cash receipts from grants or transfers and other appropriations
or other budget authority made by government or other public
sector entities;
iv. cash receipts from royalties, fees, commissions, and other
revenue;
v. cash payments to other Public Sector entities to finance their
operations (not including loans);
vi. cash payments to suppliers for goods and services;
vii. cash payments to and on behalf of employees;
viii. cash receipts and cash payments of an insurance entity for
premiums and claims, annuities, and other policy benefits;
ix. cash payments of local property taxes or income taxes (where
appropriate) in relation to operating activities;
x. cash receipts and payments from contracts held for dealing
or trading purposes;
xi. cash receipts or payments from discontinuing operations;
and
xii. cash receipts or payments in relation to litigation settlements.
b. Investing Activities
Investing activities are items on the cash flow statement that report
the aggregate changes in an entity’s position resulting from amount
spent on investment in non-current assets such as property, plant &
equipment (PPE), investment property, financial instruments, etc.
Cash outflows that result in a recognised asset in the statement of
financial position are eligible for classification as investing activities.
Examples:
(i) cash payments to acquire property, plant, and equipment,
intangibles, and other long-term assets. These payments
include those relating to capitalised development costs and
self-constructed property, plant and equipment;
(ii) cash receipts from sales of property, plant and equipment;
(iii) intangibles and other long-term assets;
(iv) cash payments to acquire equity or debt instruments of other
entities and interests in joint ventures (other than payments
for those instruments considered to be cash equivalents or
those held for dealing or trading purposes);
(v) cash receipts from sales of equity or debt instruments of other
entities and interests in joint ventures (other than receipts
for those instruments considered to be cash equivalents and
those held for dealing or trading purposes);
(vi) cash advances and loans made to other parties (other than
advances and loans made by a public financial institution);
(vii) cash receipts from the repayment of advances and loans
made to other parties (other than advances and loans of a
public financial institution);
(viii) cash payments for futures contracts, forward contracts, option
contracts and swap contracts, except when the contracts are
held for dealing or trading purposes, or the payments are
classified as financing activities; and
(ix) cash receipts from future contracts, forward contracts, option
contracts, and swap contracts, except when the contracts
are held for dealing or trading purposes, or the receipts are
classified as financing activities.
c. Financing Activities
Financing activities are activities that result in changes in the size
and composition of the capital structure of a reporting entity that
are not its primary business. The separate disclosure of cash flows
arising from financing activities is important, because it is useful in
predicting claims on future cash flows by providers of capital to the
entity.
Examples:
• cash proceeds from issuing debentures, loans, notes, bonds,
mortgages, and other short or long-term borrowings;
• cash repayments of amounts borrowed; and
• cash payments by a lessee for the reduction of the outstanding
liability relating to a finance lease.
CONSOLIDATED STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31ST DECEMBER 2016
DESCRIPTION NCOA CODES NOTES 2016 2015
COA REF. N N N N
CASH FLOW FROM OPERATING ACTIVITIES
INFLOWS 1068
GOVERNMENT SHARE OF FAAC (STATUTORY 110101 & 110103 1,864,112,413,551.29 2,426,016,647,945.69
REVENUE)
GOVERNMENT SHARE OF VAT 110102 108,997,999,612.48 104,661,035,354.09
TA REVENUE 120101 5,824,575,171.65 -
NON-TAX REVENUE 120201 – 120210 & 120213 95,460,002,736.60 382,459,772,368.69
INVESTMENT INCOME 120211 158,730,832,737.44 298,916,102,027.74
INTEREST EARNED 120212 319,879,804.98 47,097,219.74
AID & GRANTS 130101 – 130204 37,981,866,436.69 -
DEBTS FORGIVENESS 140401 – 140402 1,446,363,633,741.47 -
OTHER REVENUE 140701 578,931,562.10 -
TRANSFER FROM OTHER GOVERNMENT ENTITIES 150101 -
TOTAL INFLOW FROM OPERATING ACTIVITIES (A) 3,718,370,135,354.70 3,718,370,135,354.70 3,212,100,654,915.93 3,212,100,654,915.93
OUTFLOWS
SALARIES & WAGES 210101 – 210202 1,988,002,931,916.23 2,050,080,350,036.02
SOCIAL BENEFITS 210301 262,480,236,941.62 78,776,312,731.02
OVERHEAD COST 220201 – 220208, 220210 & 670,827,528,970.26 537,917,487,132.38
230501
GRANTS AND CONTRIBUTIONS 220401 & 220402 488,451,449,713.38 -
SUBSIDIES 220501 & 220502 74,789,413,705.67 -
TRANFER FROM OTHER GOVERNMENT ENTITIES 220701 – 220801 2,284,673,060,916.84 514,300,464,669.98
FINANCE COST 220209 1,297,009,110,138.06 -
NET COST INFLOW/(OUTFLOW) FROM OPERATING

TOTAL OUTFLOW FROM OPERATING ACTIVITIES (B) 7,066,233,732,302.05 7,066,233,732,302.05 3,181,074,614,569.40 3,181,074,614,569.40
ACTIVITIES C=(A-B)
1 (3,347,863,596,947.35) 6,362,149,229,138.80 31,026,040,346.53
CASH FLOW FROM INVESTING ACTIVITIES

PROCEEDS FROM SALES OF PPE NA
PROCEEDS FROM SALES OF INVESTMENT PROPERTY NA
PROCEEDS FROM SALE OF INTANGABLE ASSETS NA
PROCEEDS FROM SALES OF INVESTMENT NA
DIVIDENDS RECEIVED NA
PURCHASE/CONSTRUCTION OF PPE 320101 – 320110
PURCHASE/CONSTRUCTION OF INVESTMENT 320201
PROPERTY
PURCHASE OF INTANGEBLE ASSETS 320301
ACQUISATION OF INVESTMENTS 310901 & 310902, 311001 & -
NET CASH FLOW FROM INVESTING ACTIVITIES

311002
31,026,040,346.53
CASH FLOW FROM FINANCING ACTIVITIES

CAPITAL GRANT RECEIVED 430101 1,025,786,888,795.55
PROCEEDS FROM BORROWINGS 420301(CR) 564,701,460,000.00
REPAYMENT OF BORROWINGS 420301(DR) (35,541,650.000.00)

DISTRIBUTION OF SURPLUS DIVIDENDS PAID 22010102
NET CASH FLOW FROM FINANCING ACTIVITIES 1,554,946,638,795.55 1,554,946,638,795.55
NET CASH FLOW FROM ALL ACTIVITIES

(1,792,916,958,151.80)
CASH & ITS EQUIVALENT AS AT 1/1/2016 299,051,771,918.00

CASH & ITS EQUIVALENT AS AT 31/12/2016 2 157,617,261,989.58
NOTES 1.
RECONCILIATION
SURPLUS(DEFICIT PER STATEMENT OF NRT SURPLUS(DEFICIT) FOR (3,406,114,728,400.20)
PERFORMANCE) THE PERIOD OF AS PER
FINANCIAL PERFORMANCE
ADD BACK NON-CASH MOVEMENT ITEMS;
DEPRECIATION CHARGES 240101 – 240201 16 58,074,816,675.34
AMORTIZATION CHARGES 250101 17 169,686,368.56
IMPAIRMENT CHARGES 260101 – 260301 18 6,520,313.00
DEBTS FORGIVENESS 270101 – 270102 19 108,095.95
NET MOVEMENT IN CURRENT ASSETS/LIABILITIES (3,347,863,596,947.35) (3,347,863,596,947.35)
NET MOVEMENT IN INVENTORIES 310501(OPENING BAL. LESS 35,772,920,928.16
CLOSING BAL.)
NET MOVEMENT IN RECEIVABLES 310601 – 310604 & 310801 41,134,598,014.72
(OPENING BAL LESS CLOSING
BAL.)
NET MOVEMENT IN PAYABLES 410401 – 410501(OPENING 199,969,257,538.71

BAL LESS CLOSING BAL)
NET CASH INFLOW FROM OPERATING ACTIVITIES 267,876,776,481.59 276,876,776,481.59
NOTES 2
CASH & ITS EQUIVALENT AS AT 31/12/2016
CASH BALANCES NA
BANK PHOTOCOPY (157,617,261,949.58) (157,617,261,949.58)
30.2.8 Statement of Comparison of Budget and Actual Amount

Presentation of budget information in financial statements is
covered by IPSAS 24: Statement of Comparison of Budget and
Actual Amount (otherwise refers to as performance report) shows/
indicates the performance of a reporting entity. It compares actual
performance of an entity with the approved budget. This report is
very essential as it enables users to ascertain the budget performance
of the reporting entity.
An entity shall present a separate financial statement, that is, a
statement of comparison of budget and actual amounts in the
complete set of financial statements as specified in IPSAS. It can
also be presented as an additional budget column in the primary
financial statements where the Financial Statements and the Budget
are prepared on a comparable basis. The additional column will
identify original and final budget amounts and if the entity so
chooses, difference between the budget and actual amounts.
The financial statements and budget are prepared on comparable
bases when the basis of accounting, reporting period, and
classification structure are the same. The following information is
to be disclosed in the financial statements:
i. Whether changes between the original and final budget are
a consequence of re-allocation within the budget, or of other
factors:
a. by way of note disclosure in the financial statements: or
b. in a report issued before, at the same time as, or in
conjunction with the financial statements, and shall
include a cross reference to the report in the notes to the
financial statements.
ii. The explanation on the budgetary basis and classification
basis in the approved budget.
iii. The period of the approved budget.
iv. The entities included in the approved budget.

Statement of accounting policies is one of the statements that should
be presented in the financial statements. They are the specific
principles, bases, conventions, rules and practices applied by an
entity in preparing and presenting financial statements.
30.2.10 Other Disclosures in the Financial Statements

Other minimum disclosures in the financial statements as prescribed
by IPSAS 1, supplementing the disclosures required by individual
IPSAS are:
i. disclosure of measurement bases used;
ii. information required by IPSAS that is not presented on
the face of the GPFS;
iii. disclosure of the extent to which transitional provisions
have been used;
iv. presentation of judgments that management has made
in the process of applying the public sector entity’s
accounting policies that have the most significant effect
on the amounts recognised in the financial statements;
v. disclosure of the domicile and legal form of the entity;
vi. a description of the nature of the entity’s operations;
vii. a reference to the relevant legislation governing the
entity’s operations;
viii. disclosure of the name of the controlling entity and the
ultimate controlling entity of an economic entity.
Note: that the subvention and grants to those parastatals are

part of their income.
Chapter Thirty One
Directorate of Inspectorate and Treatment of Losses off

Government Fund
Learning Outcomes
i. discuss the key functions of the inspectorate department;
ii. specify the functions and composition of the losses
committee;
iii. explain the functions of the board of survey on cash/bank
balances and stamps;
iv. discuss the actions to be taken by Accountant-General when
there is any loss of fund;
v. discuss the accounting treatment of losses;
vi. discuss the various thresholds for the write-off of
unserviceable stores;
vii. enumerate the source of investigation that may arise from
the MDA’s;
viii. specify the composition of the members of ministerial/
departmental board of survey on unserviceable items;
ix. identify officers that should not be on the Board of Survey
on unserviceable items; and
x. understand the guidelines of disposing off the motor vehicles,
plants and equipments in the Public Sector.
31.0 Introduction
The treasury inspectorate serves as the oversight branch of the
treasury on accounting and financial control matters. The inspectorate
department carries out its mandate through the following sections:
(a) Inspection
(b) Losses
1071
(c) Investigation
(d) Permanent Board of Survey and Inquiry.
31.1 Inspection Section

The inspections section in inspectorate department is involved in
the following functions:
i. Review of the accounting systems in operation, assessing of
the system of internal control and internal checks installed
in each ministry or agency.
ii. Testing compliance with regulations, circulars and
directives.
iii. Vetting and approving draft accounting code and audit
guides of the ministry/department in consultation with the
Auditor-General for the Federation.
iv. Undertaking tour of the states of the federation, ministries,
departments for compliance with rules and regulations.
31.2 Losses
Losses section of the inspectorate department’s main functions are
as follows:
a. It takes charge of the credit control of government by
pursuing claims, recovering overpayment and compiling
the statements on arrears of revenue abandoned and losses
written off.
b. It requests for publication of loss of LPO’s, receipt books,
etc. from both federation and state governments in official
gazette.
c. It produces draft memorandum of losses for the Accountant-
General for presentation to the minister of finance for
written-off approval.
d. It represents the Accountant-General on the losses
committee.
1073 Directorate of Inspectorate and Treatment of Losses of Government Fund
31.2.1 Losses Committee

Functions
a. Monitors all reported cases of loss of funds, stores and other
Government assets to make sure that action is being taken on
them.
b. It serves as the highest advisory body to the minister of
finance and Federal Civil Service Commission through the
Accountant-General of the Federation for cases of loss and
items to be written-off.
c. Follows up all cases of loss of public properties/funds and
ensures that each case is treated strictly according to existing
regulations.
d. Recommends write-off or recovery and disciplinary measures
for the public officers responsible for the loss.
31.2.2 Composition of Losses Committee

i. Representative of the office of the Auditor-General for the
Federation as the chairman.
ii. Representative of the office of the Accountant-General of the
Federation as member.
iii. Representative of the Federal Civil Service Commission as
member.
31.2.3 Recommendation of Losses Committee

The recommendations of the losses committee take the form of final
determination of:
i. the extent of fraud, abuse and errors which led to a particular
loss;
ii. the weakness in internal control procedures or practices
which might have facilitated the occurrence;
iii. the vulnerability of existing practices which may facilitate
the re-occurrence of such losses, in the particular agency and
in other agencies; and
iv. the joint and/or several culpabilities and recommendations of

disciplinary action against the various officers responsible.
31.3 Investigation
Investigation section in the department carries out investigation that
may arise from the following:
i. Discoveries from routine examination and inspection of
accounting records in ministries/department.
ii. Internal Audit and Auditor-General for the Federation’s
reports.
iii. Newspaper publications and other news media information.
iv. Direct personal information on suspected or known fraud or
requests by ministries/departments.
v. Suspicion based on alteration or falsification of records.
vi. Petitions and anonymous letters.
31.3.1 Procedure
To investigate a case, at least two investigators are appointed so that
one can corroborate the report of the other. During investigation,
records are examined, extracts are made from relevant documents,
visits are made to various places connected with the case to collect
information and those concerned are interrogated.
31.3. 2 Investigation Report

At the conclusion of their assignment, the investigators are expected
to make recommendations:
a. as to the punishment to be meted out to the erring officer(s);
b. where necessary, recommend that the board of survey and
inquiry should sit and examine the case thoroughly; and
c. about improvement in internal control system if the fraud is
as a result of flaws in the system.

31.4 Permanent Board of Survey and Inquiry

There are two types of board of survey:
a. Board of survey on cash/bank balance and stamps.
b. Board of survey on unserviceable items.
31.4.1 Board of Survey on Cash/Bank Balances and Stamps

A board of survey is a committee set up by director treasury
inspectorate in the office of the Accountant-General of the Federation
to verify the amount and stamps each MDAs is having as the
closing balances at the end of each year. Board of survey on cash/
bank balances consists of members appointed by the Accountant-
General of the Federation through director, sub-treasury department
to determine the balances to be surrendered by each ministry and
department at the end of each financial year.
The annual board of survey is held after the close of business on the
last business day of each financial year or before the commencement
of business on the first working day of the new financial year to
determine the working balance of the federal government.
31.4.1.1 Composition
A board of survey usually consists of three officers, one of whom
should serve as the president and must be a senior officer whose rank
should not be below Grade LeveI-10 while other members should
not be lower than officers on Salary Grade Level 08 (FR1805).
31.4.1.2 Duties of the Board

The members of the board are to:
i. report early at the office of the survey not later than the
official opening time;
ii. check the cash and stamp register by casting the entries for
the last month of the year and verifying the balance shown
at hand with the actual cash/stamps on record;
iii. make sure that in case of bank account, a bank certificate of
the balance must be obtained from the bank by the president
of the board and reconciled with the bank balance shown in

the cash book;
iv. ensure that all currency notes are properly counted;
v. certify the cash and bank balance on both the originals and
duplicate copies of the cash book;
vi. bring any surplus disclosed to accounts in the cash book as a
credit to revenue head. The officer must make any shortage
good by the officer responsible or charged to an advance
account for investigation. A serious shortage should be
reported to the Accountant-General; and
vii. on completion of the survey, a report will be rendered in
triplicate on Treasury Form 42, while all members of the
board will sign the certificate. Two copies will be forwarded
to the Accountant-General who will later send a copy to the
Auditor-General for the Federation.
31.4.2 Board of Survey of Unserviceable Items

Board of survey of unserviceable items is a committee set up to
verify the unserviceable items claimed by MDAs to ensure those
items are really unserviceable. The committee (Board) can also be
asked to carry out store count to verify the store items as recorded
in the store books.
Each ministry/department is given the authority to constitute its
board of survey and for the write-off and disposal of unserviceable
items.
31.4.2.1 Write-off of Unserviceable Store by Accounting Officer

Unserviceable stores, buildings, plants, motor vehicles and equipment
may be written-off and disposed of under the personal authority of the
accounting officer, provided that the original cost or estimated value,
whichever is applicable: does not exceed
(a) General Store- N250,000.00
(b) Plants, Motor Vehicles & Equipment- N500,000.00
(c) Building in any financial year- N1,000,000.00
31.4.2.2 Write-off of Unserviceable Store by Accountant-

General of the Federation
(a) General Store- N 300,000.00
(b) Plants, Motor Vehicles & Equipment- N 750,000.00
(c) Building in any financial year- N1,500,000.00
Where exigencies of the service demand, the Minister of Finance will

grant special dispensation to each ministry/extra-ministerial office
and other arms of government. Disposal of articles, which exceed
the value stated above, requires the approval of the Accountant-
General of the Federation.
31.4.3 Report of the Board

The board will write its report that the stores, buildings, plants,
motor vehicles or equipment have been surveyed and found to be
obsolete, unserviceable or dilapidated, as the case may be, by an
independent board of survey.
It is on this note that those items can be disposed after the
accounting officer has obtained the opinion, and taking advice from
the appropriate technical officer, that the unserviceable articles
are beyond economic repair. In the case of motor vehicles, plants
and equipment, ministries/extra-ministerial offices and other
arms of government, which have their own engineering/technical
facilities, shall undertake the inspection and valuation. Those
without such facilities may request the assistance of the ministry of
works, or other ministries/extra-ministerial offices and other arms
of government having such facilities, or employ the services of a
registered engineering/technical workshop (FR 2609)(d).
31.4.4 Constitution of Ministerial/Departmental Board of

Survey on Unserviceable Items and Its Members
Each ministry/extra-ministerial office and other arms of government
shall set up a board of survey for the boarding and disposal of its
unserviceable stores, vehicles, plants and equipment. A ministry/
extra-ministerial office and other arms of government board of

survey shall consist of at least three members.
31.4.5 Composition of the Members

• the chairman shall be an officer on GL 14 or above except
in an overseas mission where an officer on GL 12 and above
may be the chairman;
• the head of accounts division or his nominee; and
• a professional/technical officer in federal service whose
expertise relate to the items being boarded.
Officer That Should not be a Member of Board of Survey
a. the transport officer;
b. storekeeper(s) or other stores officials of the ministry/extra-
ministerial office; and
c. other arms of government or overseas mission shall not serve
on the board.
31.4.6 Unserviceable Store for Destruction

Authorised unserviceable stores to be destroyed must be destroyed
in such a manner as to render the articles unusable for their original
purpose. The certificate of destruction, signed by at least two
officers who witnessed the destruction must be completed to include
details of the quantities destroyed and the method of destruction
used (FR2618).
31.4.7 Proceeds of Items for Disposal

Accounting officers shall make arrangements for the sale of the
unserviceable and obsolete stores by a licensed public auctioneer,
or where appropriate, by public tender in accordance with Financial
Regulation 2964.
The officer in charge of the public auction, or public tender shall pay
the net proceeds of the auction after the deduction of the auctioneer’s
commission, to the TSA Pool Account using appropriation chart of
account. i.e, miscellaneous revenue. He shall inform the accounting
officer concerned of the details of the proceeds of sale and quote the
reference and date of the relevant treasury receipt. The Accounting

Officer shall inform the Accountant-General and the Auditor-
General of the reference number, date and amount of the treasury
receipt for the proceeds of the sales of articles disposed of (FR2620).
The documents relating to items to be sold and the Accountant-
General’s comments are usually forwarded to the Auditor-General
for the Federation for his approval. After the approval of the Auditor-
General, the treasury department will then sign Store Form 9 in
respect of the items to be disposed off and the secretary, permanent
board of survey will communicate the approval to the ministry/
department concerned.
Note: The Accountant-General and Auditor-General must be given
details of the items to be disposed and the officer in charge of the
auction who must pay the net proceeds of the auction classified
to the appropriate revenue head. Where auction sales are to be
conducted, the accounts and internal audit should be represented
and treasury receipts are to be issued for proceeds of sales.
31.4.8 Estimated Value of Motor Vehicles, Plants and Equipment

to Be Disposed
The following guidelines must be followed to determine the amount
to dispose off any unserviceable items. The year of purchase and the
depreciation shall be the guide.
(a) For motor vehicles with engine capacity of 2000cc and
below:
• Under 1 year old, 20% reduction on original cost.
• Between 1 and 2 years old, 40% reduction on original
cost.
cost.
cost.
cost.

cost.
• Between 6 years and above, 95% reduction on original
cost.
(b) For motor vehicles with engine capacity of over 2000cc

▪ Under 1 year old, 30% reduction on original cost.
▪ Between 1 and 2 years old, 50% reduction on original
cost.
cost.
cost.
cost.
cost.
▪ Between 6 years and above 95% reduction on original
cost.
(c) Vehicle rendered unserviceable as a result of accident or

whose working life has come to premature end for other
reasons.
Arrangement should be made within two months of
such accident or where police investigation is involved,
immediately after such investigation to have the vehicle
inspected and certified as such by an engineer or technical
expert such as mentioned in FR 2609 (d) above who
should also produce a valuation report for the guidance
of the board of survey.
(d) For Plants and Equipment:

An engineer’s estimated value of the asset at the time of the
write-off or disposal shall be obtained.
(e) For general stores:

A stock verifier shall furnish the estimated value.
(f) In an overseas mission:

Motor vehicles can be written off at depreciation rates
prevailing in the host country.
How to Calculate Amount to Be Paid for the Unserviceable

Items under Cash Basis
• Obtain the asset file e.g. motor vehicle file.
• Extract the cost of the vehicle or the Asset.
• Extract the date of purchase.
• Use the table on the guideline to determine the expected
amount to be paid or realised from the asset.
Illustration
In the Ministry of Agriculture, a director was about to be retired and
the official vehicle allocated to him is to be disposed of to him. The
particulars extracted from the vehicle file are as follow:
a) Capacity of the vehicle 2000cc and below
b) Cost of the vehicle N4,500,000.00
c) Year of purchase 2009 6 years
You are required to calculate the expected amount to be paid by the

director
• Cost of the Vehicle 4,500,000.00
• Accum. Depreciation Amount 6yrs 95% 4,275,000.00
• Expected Amount to be paid 225,000.00
However with the accrual-bases of accounting, the depreciation rate

in the accounting policy of the entity will be applied.
Issued on Accidental Vehicles

According to FR 2609(d), two months after the accident, effort should
be made to dispose off the vehicle to avoid further deterioration.
Most of accidental vehicles of government are left undisposed

off. In case there are police investigations, effort should be made
to complete the investigation and dispose the accidental vehicle to
avoid further deterioration.
31.4.9 Treatment of Losses of Government Funds

Loss of government fund or shortage of fund is a depletion of
government fund at a given time. This can arise from any of (but
not limited to) the following:
i. Misappropriation of funds
ii. Falsification of records
iii. Conversion of funds to personal use
iv. False claims
v. Fraudulent payments
vi. Theft
vii. Negligence
Loss of government fund cannot occur either without fraud or theft
being involved. Where a cash loss to the value of N50,000.00 or
below is involved, the accounting officers are personally empowered
to surcharge the officer responsible up to the full amount of the
loss, provided the officer is not above officer on GL 10 (FR 2501).
Where a loss is treated under this regulation, accounting officers
must immediately send a brief report of the circumstances including
the value of the loss and the names of the officers he has surcharged,
together with the amounts of the surcharge in each case to:
a. the Chairman, Federal Civil Service Commission;
b. the Auditor-General;
c. the Accountant-General; and
d. Federal Ministry of Finance.
31.4.10 Procedures to Be Followed Where Loss Occurred

• Report immediately to the head of the unit or division by
faster means if loss occurs away from the headquarters.
• Report to police if there is any possibility of fraud or theft.

• Immediately, initiate action on Treasury Form 146.
• If weakness in the system of control or insecurity is
revealed, adequate measures should be taken to correct
such weakness(es) so as to prevent a recurrence of that
loss.
• Ensure that the appropriate accounting entries have been
made.
31.4.11 Actions to Be Taken by Accountant-General When

There Is Any Loss of Fund
 He would ensure that correct procedures have been
followed by the department concerned, such as submission
of TF 146, report from board of enquiry and or police as
required so that full information is available.
 Decide if he considers it advisable for an accounts officer
to be included on the board of inquiry and notify the
officer concerned accordingly.
 Request the secretary, permanent board of survey and
inquiry to convene a board should he disagree with a
decision not to call for one.
 Advise the officer submitting the terms of reference if
there is any disagreement with the recommendations.
 Submit his final recommendations to the Permanent
Secretary, Federal Civil Service Commission.
 Convey any approval of write-off to the minister or head
of extra-ministerial department, Auditor-General and
Chairman, Civil Service Commission.
31.5 Accounting Treatment of Losses

• On the discovery of a loss of fund, the amount of the loss
will normally be charged to an advance non-personal
account of the ministry/department concerned and credit
cash account by preparing a payment voucher pending the
investigation of the loss.
• When a fraud occurs or an overpayment is made, an

adjustment voucher will be raised debiting advance non-
personal account, and if recovered within the financial year
in which it occurs, the account originally debited shall be
credited in reverse — that is, the head and sub-head in
which the fraud or overpayment were made.
• When a fraudulent payment in a previous financial year,
which is already charged against Consolidated Revenue
Fund, is discovered, all you have to do is to credit an
account head known as “Miscellaneous” under a sub-head
known as “Sundries”. The reason is that the account for
the previous year would have been closed with the loss
charged to advance non-personal account if the government
accounting is operating on cash-basis.
• For fraudulent payment or overpayment made in the
development fund and discovered within the same year or
in the next accounting period, the advance non-personal
account will be debited and credited to account originally
debited, irrespective of the accounting period in which the
overpayment occurred. The reason is that it is a capital
expenditure, which does not lapse.
• Overpayment not involving fraud made in a previous
financial year and charged against Consolidated Revenue
Fund or Development Fund, should be registered by the
Accountant-General as a loss as no adjustment is required.
• Abandonment of the recovery of a bicycle advance issued
initially from recurrent expenditure should be registered
by Accountant-General as a loss as no adjustment is
required. The reason is that it was not paid originally from
the below-the-line account.
• In case of an abandonment of the recovery of an account
of advance charged initially to personal advance account,
transfer the amount with an adjustment voucher when
authority has been given for the abandonment by crediting
personal advance account and debiting the loss of fund
vote of the ministry head of expenditure.
• Abandonment of the recovery of unpaid revenue requires

no adjustment but it should be registered by the Accountant-
General of the Federation as a loss.
31.5.1 Accounting entry required for the treatment of loss will

depend on the following factors:
The Nature of the Loss: Is it a loss in cash or embezzlement or an
overpayment?
a. The type of fund from which the loss or overpayment occurred.
b. The date of discovery and recovery.
c. The date of passing the necessary entries.
These are the entries to be made for the underlisted types of losses:
Types of Losses Accounting Entries Dr Cr

a. Loss of Cash Advance Non-personal xxx
To Cash xxx
b.(i) Fraud or overpayment Advance Non-personal xxx
made within the year. To Relevant Account/
sub-head. xxx
When recovered Cash xxx
Advance Non-personal xxx
c.(i)(ii) Fraud or overpayment Advance Non-personal xxx

in previous year Miscellaneous (Sundries) xxx
When Recovered Cash xxx

Advance Non-personal xxx
d.(i) Fraud or overpayment Advance Non-personal xxx
made in previous year To Account originally
and charged against debited xxx
development fund
ii) When Recovered Cash to Advance xxx

Non-personal. xxx
e. Overpayment not No adjustment is

involving fraud made required but
in a previous financial abandonment of the
year charged against recovery should be
the CRF or registered by AGF
Development Fund. as loss.
f. Abandonment of the
recovery of advances
issued initially from
recurrent expenditure. -do- — —
g. Abandonment of the Loss and fund xxx

recovery of an advance to Advance Non-
charged initially to an personal xxx
h. Abandonment of the No adjustment is

recovery of unpaid required but must — —
revenue. be registered by
AGF as loss.
Illustration (1)
On 31st May, 1994, the cashier of Federal Ministry of Education went
to bank to cash N45,000 for the payment of salary of the junior staff,
but on his way back to the office, he was attacked by armed robbers
who took away the money. What are the accounting entries to be made
and necessary actions to be taken?
Solution
Particulars Dr Cr
Advance Non-personal (Dr) 45,000
To Cash Book 45,000
Being amount withdrawn for
the payment of the junior staff
salary stolen by armed robbers.
This will be reported to the Accountant-General and the Auditor-

General. The matter will then be forwarded to the losses committee.
If it is then discovered that the cashier did not go to the bank with
police escort as required by the existing regulation. All officers
involved will be surcharged and the entry will be:
Particulars Dr Cr
Individual Advance A/C 45,000
To Advance Non-personal 45,000
Being amount surcharged
the officers involved in the
loss of cash.
However, if all precautions were taken by the cashier and other

officers, the write off will be recommended by the losses committee
and the accounting entries will be:
Particulars Dr (N) Cr (N)

Loss of Fund (Dr) 45,000
Advance Non-personal 45,000
Being amount of losses to be
written off.
Illustration (ii)
On 1st February 1994, a double payment was made to a contractor
for the supplies of stationery items. The amount involved is N15,000
and the discovery was made in July, 1994 and recovery was made
in November, 1994.
Solution

Advance Non-personal (Dr) 15,000
Stationery sub-head 5 15,000
Being amount of overpayment
made to a contractor now
discovered.
Bank (Dr) 15,000

Advance Non-personal 15,000
Being overpayment recovered
from contractor.
Illustration (iii)
The same facts as above but the overpayment was not discovered
until May 1995, the following year.
Solution:

Advance non-personal (Dr) 15,000
To Miscellaneous (Sundries) 15,000
made but discovered after the
accounting period.
Bank (Dr) 15,000

Advance non-personal 15,000
recovered from contractor.
Note on the Illustrations:

When the discovery was made, non-personal advance account was
debited and the stationeries sub-head 5 from which the fund was paid
credited. Remember also that stationery is recurrent expenditure,
which lapses at the end of the financial year.
When the cash was recovered, this was debited to the cash book
and credited to the non-personal advance account as a reverse entry.
When the recovery was made after the financial year, the amount
was credited to miscellaneous revenue head as it cannot be credited
to the sub-head 5: (Stationery) again as any balance at the end of the
year has to lapse.
Illustration (iv)
The sum of N40,000 was fraudulently withdrawn from Head 221:
Agriculture in May, 1994 but the fraud was discovered in June 1995.
Particulars Dr(N) Cr(N)

(i) Advance Non-personal (Dr) 40,000
To Head 221:Agriculture 40,000
Being amount fraudulently
withdrawn now discovered.
(ii)
Cash (Dr) 15,000
To Advance Non-personal 15,000
Being cash recovered on
the amount fraudulently
withdrawn from Development
Fund.
Note: Being capital project fund which does not lapse, the amount
will be credited to the head in which the fund was fraudulently
paid even though the recovery was made after the financial year in
which the fund was made.
31.6 Board of Inquiry

The board of inquiry is in most cases convened when there is loss of
government fund. The aim is to find out the causes and perpetrators
of the fraud/loss. The Accountant-General often orders the board
of inquiry to be convened on the request of the accounting officer.
The board will then investigate the circumstances of the loss of the
funds. The secretary’s convening order is expected to incorporate
any special terms of reference for the board as may be required by
the Accountant-General.
31.6.1 Copies of the convening order with full terms of

references must be sent to the following officers:
• Accounting Officer
• Accountant-General of the Federation
• Auditor-General for the Federation
• Chairman, Federal Civil Service Commission
• The Federal Ministry of Finance
When the matter is reported to the police, the final deliberation and
recommendations of the board will be deferred until the completion
of police investigation and will include consideration of any relative
police report/court proceedings. Once the board is convened, the
meeting of members shall not be deferred as it is important that the
Accountant-General and Federal Ministry of Finance be informed
of all the facts relating to the circumstances of the loss with the least
possible delay in order to correct any weakness in the accounting
system revealed by the investigation. The board shall, therefore,
direct its enquiries towards discovering such weakness and submit
an interim report even if it is not able to include a recommendation
as to the fixing of responsibility for the loss.
31.6.2 Establishment and Constitution of Permanent Board

of Survey and Inquiry
The establishment and constitution of Permanent Board of Survey
and inquiry shall be guided by the following:
i. There shall not be fewer than 24 members including a

secretary. The board shall constitute itself into panels,
which shall consist of not less than a president and at
least, two members.
ii. The Accountant-General shall make appointment to the
board.
iii. The president shall not be below salary grade level 15 and
others not below level l2.
iv. The board shall have power to investigate cases of loss
of fund, fraud, ascertain adequacy of existing security
and control systems and recommend improvement in the
system.
v. When the board is in session to determine an issue before it,
it shall be guided by the rules of natural justice (FR 2534).
31.6.3 Taking of Evidence

(a) Where practicable, the evidence taken by the board shall
be recorded verbatim and/or on tape but where this is
impracticable, the board in such a manner as to facilitate
examination and deduction, will summarise the evidence.
(b) In order to ensure fair hearing, where evidences of
witnesses are to be obtained, the following shall be
observed:
a. the officer(s) being investigated shall be entitled
to be present and to put questions to witnesses.
b. no documentary evidence shall be used against
an officer unless he has previously been supplied
with a copy thereof or given access thereto.
c. the officer shall be entitled to know the whole case
against him and shall have an adequate opportunity
of preparing his defence.
31.6.4 Contents of the Board’s Report

(a) A statement on the exact amount of loss incurred.
(b) An opinion on the appropriateness of the accounting
system with suggestions as to any remedial measures
which may appear to be practicable in view of local
condition.
(c) An opinion on whether the operation of the accounting
system is faulty in the office concerned.
(d) Recommendations for improving the physical security
measures if those in place have been discovered to be
inadequate.
(e) Recommendations, based on the assessment of the degree
of negligence of the officers considered responsible for
the loss.
(f) A recommendation on the fixing of responsibility for the
loss in whole or in part.
31.6.5 When to Convene Board of Inquiry

In considering whether a board of inquiry should be held,
consideration should be given to the following:
• If fraud has occurred.
• If the loss exceeded N20,000.00 which the accounting
officer cannot deal with.
• If several officers were involved i.e., if there has been
collusion among officers.
• If the responsibilities of the officers were not clearly
defined.
• If the loss took place over a period of time.

31.6.6 The Board of Inquiry may not be convened when:
(i) The amount involved is very small.
(ii) It is an isolated incident.
(iii) The identity of the officer responsible is indisputable.
Practice Questions
1. Discuss the key functions of the inspectorate department.

2. Specify the functions and composition of the losses
committee.
3. Explain the functions of the board of survey on cash/bank
balances and stamps.
4. Discuss the actions to be taken by Accountant-General when
there is any loss of fund.
5. Discuss the accounting treatment of losses.
6. Discuss the various thresholds for the write off of
unserviceable stores.
Chapter Thirty Two
Presidential Administrative Instruments under

The Presidential System of Government: Executive Order,
Presidential Proclamation and Presidential Memoranda
Learning Outcomes
At the end of this chapter, readers should be able to:
i. appreciate the importance of presidential administrative
instruments;
ii. identify and discuss the various types of presidential instruments;
iii. distinguish between executive orders, presidential proclamation
and presidential memoranda;
iv. discuss the merits and demerits of presidential administrative
instruments; and
v. examine the challenges of enforcing presidential administrative
instruments.
32.0 Introduction
Under the presidential system of government adopted in the United
States of America and Nigeria, there are administrative instruments
that are available to the president not only to facilitate operations
but also to enable the government to fulfil its campaign promises.
Generally, presidential instruments are directives by the president
on an issue of public interest and they that are binding. There
are three major instruments the president can use depending on
the circumstances: executive orders, presidential proclamation
and presidential memoranda. It is useful to fully understand the
dynamics behind the three presidential instruments, which are novel
in Nigeria. Before President Buhari came to power, no civilian
1094
1095 President Administrative Instruments under The Presidential System ...
president has ever issued any executive order. Thus far, the President
Buhari Presidency has issued eight of such orders.
In the past, General Circulars were issued by the Secretary to the
Government of the Federation (SGF) to guide the public service.
Public servants are familiar with general circulars and regularly
trained to adhere and enforce compliance to them. The fundamental
difference between the executive orders and these service-wide
circulars is that the latter, unlike the former, do not derive from
Section (5) of the 1999 Constitution (as amended), Powers of the
President. Again, the SGF and not the President sign these circulars.
Therefore, the circulars have doubtful legal effects and are not
readily enforceable by the courts.
Recently, the Nigerian Presidency issued an executive order,
Presidential Order No. 6 of 2018, affecting assets linked to corruption
and other related offences. This is the 6th of such orders. Previous
orders have focused on administration of public procurement,
especially as it deals with purchase of Nigerian goods and services,
registration of businesses, taxes and other aspects of ease of doing
business in Nigeria. Executive Order 6 has provoked harsh criticisms
from politicians and human rights advocates because it provides for
the interim seizure of assets linked to ongoing criminal trials and
investigations.
The problem is that the nation does have a practice of issuing
executive orders. Therefore, the Nigerian courts do not directly
have precedents and decided cases on them. So, to understand
the criticisms and the rebuttals, it is necessary to put these orders
in the proper contexts defined by how the constitution structures
the relationship between the president as chief executive and
other branches of government. It is important to also analyse the
constitutionality and legality of these executive orders within the
context of the conflict between a commitment to efficiency and a
commitment to rights and legislative due process.
This chapter seeks to give a better understanding of the three
presidential instruments and to examine the origin, usage and the
scope of the president’s authority to use such instruments.
32.1 Executive Order

This is a rule or official directive issued by the president or head
of the executive arm of government to an executive branch of the
government and having the force of law. Executive orders can do
the following:
i. enforce legislative statutes;
ii. enforce the constitution or treaties with foreign nations;
and
iii. establish or modify rules and practices of administrative
agencies of the executive arm.
In a democracy like in the USA and Nigeria, an executive order is an
official directive issued by the president who has the responsibility
for the operations of the federal government and such executive
orders, have the force of law. Indeed, Executive orders represent
the president’s legislative power and they require no approval from
the National Assembly. The National Assembly cannot overturn
the executive order nor overrule the President. While there is no
specific provision in the constitution that permits their issuance,
often the United States Presidents have relied upon Article 11 of
the Constitution as the sole basis for issuing Executive orders and
Presidential Proclamations.
Article 11 of the United States Constitution and Section (5) of the
1999 Nigerian Constitution respectively provide that the executive
power shall be vested in the President of the United States, and
President of Federal Republic of Nigeria. The president shall be
commander-in-chief of the armed forces of the country and “he
shall take care that the laws be faithfully executed and not to make
them”. Here lies a critical issue: the president is to execute laws
and not make them. But through the exercise of executive orders,
binding directives are issued which have the force of laws.
According to Contrubis (1999), there is the possibility that the
issuance of presidential instruments may directly or indirectly
affect the substantive rights, duties or obligations of persons
outside the government. As a consequence, since executive orders
and proclamations are a type of executive legislation, they have
1097 Presidential Administrative Instruments under The Presidential System...
important constitutional implications, particularly with respect to

the separation of powers. Therefore, these instruments, if issued
under a valid claim of authority and published have the force and
effect of law and courts are required to take judicial notice of their
existence. However, the rule of law, both from a constitutional
law and administrative law conceptions, implies the separation of
power. As Montesquieu rightly observed centuries ago, the only
way to guarantee the liberty and freedom of the people is to ensure
that power is not concentrated in one person or organ. The use of
presidential instruments is not a breach of the rule of law neither
is it a usurpation of the legislative powers of parliament. They are
merely administrative pronouncements that have the force of law.
32.1.1 Some of the Emerging Issues in Executive Order

• Most executive orders sometimes stem from a president’s
desire to bypass the National Assembly.
• It is often used when the president wants to do it alone.
• Although the National Assembly has the power to overturn
any executive order by passing legislation that invalidates
it, the president retains the power to veto such a decision,
which can be overridden by two-third majority vote of the
National Assembly.
• The president has the powers to reverse executive orders
especially if he is not comfortable with an executive order
of the previous administration. For example, President
Ronald Reagan used an executive order in 1984 to bar the
use of federal funds for advocating abortion. President Bill
Clinton reversed it when he took office in 1993.
• If the executive order contravenes existing laws, the Court
can upturn it.
• Most executive orders help to put into action some aspects
of laws that were not active or put to use. It ensures no law
goes to sleep without accomplishing the purpose for which
it was enacted.
• Most presidents have used it to reinvigorate government
activities by simplifying some of the existing laws.
• They are operations-based; they prompt agencies of

government to act in a particular way. For instance, executive
order regarding visa says “entry visa to Nigeria shall
henceforth be issued or rejected with reasons by the Consular
Officer of Nigerian embassies and high commissions within
48 hours of receipt of valid applications”.
• Executive order is a strong directive to target and enhance
the operations of the executive arm. They must be obeyed.
• Fundamental rights of the citizens are guaranteed and
therefore, executive order cannot be used to negatively
affect the fundamental human right of the citizen.
32.2 Presidential Proclamation

Presidential proclamation is a statement issued by the president on
an issue of public policy. It is a kind of presidential directive. A
presidential proclamation is an instrument that:
• States a condition
• Creates a law and requires obedience
• Recognises an event
• Triggers the implementation of a law, by recognising that
the circumstances described in the law have been realised.
32.2.1 Types of Proclamation

Proclamations issued by the United States President fall into two
broad categories:
• ceremonial proclamations that designate special observance
or celebrate national holidays;
• substantive proclamations that usually relate to the conduct
of foreign affairs and other sworn executive duties. These
may be, but are not limited to, matters of international trade,
the execution of set export controls, the establishment of
tariffs or the reservation of federal lands for the benefit of
the public in some manner.
Unless authorised by Congress or National Assembly, a presidential

proclamation does not have the force of law. If Congress or National
Assembly passes an act that would take effect upon the happening
of a contingent event, and subsequently, the president proclaimed
that the event has happened, then the proclamation would have the
force of law.
Presidential proclamations are often dismissed as a practical
tool for policy making because they are considered to be largely
ceremonial or symbolic in nature. The administrative weight of these
proclamations is upheld because they are often specially authorised
by congressional statute making them “delegated unilateral powers”.
Their issuance has on some occasions, led to important political
consequences in the development of the United States. George
Washington’s Proclamation of Neutrality in 1793 and Lincoln’s
Emancipation Proclamation in 1863 are some of America’s most
famous presidential proclamations in this regard.
Proclamations are also used, often contentiously, to grant presidential
pardons. In Nigeria, President Jonathan issued a proclamation to
pardon Late Diepreye Alamieyeseigha in March 2013 who was
convicted by a court. Although less significant in term of public
policy, proclamations are also used ceremonially by presidents to
honour a group or situation or to call attention to certain issues or
events. President Buhari issued a proclamation to recognise June
12 each year as Democracy Day in Nigeria. For instance, President
George H. W. Bush issued a proclamation to honour veterans of
World War II and Ronald Reagan called attention to the health of
the nation’s eyes by proclaiming a “Save Your Vision Week” and
Proclamation 5497 recognising National Theatre Week.
32.3 Presidential Memorandum

Presidential memorandum is a type of directive issued by the
President to manage and govern the actions, practices and policies
of the various departments and agencies found under the executive
branch of the government. It has the force of law and is usually
used to delegate tasks, direct specific government agencies to do

something or to start a regulatory process.
There are three types of presidential memoranda:
• Presidential determination or presidential finding
• Memorandum of disapproval
• Hortatory men
An Executive order is a more prestigious form of executive action
that must cite the specific constitutional or statutory authority the
president has to use. Unlike executive orders, memoranda are not
required by law to be published in the federal register or official
gazette. But publication is necessary in order to have general
applicability and legal effect. The federal register/official gazette
gives publication privities to Executive order and presidential
proclamation over memoranda. Memoranda can be amended
or rescinded by executive orders or another memorandum, but
executive orders take legal precedence and cannot be changed by a
memorandum.
32.4 Historical Background of Executive Order and

Presidential Proclamation
In his research in the Congressional Research Service Report for
Congress No. 95-722A, Contrubis (1999) analysed the scope of the
president’s authority to use such instruments and possible responses
by Congress and the Judiciary. He also compared presidential
memoranda, a frequently used executive instrument, to execute
orders.
The first use of proclamations can be traced back to the administration
of George Washington. In 1793, the Washington administration
wrestled with the idea of issuing a proclamation declaring the
United States’ neutral in the war between England and France.
Given the option of calling Congress back into session or issuing
a proclamation on his own accord, President Washington chose
the latter. On April 22, 1793 Washington issued a proclamation
which enjoined the citizens of the United States to “...avoid all
acts and proceedings whatsoever, which may in any manner tend

to contravene such disposition...” of “...a conduct friendly and
impartial toward the belligerent powers....”
Moreover, he had “given instructions to those officers, to whom it
belongs, to cause prosecutions to be instituted against all persons,
who shall, within the cognisance of the courts of the United States,
violate the law of nations, with respect to the powers at war, or
any of them.” However, he found that enforcing his proclamation
was difficult and, thus, decided to look to Congress for assistance.
Congress responded by passing the Neutrality Act of 1794 which
gave the administration the power to prosecute those who violated
Washington’s proclamation.
The next major use of proclamations came during the Presidency
of Abraham Lincoln. At the outset of the Civil War, President
Lincoln issued a proclamation authorising Gen. Scott to watch the
activities of the Maryland State Legislature and to act to suppress
any insurrection. In his proclamation, Lincoln even authorised the
suspension of the writ of habeas corpus. Pursuant to this proclamation,
John Merryman was arrested on May 25, 1861, and held at Ft.
McHenry by Gen. Cadwalader. Subsequently, Chief Justice Taney
ordered that a writ of habeas corpus be issued. Gen. Cadwalader,
however, citing his authority pursuant to Lincoln’s proclamation,
refused to comply. Chief Justice Taney, in his opinion, stated that
the power to suspend the writ of habeas corpus was exclusively a
legislative one, and that the president cannot suspend the privilege
nor authorise a military officer to do it. Taney based his argument
on legal and constitutional history and the fact that the power to
suspend the writ is contained in Article I (the legislative article) of
the constitution. Although Taney was unable to enforce his decision,
Lincoln addressed Congress, on July 4, 1861, to explain the actions
he had taken and to get congressional approval for them. Almost two
years later, Congress passed the Habeas Corpus Act of 1863 which
authorised the president to suspend the writ of habeas corpus when,
in his judgment, the public safety may require it. Thus, Congress did
assert its jurisdiction over the matter of habeas corpus suspension,
and, in the long run, Congress sanctioned Lincoln’s actions.
With the exception of Lincoln’s assumption of power during the Civil

War, Congress usually maintained tight control over the executive
branch through detailed statutes, strict budgetary controls and
reviews of even the most mundane administrative matters. During
the nineteenth century, executive orders most often supplemented
acts of Congress to carry out minor details. The use and scope of
executive orders and proclamations expanded, however, with the
presidency of Theodore Roosevelt.
President Roosevelt’s theory on the presidency, the “stewardship”
theory, was based on his view that the president was vested with
residual powers which were neither enumerated in the Constitution
nor assigned broadly to a specific branch, instead, they simply
resided in concepts like national security or the public good. Thus,
Roosevelt stated:
My view was that every officer, and above all, every executive
officer in high position, was a steward of the people... My belief
was that it was not only his right but his duty to do anything that
the needs of the nation demanded unless such action was forbidden
by the Constitution or by the laws.
This expansion of executive power, however, did not firmly take

hold until the presidency of Woodrow Wilson.
With the onset of World War I, President Wilson was able to expand
the discretion of the presidency through the use of emergency
powers. During his tenure, Wilson issued over 1800 executive
orders. This period appears to mark the beginning of legislative and
judicial tolerance towards expanded executive power during times
of national emergency. Nothing underscores this more than the use of
executive orders by President Franklin D. Roosevelt. Taking office
during the depression, President Franklin D. Roosevelt was given
great latitude by Congress to implement his New Deal programme.
In his first year, President Franklin D. Roosevelt issued 654
executive orders, including his Inaugural Day Proclamation closing
all banks for four days to restructure the financial system and to
establish the administrative mechanism necessary to implement his
New Deal programmes. World War II provided further impetus for
him to continue the expansion of executive power. Without statutory

authority, but as he put it, pursuant to the powers vested in him “by
the Constitution and laws of the United States, as President of the
United States of America and Commander-in-Chief of the Army
and Navy of the United States.” President Franklin D. Roosevelt
issued an executive order on June 9, 1941, seizing North America
Aviation’s plant in California. Two years later, Congress acquiesced
(accept something reluctantly but without protest) in this and other
seizures by passing the War Labour Disputes Act which provided
statutory authority for presidential seizure of plants, mines and
other facilities. However, as the war drew toward an end, Congress
began to regain control of legislative activity which in large part
had been relegated to the executive in a time of national emergency.
In 1944, Congress invoked its power of the purse to prevent the
president from using appropriated funds to finance agencies created
by executive order unless Congress specifically appropriates for the
agency or authorises the expenditure of funds by it. At the beginning
of USA next conflict, the Korean War, President Truman was not as
successful as President Wilson and President Franklin D. Roosevelt
were in expanding his authority to issue executive orders and
proclamations.
32.5 Presidential Power and Constitutional Democracy

A major trait of the democratic form of government is the limitation
of power. Unlimited power is incompatible with democracy as a form
of government. Democracy has not always been the preferred form
of government in human history. All forms of undemocratic regimes
have held sway in the world in the past. But today, democracy is
the legitimate and pervasive form of government in the world. But
democracy stands for the simple idea that those who control the
reins of power are exercising a delegated authority. Ultimate power
resides with the people.
Executive Orders are products of the exercise of presidential power
under the constitution. So, it is important to understand presidential
power under the constitution to understand the legal dimensions of
these orders. The 1999 Nigerian Constitution adopts the presidential

system of government rather than the parliamentary system adopted
by the 1960 and 1963 Independence and Republican Constitutions.
The 1999 Constitution is like the 1979 Constitution in this regard.
Speaking about the design of the 1979 Constitution, Africa’s leading
constitutional law scholar, Professor Ben Nwabueze, argues that it
was the exigency of rapid economic development that suggested
the need for a presidential system of government with an executive
president rather than the parliamentary system with a ceremonial
president.
In practical terms, the 1999 Constitution follows the US Constitution
in separating the executive power from the legislative and judicial
powers. Section 5 of the Constitution vests the executive power of
the Nigerian Federation on the president personally. This is very
significant, whereas the legislative power is vested in an institution
– the National Assembly (Section 4). The judicial power is vested
on the Superior Courts of Record (Section 6). The executive power
is vested on the president, who may exercise it by himself or through
his vice president or any other official.
Constitutional law scholars have extracted three offices in the
constitutional language.
• First, the president is chief executive of the federation. He
has responsibility to manage and administer the federal
government. As the chief executive, the president hires and
fires, and co-ordinates the national economy.
• The second position is as commander-in-chief. As
commander-in-chief, the president has responsibility to
secure the federation and marshal the armed forces of the
federation to protect its territorial integrity.
• The third office is the sole organ. The president as sole organ
represents the Federation in foreign relations. Exercising the
functions of this office, the president negotiates with foreign
entities and signs treaties that create external obligations for
the country.
Each of these offices has its incidents and limitations. It is important

to bear in mind that even as Section 5 (2) grants the president wide
power to maintain the constitution and the laws, and to attend to
all matters which the National Assembly has power to make law
(which is basically everything under our own expansive federal
jurisdiction), subsection (1) limits the exercise of this wide power.
The executive power of the Federation that vests on the president,
is to be exercised subject to ‘the provisions of this Constitution’
and ‘to the provisions of any law made by the National Assembly.’
The President can only exercise the awesome power of his office
strictly in accordance with the provisions of the Constitution or
laws made by the National Assembly. Even though he is the chief
executive who has responsibility to superintend the wellbeing of
the federation, he cannot act, even in national interests, except such
action can be justified by the provisions of the constitution or any
law made by the National Assembly.
32.6 Legal Incidents and Decided Cases on the Power of the

President to Issue Executive Order and Presidential
Proclamation
In order to understand the intricacies of the authority of the
president to issue executive order and presidential proclamation or
exercise emergency power, the executive orders issued by President
Truman (or emergency power exercised by him) will be examined
and analysed as presented by Contrubis (1999) in Congressional
Research Service Report to Congress.
President Truman’s use of executive orders and proclamations
experienced a turning point at the onset of the Korean Conflict. On
December 18, 1951, collective bargaining between steel companies
and their employees broke down and led to an announcement that
the employees would strike on December 31, 1951. In an attempt
to reach an agreement between the parties, the Federal Mediation
and Conciliation Service intervened. Its efforts were unsuccessful.
President Truman then referred the dispute to the Federal Wage
Stabilisation Board to investigate and make recommendations for
fair and equitable terms of settlement. Unfortunately, this method
also proved fruitless. The President did not, perhaps for political
reasons, invoke the emergency provisions of the Taft-Hartley Act
which could have enjoined the strike for 60 days. The proposed Steel
mill strike threatened the supply of weapons to the armed forces
during the Korean War. Upon the announcement of a nationwide
strike, President Truman issued an executive order authorizing the
Secretary of Commerce to take possession of and operate most of
the nation’s steel mills. Similar to President Franklin D. Roosevelt’s
executive orders seizing property in the name of national security,
this order was not based on any statutory authority, but was based
generally upon all powers vested in the president by the Constitution
and laws of the USA and as President of the USA and Commander-
in-Chief of the Armed Forces. The order contained a finding that
the president’s action was necessary to avoid a national catastrophe,
since a work stoppage would immediately imperil the national
defence at a time when American troops were fighting in Korea.
Truman immediately informed Congress of his action and stated
his intention to abide by the legislative will. However, Congress
took no action. Therefore, the judicial branch was called upon to
determine the scope of the President’s executive authority.
The steel companies sued the Secretary of Commerce in a federal
district court, praying for a declaratory judgment and injunctive
relief. The district court issued a preliminary injunction, which the
court of appeals stayed. The Supreme Court granted certiorari. In
Youngstown Sheet & Tube Co. v. Sawyer, the Court found that the
President had acted without statutory or Constitutional authority.
Moreover, the court declined to entertain the contention that
presidential power should be implied from the aggregate of his
powers under the Constitution.
In its decision, the court explained that the president’s power to
issue executive orders must stem from either an act of Congress
or from the Constitution itself. The court could not find any statute
which either expressly or impliedly authorized the president to take
possession of property as he did in this situation. In fact, the use of
the seizure technique to solve labour disputes in order to prevent
work stoppages was not only unauthorised by any congressional
enactment, but had been rejected by Congress as a method of

settling such disputes. Instead, Congress enacted the Taft-Hartley Act
which permitted the executive to settle disputes through mediation,
conciliation, investigation by boards of inquiry and public reports.
In some instances, temporary injunctions were authorised to provide
cooling-off periods of 60 days. Congress’ explicit refusal to include
the seizure technique as one of the many mechanisms provided to
the executive made it clear that the president did not have statutory
authority), to issue the executive order in question. Moreover, the
court failed to find any constitutional basis for the president to issue
such an order. In particular, the court declined to find the “aggregate”
of the president’s powers was sufficient to authorize seizure of the
nation’s steel mills.
The court went on to state that although other presidents may have
taken possession of private businesses in order to settle labour
disputes in the past, Congress has not lost its exclusive constitutional
authority to make laws necessary and proper to carry out the powers
vested by the Constitution. Thus, the only role the president had in
this situation was to make sure that the laws be faithfully executed,
not to make them.
32.7 Amendment to Existing Executive Order

There are methods for amending or repealing an executive order
or proclamation that do not involve Congress. The president may
amend or repeal an executive order that he issued or that any of his
predecessor in office issued. This can be done by issuing a similar
document and declaring such change. A recent example involved
President Clinton’s Executive Order 12,866, which altered the
regulatory planning and review process, which had been in place
since 1981. In his order, President Clinton explicitly revoked
“Executive Orders 12,291 and 12,498; all amendments to those
Executive Orders; all guidelines issued under those orders; and any
exemptions from those orders before now granted for any category
of rule.”
Moreover, the president may amend or repeal an executive order or

proclamation, with the advice and consent of the Senate, through
treaty. For instance, Executive Order 11,618 established the
foundation of the legislative and executive branches of government
on the Ryukyu Islands. Shortly thereafter, the United States, by
treaty, returned the administration of the Ryukyu Islands back to
Japan. Thus, Executive Orders 11618 and 10713 were repealed by
treaty.
Executive orders and proclamations may also be terminated by
the terms of the presidential action. In other words, an executive
order may be temporary. Executive Order 12664 was a temporary
order, which established an Emergency Board to investigate a
dispute between the Port Authority Trans-Hudson Co. and certain
of its employees represented by the Brotherhood of Locomotive
Engineers. The emergency board remained in existence until it
submitted its final report about 60 days after the order was issued.
Thus, Executive Order 12664 was self-terminated.
32.8 The Uses of Executive Orders

There are many ways in which executive orders can be used and
some of them will be discussed in this section.
(a) As the challenges of managing the national economy
increases, the government can resort more frequently to
the use of regulatory agencies that exercise wide range of
powers over domestic affairs, even impacting on private
economic interests. The president can intervene through
regulatory commissions duly created by the legislature.
He can also intervene directly through executive orders
or presidential proclamations.
• For instance: Regulatory agencies like Central Bank
of Nigeria, any directive issued becomes law that
must be obeyed. The maximum 10 years tenure of
the bank executive was directive of the regulatory
agency
(b) One good use of the executive order is to prioritise

commitment of the executive branch of government.
For example, when Barack Obama became President
of the United States, he needed to signal the change of
government from the high-handedness of the George Bush
Jr’s war against terrorism by opening the government
to greater transparency. This resulted in issuing his first
executive order that mandated agencies to comply with
requests for disclosure of information. This order puts
the onus on the agency that wants to deny the request
to justify the denial rather than on the person seeking
disclosure of information. When Donald Trump became
President, he issued an executive order on immigration
to quickly deal with the grave challenge of immigration,
which formed the heart of his presidential campaign.
(c) In Nigeria, there has been a crying need for exercise of
presidential power through issuance of executive orders.
For instances, there has always been a jurisdictional
conflict between the Bureau for Public Enterprises
(BPE) and the Infrastructure Concession and Regulatory
Commission (ICRC) about responsibility for privatisation
tasks. This noticeable conflict required an executive order
to streamline the focus of each of these statutory agencies.
In other words, an executive order can boost the effective
exercise of executive powers.
(d) In the Nigerian case, executive order will be required to fill
in the gaps in legislations by creating executive agencies.
Because of the interest bargaining-implicit in law making,
oftentimes, law creating executive agencies leave gaps
that militate against effectiveness of these agencies and
their ability to meet legislative mandates. Executive
orders help to fill the legislative gaps by authorising
procedures that enable agencies achieve legislative
mandates better. A good instance of such executive order
would be Executive Order 5, issued by the president
relating mainly to the promotion of Nigerian content in
public procurement of goods and services. For instance,

Nigeria Electricity Regulatory Commission (NERC)
issued a regulation on national content in the electricity
industry. The Executive Order 5 now reinforces the local
regulation in the electricity industry. This is an important
function of executive orders. They help to align broad
agency mandates with presidential priority.
(e) It helps to execute regulations and guidelines of legally
recognised executive agencies. For instance, US
Presidents have been very busy with executive orders in
shaping the regulatory activities of executive agencies.
Because of how these activities affect the economy,
different Presidents, aiming at different outcomes,
have issued executive orders to shape and streamline
regulatory actions. Agencies make rules in pursuit of their
legislative mandates. The legislature vests such agencies
as the Central Bank of Nigeria, the Nigerian Electricity
Regulatory Commission, the National Communications
Commission and the likes, with rulemaking powers
because they are part of the executive branch of
government. These agencies exercise presidential powers.
As Kerwin and Furlong (2011) observed in their book,
Rulemaking: How Government Agencies Write Law and
Make Policy, agencies are the equal of Congress and the
president because the rules they issue “carry the same
weight as congressional legislation, executive orders and
judicial decision.”
(f) Presidents exercise oversight over administrative agencies
by use of executive orders. The president can issue executive
order that mandates some form of review process before
a regulatory intervention can be issued. The president
can vary the internal review mechanisms for issuance of
license and permits. All these orders redefine the landscape
of regulatory action to achieve strategic policy objective of
the government. President Reagan, Clinton, Bush, Obama
and Trump issued such orders to improve the quality of
rulemaking or constrain the power of agencies to make

rule by imposing additional review process.
(g) This use of executive orders is very necessary in the
context of regulatory contradiction and uncertainty in
Nigeria. Many regulatory agencies in Nigeria don’t
have comprehensive business rules that guarantee
regulatory certainty. There is also a worrisome absence
of a comprehensive procedural law like the US
Administrative Procedure Act (APA), which clearly sets
out the procedure for rulemaking. This poses two major
problems for doing business in Nigeria. First, it grants
so much discretion to agencies to make rules as they
wish since there is no substantive administrative law
that constrain their rulemaking power. This increases the
propensity for capricious and highhanded rulemaking.
Second, the absence of administrative procedure law
imposes uncertainty as to the procedure to be adopted
for rule-making. It also imperils the constitutional
requirement of fair hearing as the regulator may not
be sure of which procedure will best comply with fair
hearing requirements.
32.9 Executive Orders vs. Presidential Memoranda and Its

Uses
Another executive tool, which has raised many questions, is the
presidential memorandum. Although they possess a different title
than executive orders, it appears as though these instruments are
very much alike. Both are undefined, written instruments by which
the president directs, and governs actions by government officials
and agencies.
The following are the noticeable differences between executive
order and presidential memoranda:
• Executive orders must be published in the Federal
Register/official gazette whereas presidential memoranda
are similarly published only if the President determines
that they have “general applicability and legal effect if
issued under a valid claim of authority and published”.
• Executive orders and presidential memoranda have the

force and effect of law and courts are required to take
judicial notice of their existence.
• In at least one instance, a federal district court seemed to
use the two terms interchangeably. In Lower Brule Sioux
Tribe v. Deer, the court, in describing how a particular
presidential memorandum did not create an enforceable
duty to permit a private right of action, referred to
executive orders needing specific foundation in order to
be judicially enforceable in private civil suits.
• This usage implies that the two terms are similar, if
not identical. One may say that the difference between
executive orders and presidential memoranda may be,
similar to executive orders and proclamations, one more
of form than of substance.
32.10 How Presidential Memoranda Is Used

• This proposition may best be demonstrated in the uses
of presidential memoranda. One example is the use of a
type of presidential memorandum called a “presidential
determination”. Typically, a presidential determination
is made in order to satisfy a statutory requirement that a
certain event or action has occurred or a condition has been
met. The determination often acts as the President’s way
of notifying Congress of such satisfaction. For example,
President Clinton’s most recent determination, based on
section 614(a)(1) of the Foreign Assistance Act of 1961,
was that “it is important to the security interests of the
United States to furnish funds [from the] Nonproliferation,
Anti-terrorism, Demining and Related Programmes . . . to
the Korean Peninsula Energy Development Organisation”
This determination permitted the President, pursuant to
section 614(a)(1) of the Foreign Assistance Act of 1961,
to contribute $25 million to this organisation. Although
presidents have chosen to issue presidential memoranda
to make such determinations, there is no constitutional or
statutory provision that would have prohibited them from

issuing an executive order instead. Thus, there would be
no substantive difference between an executive order and
a presidential memorandum in this situation.
• Presidential memoranda have also been used by the
President to delegate his authority in certain instances.
In a recent delegation of authority, President Clinton,
citing the Constitution and 3 U.S.C. & 301, delegated
to the Secretary of State the authority to set rates on
compensation for U.S. representatives to the United
Nations. However, the use of presidential memoranda
for this purpose is not exclusive. Previous presidents
have relied on the same authority to make delegations of
authority pursuant to executive orders. One example of
this occurred in 1979, when President Carter issued an
executive order in order to delegate certain functions to
the Director of the Office of Management and Budget.
Once again, there appears to be no substantive difference
between the use of these presidential mechanisms.
• One of the more controversial uses of presidential
memoranda, and for that matter, executive orders, has
been to effectuate action by the agencies. Although the
term “executive order” usually comes to mind when
a President directs an agency to act, there are many
instances when a presidential memorandum was used
for this purpose. One example of this involved a very
controversial presidential memorandum, issued by
President Clinton, directing the Secretary of Health and
Human Services to remove the moratorium on Federal
funding of research involving the transplantation of fetal
tissue from induced abortions. Although this action was
reported by many as an executive order, it was actually
done by presidential memorandum. The confusion,
however, is understandable since there is no reason why
the President could not have issued an executive order in
this case.
• The interchangeability of presidential memoranda and

executive orders can be seen more clearly in the following
examples. In April 1995, President Clinton issued a
presidential memorandum directing specific agency heads
to implement new policies, outlined by the President, “to
give compliance officials more flexibility in dealing with
small business and to cut back on paperwork.” Several
months later, the President issued an executive order
requiring agencies that conduct, support or regulate
research involving human subjects to review, and report
on, the protections of the rights and welfare of human
research subjects that are afforded by existing policies and
procedures. Although these two actions are not directly
related, they both involve policy initiatives initiated by
the President. Once again, either presidential mechanism
would have been sufficient to direct the agencies to act.
32.11 Areas Where Executive Order and Presidential Memorandum

Were Used Interchangeably
i. One function where presidents have almost exclusively
relied on executive orders has been for the establishment of
advisory committees and other similar bodies.
ii. Another has been to establish emergency boards to investigate
certain labour disputes.
iii. Most recently, President Clinton issued an executive order
creating such a board to help avert a strike between American
airlines and its pilots.
Neither of these actions requires that an executive order be issued.
The President could have issued a presidential memorandum in both
instances. The only time a president is required to use an executive
order rather than another instrument is when Congress so requires in
statute. One example of such a requirement is where the apprehension,
detention or conditional release of individuals is necessary to “prevent
the introduction, transmission or spread of communicable diseases
as may be specified in executive orders of the President. Otherwise,
executive orders and presidential memoranda may be, and appear to

be, used interchangeably.
Presidential memoranda and executive orders appear to be very
closely related, if not identical. However, the lack of a definition
for either of these mechanisms has made it difficult to make a clear
distinction between them. Although a clear distinction cannot be
made, they are both forms of executive legislation that must possess
similar authority. If issued under a valid claim of authority and
published executive orders and presidential memoranda have the
force and effect of law and courts are required to take judicial notice
of their existence.
32.12 Executive order issued by President Mohammadu Buhari

From the historical background of the three presidential instruments
being used by the president of United States of America, there was no
order made that were not effective except those that were challenged
in the court of law. The following are the executive orders issued to
date by President Buhari; the objective of each will be examined,
analysed and evaluated particularly in terms of compliance.
i. The promotion of transparency and efficiency in the business
environment designed to facilitate the ease of doing business
in the country.
ii. Submission of annual budgetary estimates by all statutory
and non-statutory agencies, including companies owned by
the federal government.
iii. Support for local contents in public procurement by the
Federal Government.
iv. Voluntary Assets and Income Declaration Scheme.
v. Planning and execution of Project, Promotion of Nigeria
Content in Contracts and Science Engineering and
Technology
vi. The Preservation Of Suspicious Assets Connected With
Corruption And Other Relevant Offences
vii. Road infrastructure Development and Refurbishment

investment Tax credit Scheme is designed to develop and
deliver Public Private Partnership.
viii. Mandating Nigerians with foreign assets to pay tax.
The executive orders issued till date will not be effective if
the environment for their implementation and enforcement is
not conducive. From the above, we shall examine executive
orders 1 & 2 to evaluate their effectiveness.
32.13 Executive Order on the Promotion of Transparency and

Efficiency in the Business Environment — 18 May, 2017
32.13.1 Text of the Order

WHEREAS, it is the policy of the Federal Government of Nigeria
(FGN) to create an enabling environment for businesses and
entrench measures and strategies aimed at promoting transparency
and efficiency;
WHEREAS, the FGN is committed to the promotion of domestic
and foreign investments, creation of employment and stimulation
of the national economy; and
WHEREAS, His Excellency, Muhammadu Buhari, GCFR, the
President, Commander-in-Chief of the Armed Forces, Federal
Republic of Nigeria constituted the Presidential Enabling Business
Environment Council to coordinate the implementation of this
policy.
Now therefore, pursuant to the authority vested in me by
theconstitution as the acting president of the Federal Republic of
Nigeria, I hereby order as follows:
Transparency in MDAs
(a) Every Ministry, Department and Agency (MDA) of the
FGN shall publish a complete list of all requirements or
conditions for obtaining products and services within
the MDA’s scope of responsibility, including permits,
licenses, waivers, tax related processes, filings and
approvals.
(b) The list shall –
a. include all fees and timelines required

for the processing of applications for the
products and services; and
b. be conspicuously pasted on the premises
of the relevant MDA and published on its
website within 21 days from the date of
issuance of this Order.
(c) It shall be the responsibility of the head of the relevant
MDA to ensure that the list is verified and kept up-
to-date at all times. If there is any conflict between
a published and an unpublished list of requirements,
the published list shall prevail.
Default Approvals
(d) Where the relevant agency or official fails to communicate
approval or rejection of an application within the time
stipulated in the published list, all applications for
business registrations, certification, waivers, licenses or
permits not concluded within the stipulated timeline shall
be deemed approved and granted.
(e) The mode of communication of official decisions to
applicants shall be stated in the published requirements.
(f) Where applications are rejected within the stipulated
timeline, all rejections shall be given with reasons.
Rejections of applications shall be tracked and accurate
records kept at all times for each MDA and shall be
submitted to the head of the MDA on a weekly basis.
(g) There shall be at least two (2) modes of communication of
acceptance or rejection of applications to the applicants by
the relevant MDAs before the expiration of the stipulated
time, including letters, emails and publications on MDA
websites.
(h) The applicant’s acknowledgement copy of the application,
including electronic submission acknowledgements, shall
serve as proof of the date of submission of the application
for purposes of determination of the commencement of
the application timeline.
(i) An applicant whose application is deemed granted under
this Directive may apply to the Minister for the time
being in charge of the application for the issuance of any
document or certificate in evidence of the grant within
14 days of lapse of the MDA’s stipulated timeline for the

application.
(j) Failure of the appropriate officer to act on any application
within the timeline stipulated, without lawful excuse,
shall amount to misconduct and be subject to appropriate
disciplinary proceedings in accordance with the law and
regulations applicable to the civil or public service.
One Government Directive
(k) An MDA that requires input documentation,
requirements or conditions from another MDA in order
to deliver products and services on applications within
the originating MDA’s remit or mandate, including
permits, licenses, waivers, tax documentation, filings
and approvals shall only request a photocopy or other
prima facie proof from the applicant. It shall be the
responsibility of the originating MDA to seek verification
or certification directly from the issuing MDA.
(l) Service Level Agreements shall be binding on MDAs and
shall be relied upon by MDAs in the issuance of published
stipulated timelines for processing of applications for the
products and services.
(m) It shall be the responsibility of the head of the relevant
MDA to ensure that the agreed terms of the Service Level
Agreements are adhered to.
(n) Failure of the appropriate officer to act within the timeline
stipulated in the Service Level Agreement, without lawful
excuse, shall amount to misconduct and be subject to
appropriate disciplinary proceedings in accordance with
the law and regulations applicable to the civil or public
service.
Entry Experience of Visitors

(o) Ordinary tourist and business entry visas to Nigeria
shall henceforth be issued or rejected with reason
by the Consular Office of Nigerian Embassies and
High Commissions within 48 hours of receipt of valid
application. The timeline shall be notified to the public
by pasting a notice conspicuously at every Consular
Office and by publication on every website of Nigerian
Embassies and High Commissions.
(p) A comprehensive and up to date list of requirements,

conditions and procedures for obtaining visa on arrival,
including estimated timeframe, shall be published on
all immigration-related websites in Nigeria and abroad,
including Embassies and High Commissions, and all
ports of entry into Nigeria.
(q) The processing of issuance of visas on arrival shall be
carried out in a transparent manner. Visas on arrival shall
be granted at all Nigerian ports of entry once applicants
have met all the published requirements.
Port Operations
(r) There shall be no touting whatsoever by official or
unofficial persons at any port in Nigeria. On duty, the
staff shall be properly identified by the use of uniform
and official tags. Off duty staff shall stay away from the
ports except with the express approval of the agency
head. The FAAN Aviation Security (AVSEC) and Nigeria
Ports Authority (NPA) Security shall enforce this order.
(s) All non-official staff shall be removed from the secured
areas of airports. No official of FAAN, Immigration,
security agency or Ministry of Foreign Affairs (MoFA) or
any other agency is to meet any non-designated dignitary
at any secure areas of the airport. The official approved
list of dignitaries that have been pre-approved to be
received by protocol officers shall be made available to
AVSEC and other relevant agencies ahead of their arrival
at the airport.
(t) Any official caught soliciting or receiving bribes
from passengers or other port users shall be subject to
immediate removal from post and disciplinary as well
as criminal proceedings in line with extant laws and
regulations.
(u) All relevant MDAs at the airports shall within 30 days of
the issuance of this Order merge their respective departure
and arrival interfaces into a single customer interface,
without prejudice to necessary backend procedures.
(v) All agencies currently physically present in Nigerian
Ports shall within 60 days harmonise their operations into
one single interface station domiciled in one location in
the port and implemented by a single joint task force at all
times, without prejudice to necessary.
Back End Procedures

(w) The new single interface station at each Port shall capture,
track and record information on all goods arriving and
departing from Nigeria and remit captured information to
the head of the MDA and the head of the National Bureau
of Statistics on a weekly basis.
(x) Each Port in Nigeria shall assign an existing export
terminal to be dedicated to the exportation of agriculture
produce within 30 days of the issuance of this Order.
(y) The Apapa Port shall resume 24-hour operations within
30 days of the issuance of this Order.
Registration of Businesses
(z) The Registrar-General of the Corporate Affairs
Commission (CAC) shall within 14 days of the issuance
of this Order ensure that all registration processes at
the CAC are fully automated through the CAC website
from the start of an application process to completion,
including ensuring the availability of an online payment
platform where necessary.
Effective Date of the Order

(aa) This Executive Order shall take effect immediately.
Dated this 18th day of May 2017.

SIGNED BY
Prof. Yemi Osinbajo, SAN, GCON

Acting President of the Federal Republic of Nigeria
32.14 Presidential Executive Order No. 6 of 2018 on the

Preservation of Suspicious Assets Connected with
Corruption and Other Relevant Offences
32.14.1 Text of Order

Whereas it is the responsibility of the Federal Government of
Nigeria to protect the resources of Nigeria from all forms of
corruption;
Whereas corruption constitutes an unusual and extraordinary
threat to the well-being, national security and stability of the
country’s political and economic systems, as well as its continuous

existence; and must be effectively addressed;
By the powers vested in me under Section 5 of the 1999 Constitution
as amended which extends to the execution and maintenance of the
Constitution, all Laws made by the National Assembly (including
but not limited to Section 15(5) of the Constitution) to, abolish
all corrupt practices and abuse of power, it is the duty of any
responsible government to restrict dealings in suspicious assets
subject to corruption related investigation or inquiries in order to
preserve same in accordance with the rule of law and to guarantee
and safeguard the fundamental human rights;
Now therefore, I, Muhammadu Buhari, President of the Federal
Republic of Nigeria, in exercise of the powers conferred on me
hereby declare as follows:
Section 1
(a) Without prejudice to any laws or existing suits or any
other rights arising out of or in respect thereof, all
Assets of any Nigerian citizen within the territory of the
Federal Republic of Nigeria, or within the possession or
control of any person known to be a current or former
government official, a person acting for or on behalf of
such an official, any politically exposed person or any
person who is responsible for or complicit in, or has
directly or indirectly engaged in Corrupt Practices and
Other Relevant Offences are forthwith to be protected
from dissipation by employing all available lawful
or statutory means, including seeking the appropriate
Order(s) of Court where necessary, and shall not be
transferred, withdrawn or dealt with in any way until the
final determination by a court of competent jurisdiction
of any corruption related matter against such a person.
This provision shall, in particular, apply to those
connected with persons listed in the First Schedule to this
Order, (or any such list as may be issued by the Attorney
General of the Federation and Minister of Justice).
(b) Where a government official or a person acting for and on
behalf of such an official, directly or indirectly, engages
in Corrupt Practices such as misappropriation of State
assets for personal gain, receives any form of bribe or
engages in Corrupt Practices related to the performance
of his/her duties or the award or execution of Government

contract; or transfers, launder or facilitates the transfer or
laundering of proceeds of illicit activities, such official, in
addition to forfeiting the proceeds in accordance with the
relevant laws, shall forthwith be subject to the disciplinary
procedure in accordance with the Public Service Rules
and investigation by the Code of Conduct Bureau.
(c) (i) Subject to Section 174 of the Constitution, the Attorney
General of the Federation shall have power to coordinate
the implementation of this Order and to enlist the support
of any Enforcement Authority particularly those listed in
Second Schedule to this Order, or any other Person or
Entity as may be required or permitted by applicable Law
in order to give effect to this Executive Order.
(ii) The Attorney General shall from time to time publish a
list of all Assets protected pursuant to this Order.
(iii) The authority of the Attorney General of the Federation
to preserve Assets pursuant to this Order shall extend to
any Person who is under investigation in accordance with
applicable law in connection with having materially
assisted, sponsored, or provided financial, material,
or technological support for, or goods or services to or
howsoever in support of any Corrupt Practices or Other
Relevant Offences by any Person whose Assets are
protected pursuant to this Order; or any Entity that has
engaged in, or whose members have engaged in, any
Corrupt Practices or Other Relevant Offences.
Provided however, that the Attorney General shall at
all times in this connection, employ all available lawful
or statutory means, including seeking the appropriate
Order(s) of Court where necessary, and ensure that Assets
shall not be transferred, withdrawn or dealt with in any
way until the final determination by a court of competent
jurisdiction of any corruption related matter against such
a person.
(iv) Where the Attorney General has reasonable cause to
believe that any funds or assets within Nigeria is connected
with Corruption, the Attorney-General may, subject to his
powers under Section 174 of the Constitution and other
laws enabling him in that regard, approach the Court for
an Order blocking or freezing or confiscating such funds
or assets pending the conclusion of an investigation or
legal action.
(d) Enforcement Authorities shall upon request communicate

to the Attorney General of the Federation and Minister
of Justice information arising from their investigation or
enquiry on any Person (Nigerian or non-Nigerian), whether
resident in Nigeria or not, determined by such Enforcement
Authority to have directly or indirectly engaged in or
involved in Corruption within the territory of the Federal
Republic of Nigeria, and the Attorney General shall
immediately commence or direct the commencement of
appropriate process(es) either administratively or judicially
as may be necessary subject to existing applicable law.
Section 2
(a) Any Person who in circumvention of this Executive
Order attempts to or in fact: (i) interferes with the free
exercise of the authorities of the Office of the President,
(ii) destroys evidence, (iii) corrupts witnesses through
cash/kind inducements, and (iv) generally perverts the
course of justice shall be prosecuted in line with the
provision of any Law(s) governing unlawful acts.
Section 3
(i) Any Person who alleges that his rights have been, are being
or are likely to be contravened by any of the provision of
this Executive Order may apply to a competent Court in
his jurisdiction for redress.
Section 4
All Enforcement Authorities are hereby directed to diligently
and rigorously collaborate with the Federal Ministry of Justice in
implementing this Order to ensure the preservation of suspicious
assets and prevent their dissipation or removal from the jurisdiction
of Nigerian courts, in order to facilitate, support and enable the
expeditious and accelerated prosecution of the alleged Corrupt
Practices, serious or complex corruption, and Other Relevant
Offences. Heads of Enforcement Authorities shall take personal
responsibility and be subject to appropriate sanctions for any
failure to comply with this Order.
Section 5
For the purposes of this Order
(a) The term “asset’’ means and shall include all properties
including funds, liquid assets (bank balances), receivables,
stocks and bonds held in portfolios, insurance policies,
shares in listed or unlisted companies, and all manner of
fixed assets. It shall cover all such assets whether held
directly or indirectly through corporate entities, trust
structures and intermediaries;
(b) The term “corruption or corrupt practices’’ means as may
be defined under any enactment:
(i) any corrupt activity involving matters of corruption
generally economic sabotage, human trafficking,
drug trafficking and terrorism involving funds or
assets in the sum or value in excess of fifty million
Naira (N50,000,000) or its equivalent in foreign
currency;
(ii) any misappropriation of government asset, corruption
related to government contracts or bribery; or
(iii) the transfer or the facilitation of the transfer of the
proceeds of corruption.
(c) The term “enforcement authority’’ means agencies and
instrumentalities of the Federal Government of Nigeria
including but not limited to those listed in Second Schedule
to this Order imbued with regulatory/enforcement powers;
(d) The term “entity” means a partnership, association, trust,
joint venture, corporation, group, subgroup, or other
organisation;
(e) The term “other relevant offences” means any act, which
may constitute an act of, terrorism, financing of terrorism,
kidnapping, sponsorship of ethnic or religious violence,
economic sabotage, cases of economic and financial
crimes, including acts contributing to the economic
adversity of the Federal Republic of Nigeria as defined
by relevant laws.
(f) The term “person” means a natural or juristic person.
Section 6 This Executive Order shall take effect on this day of

4th July, 2018.
Section 7 This Order may be cited as the Preservation Of

Suspicious Assets Connected With Corruption And
Other Relevant Offences Order, 2018.

Dated this 4th day of July 2018
Muhammadu Buhari
PRESIDENT
FEDERAL REPUBLIC OF NIGERIA
Note: Executive order No. 6 is reproduced for the reader’s

perusal for proper understanding the augment regarding the
content.
32.15 Discussion
32.15.1 Executive Order 1: Promotion of Transparency and
Efficiency in the Business Environment
This Executive Order was designed to promote transparency and
efficiency in the business environment as a strategy for enhancing
the ease of doing business in the country. Since the issuance of the
Order, its effect has started to manifest in MDAs. Although there
is still a lot to be done, there has been noticeable improvement
in the time it takes for Nigerian Embassies and Consular to issue
visas, turnaround time of vessels and other operations at the ports,
time to register Businesses. To achieve more successes, there is
need for dissemination of the information. It is important to state
that the medium of dissemination of the executive order was not
adequate. This possibility explains why many of the public officers
who are supposed to implement the order were not apprised and
hence could not take relevant and appropriate actions.
It is therefore recommended that a circular should be issued
attaching the full content of the order to inform and instruct public
officers to implement the order. It is a known fact that circulars
are the only effective means of disseminating information in the
public service.
32.15.2 Executive Order 2: Submission of Annual Budgetary

estimates by all Statutory and Non-statutory Agencies,
including Companies Owned by the Federal Government
The focus of this executive order, which was issued on 17th May,
2017 is the submission of annual budgetary estimates by MDAs to
the Ministry of Budget to facilitate the facilitation of the national
budget. The Order was issued after two budgets had been passed
in the life of the President Buhari’s Administration. Secondly, the
Fiscal Responsibility Act of 2007 clearly specified the processes
for submitting budgetary estimates. Therefore, it can be said
that the Order is otiose as its objective was already covered by a
subsisting law. It would appear that the executive order was dead
on arrival particularly because, since the date the order was issued,
there was no conducive environment or ingredient for its survival.
Indeed, the fiscal year following its issuance (i.e., 2018), the budget
took 171 days to be passed into law, the longest time in Nigeria’s
history. In a subsequent chapter on Budget, more comments and
recommendations on the budgeting process will be made.
32.16 Highlights of the Eight Executive Orders Issued by
President Mohammadu Buhari
32.16.1 Executive Order No 1; Ease of Doing Business
Date: 18 May,2017
Focus:
i. Transparency
ii. Default Approval
iii. Entry Experience of Travellers and Visitors
iv. Ports Operation
v. Government directive on the role of MDAs that requires
an input document from other agency
vi. Registration of Business
On Transparency
• All Ministries, MDA’s must publish a complete list of all
fees, timelines, conditions & requirements for obtaining
licenses, permits.
• Each MDA’s shall publish list on its website and premises.
• Head of MDA’s must ensure list is verified and kept up-
date at all times.
On Default Approvals
a. Any application not approved or rejected by an agency
within the agency specified time shall be assumed
approved.
b. Agency must communicate acceptance to applicants
by at least two methods, including letters, emails and
publications on websites.
c. Reasons must be given to applicants for application

rejection.
d. Failure of appropriate office to act on application within
the stipulated time without lawful excuse is misconduct
and disciplinary actions would be taken.
Government directive on the role of MDAs that requires an input

of other agency
a. If an MDA requires a document from another MDA
in other to deliver a service to an applicant, it is the
responsibility of the requesting MDA – not the applicant.
b. The requesting MDA shall only request for a photocopy
from the client.
c. Service Levels Agreement shall be binding on the MDA’s.
d. Failure of the appropriate officer to act with the stipulated
time in SLA without lawful excuse shall be punished.
On Entry Experience of Travelers and Visitors

i. Ordinary tourist and transit visa’s shall be issued within
24 hours.
ii. The processing of issuance visa on arrival shall be done
on a transparent manner
• An up-to-date list of requirement and timeline for
visa-on-arrival shall be published on all immigration
website.
• Merger of all respective MDA departure and arrival
interface into a single customer interface.
• Stern prohibition of bribes from passenger by
officials and zero tolerance for touting.
Registration of Businesses
(a) All registration processes at the CAC are fully automated
through its website from the start of the application
process to completion.
32.16.2 Executive Order No. 2 On Budget

Date: 18 May, 2017
Focus:
• Timeliness in Budget Preparation
• Budgetary Compliance
• Greater Accountability
32.16.3 Executive Order No. 3; On Support for Local Contents

in Public Procurement by the Federal Government
Date: May 18, 2017
Focus:
a. The promotion of made in Nigeria goods
b. Preference for Nigerian Service Provider
c. Protection for local business against foreign competition
d. Local capacity building
32.16.4 Executive Order No. 4; On Voluntary Assets and

Income Declaration Scheme, VAIDS
Date: 1 July, 2017
Focus:
a. Regularisation of tax status in Nigeria
b. Pay all outstanding taxes
c. Prevent and stop tax evasion
d. Ensure full tax compliance
32.16.5 Executive Order No.5: on Planning and Execution of

Projects, Promotion of Nigerian Content in Contracts
and Science, Engineering and Technology
Date: 2 February, 2018
Focus:
i. To give full backing to local content development in
critical national project
ii. Nigeria first
iii. Verifiable plan for indigenous skills development
32.16.6 Executive Order No. 6: On the Preservation of

Suspicious Assets Connected with Corruption and
other Relevant Offences
Date: October 2018
Focus:
(a) Strengthen the fight against Corruption
(b) To recover as much asset from corrupt practices
(c) To tighten money Laundering channels
(d) Government efforts and activities get to the populace as
services and how such is delivered becomes very important
and it impacts people’s perception of government.
(e) That is why governments all over the world pay significant
attention to public service delivery. In Nigeria we have
SERVICOM (Service Compact with All Nigerians) as a
major initiative in this direction.
(f) The ease of doing business ranking is based on service
delivery….the turnaround time, rule of law, and other
conditions associated with the services.
32.16.7 The Executive order No. 7 of 2019 on the Road

Infrastructure Development and Refurbishment
Investment Tax Credit Scheme
Focus:
(a) Is designed to develop and deliver Public Private
Partnerships with notable investors so as to close the road
infrastructure gap in the transportation sector.
(b) Six investors, including Dangote Industries Limited,
Lafarge Africa Plc, Unilever Nigeria Plc, Flour Mills of
Nigeria Plc, Nigeria LNG Limited, and
(c) China Road and Bridge Corporation Nigeria Ltd are set
to invest in 19 road projects, measuring 794.4 kilometres
which have been prioritised in 11 states across each of the
six geo-political zones.
(d) This is in line with the Executive Order 007 2019,
signed on Friday by President Muhammadu Buhari on
Road Infrastructure Development and Refurbishment
Investment Tax Credit Scheme.
32.16.8 Executive Order No. 8: Voluntary Offshore Assets

Regularisation Scheme (VOARS)
Focus:
a. President Muhammadu Buhari has signed an executive
order mandating Nigerian taxpayers to declare and pay tax
on their offshore assets.
b. According to the statement, asset owners have a 12-month

grace window to declare and pay tax on their assets, under
the new executive order number eight, tagged Voluntary
Offshore Assets Regularisation Scheme (VOARS).
c. Executive order took effect from 8 October, when the
president signed it.
d. According to the order, “any taxpayer who truthfully and
voluntarily complies with the conditions of the scheme,
pays a one-time levy of 35 percent on the total offshore
assets or pays all outstanding taxes, penalties and interest
after forensic audit of their offshore assets and income
shall obtain immunity from prosecution for tax offenses
and offences related to offshore assets, among others.”
e. “Equally, failure of any defaulting taxpayer to take
advantage of this scheme shall, at the expiration of the
scheme result in investigation and enforcement procedures
concerning offshore assets anywhere in the world pursuant
to information now readily available through automatic
exchange of information between Nigeria and foreign
countries.”
f. By this order, Nigerian taxpayers who hold offshore
assets and incomes are expected to, within a period of
12 months, declare voluntary those assets and pay taxes
on them. When they do this, they should expect to derive
certain specified benefits.
g. In accordance with the new order, the Federal
Government, through the office of the Attorney-General
of the Federation and Minister of Justice will set up a
VOARS in Switzerland for all categories of taxpayers
who have defaulted in the declaration of their offshore
assets, payment of taxes due and collectible subject to the
fulfillment of the terms and conditions as stipulated in the
order, or any other subsequent complementary regulations
that follow.
h. To avoid the abuse of this process, the Federal Government
makes clear that the “scheme is open to all persons, entities,
and their intermediaries holding offshore assets and are
in default of their tax obligations in any way, including
those who are not already under investigation by law
enforcement agencies in Nigeria or any other country and
have not been charged with any crimes including theft of
public funds or obtaining offshore assets through corrupt
practices.”
Practice Questions
• Appreciate the importance of presidential administrative

instruments.
• Identify and discuss the various types of presidential
instruments
• Distinguish between Executive Orders, Presidential Orders
and Presidential Memoranda.
• Discuss the merits and demerits of presidential administrative
instruments.
• Examine the challenges of enforcing presidential administrative
instruments.
Chapter Thirty Three
Reforms of Public Financial Management in Nigeria
Learning Outcomes
i. discuss the objectives of government financial reforms;
ii. enumerate the various reform initiatives;
iii. discuss the purpose, objectives and scope of GIFMIS;
iv. enumerate and discuss the critical success factors of
Government Integrated Financial Management Information
System (GIFMIS);
v. explain the origin and thrust of the Economic Reforms and
Governance Project (ERGP);
vi. discuss the concept and benefits of TSA and the issues it
was designed to address;
vii. explain the purpose of Integrated Payroll and Personnel
Information System (IPPIS);
viii. discuss the objectives and structure of the National Chart of
Accounts (NCOA); and
ix. give insight into the thrust of the World Bank-sponsored
fiscal sustainability plan.
33.0 Introduction
Generally, government reforms are aimed at facilitating the
emergence of a more open, transparent, responsible and responsive
public governance. In Nigeria, Public Financial Management (PFM)
reforms is taking place in tandem with a major programme of public
service reform aimed at delivering a more efficient Public Service
in an integrated transparent and cost efficient manner possible. In
certain situations, reforms may be initiated to address the challenge
1132
1133 Reforms of Public Financial Management in Nigeria
of a failing and unstable economy such that it is transformed to

bring economic and financial growth to the system. The Office of
the Accountant-General of the Federation is central and strategic to
the PFM reforms in Nigeria.
33.1 Objectives of Government Financial Reforms

i. To restore financial and macroeconomic stability
ii. To maintain a sustainable fiscal position
iii. To ensure efficient delivery of public good and services
iv. To promote transparency and accountability
v. To ensure responsive governance
vi. To ensure efficient allocation of available resources.
33.2 Various Reform Initiatives

The Office of the Accountant-General of the Federation is
implementing the following reforms:
a. E-Collection
b. E-Payment System
c. Government Integrated Financial Management Information
System (GIFMIS)
d. Treasury Single Account (TSA)
e. Integrated Payroll and Personnel Information System
(IPPIS)
f. National Chart of Accounts (NCOA)
g. Modernisation of the Internal Audit Functions
h. Upgrading of the Federal Treasury Academy
i. Adoption of International Public Sector Accounting
Standards (IPSAS)
33.3 E-Collection and E-payment

These have been discussed in Chapter 10: Collection of Government
Revenue and Control Mechanism and Chapter 28: Revised Treasury
Cash book in Public Sector under IPSAS Accrual Accounting Basis,
E-payment System, Bank Reconciliation and Transcript.
33.4 Government Integrated Financial Management Information

system (GIFMIS)
GIFMIS is a sub-component of the Economic Recovery and
Growth Plan (ERGP), which will support the public resource
management and targeted anti-corruption initiatives by modernising
fiscal processes using better methods, techniques and information
technology. The GIFMIS is aimed at improving the acquisition,
allocation, utilisation and conservation of public financial resources
using automated and integrated, effective, efficient and management
information systems. The GIFMIS will aid strategic management of
public financial resources for enhanced accountability, transparency,
cost effectiveness, public service delivery, and economic growth
and poverty reduction efforts.
33.4.1 Purpose of GIFMIS

The GIFMIS was introduced to assist the FGN to improve the
management, performance and outcomes of Public Financial
Management (PFM). The immediate purpose of this project is to
enable an executable budget (i.e. a budget which can be implemented
as planned) by addressing the critical public financial management
weaknesses including:
i. failure to enact the budget before the start of the financial
year;
ii. the budget not being based on realistic forecasts of cash
availability;
iii. lack of effective cash management — multiple bank accounts
within Treasury and MDAs that make effective control
impossible. When combined with the lack of cash forecasting
this leads to inefficient and unplanned borrowing; and
iv. a lack of integration between different financial management
functions and processes, e.g. budget is prepared in a way that
makes it difficult to manage the budget execution through
the chart of accounts.
Therefore, GIFMIS is part of the solution to the above problems.
• As designed, GIFMIS is a tool to facilitate change. However,

it is not a stand-alone driver of change to better public
financial management. Hence, the introduction of GIFMIS
will be combined with major changes to business processes
to achieve desired results.
• GIFMIS provides an opportunity to move to Treasury Single
Account and to reduce the number of stages in transaction
processing.
• In addition, it will provide better access to information,
which can be used to improve fiscal and operational
management.
• GIFMIS will also reduce fiduciary risk by enabling greater
transparency and by reducing the opportunities for manual
intervention in financial transactions.

33.4.2 Objectives of the GIFMIS
The overall objective of GIFMIS is to implement a computerised
financial management information system for the FGN, which is
efficient, effective, and user friendly and which:
• increases the ability of FGN to undertake central control and
monitoring of expenditure and receipts in the MDAs;
• increases the ability to access information on financial and
operational performance;
• enhances internal controls to prevent and detect potential
and actual fraud;
• increases the ability to access information on government’s
cash position and economic performance;
• improves medium term planning through a Medium Term
Expenditure Framework (MTEF)
• provides the ability to understand the costs of groups of
activities and tasks; and
• increases the ability to demonstrate accountability and
transparency to the public and cooperating partners.
33.4.5 GIFMIS Scope

The GIFMIS will be used to support the government in all aspects
of budget preparation, execution and management of government
financial resources. The system will cover all spending units
financed from the government’s budget and will process and manage
all expenditure transactions (including interfaces) pertaining to
these units. All steps in the expenditure cycle including budget
appropriations, financing limits, commitments, and verification and
payment transactions will be recorded by and managed through the
system. In other words, the system will be a modern, efficient and
user-friendly facility, providing comprehensive information on all
the financial affairs of the government. This will act as a reliable basis
for multi-year budgeting, annual budgeting, commitment control,
payment control, financial and cash management and economic
planning. The financial management functions of the GIFMIS will
cover the entire financial management cycle including:
• Budget preparation
• Budget maintenance and management
• Budget execution and treasury management
• General ledger
• Procurement, including commitments of purchase orders,
maintenance of a central supplier register and support for
e-procurement
• Receipting, accounts receivable and revenue management
• Payments and accounts payable
• Inventory and stock control
• Asset management
• Budget execution reporting
• Financial reporting
• Project accounting
• Loans and advances
Interfaces with third party systems to be provided by the GIFMIS

include:
i. Human Manager – Payroll – OAGF – Payroll costs/Loan
repayments
ii. ASYCUDA – Customs – NCS - Revenue

iii. SAP – Taxation – FIRS - Revenue
iv. CD-DRMS - Debt Management – DMO – Debt Payments
v. Oracle ERP – Banking Interface – CBN – Bank Statements
vi. Oracle 9i – Medium Term Budgets – BoF – Annual budgets
and ceilings
GIFMIS will be implemented centrally initially within the Budget
Office, OAGF, and all MDAs with access by the Auditor General
followed by a phased approach for remaining MDAs and FPO or
state based processing centres that are not on the GIFMIS platform.
Note: Based on the scope of the GIFMIS, preparation of the
financial statement is to be automated provided the appropriate
National Chart of Accounts (NCoA) is used. It is a robust platform
provided one understands how it operates.
33.4.6 GIFMIS Critical Success Factors

The following factors have been identified as critical to the success
of GIFMIS implementation:
• Sustained management support
• Effective organisational change
• Good project scope management
• Adequate project team composition
• Comprehensive business process re-engineering
• Adequate project sponsor and champion role
• User involvement and participation
• Trust between partners
• Dedicated staff and consultants
• Strong internal & external communication
• Formalised project plans
• Adequate training Programme
• Data conversion management
• Empowerment of project management team and sponsor
• Adequate GIFMIS implementation strategy
• Avoidance of extensive customisation
Note: Failure of any or combination of the above may have effect

on the success of GIFMIS operation, for instance inadequate
training for dedicated staff and consultants, etc.
33.5 Economic Reforms and Governance Project (ERGP)

The ERG Project was approved by the World Bank in December
2004 and in line with the federal government’s goal to significantly
strengthen governance and accountability, reduce corruption and
deliver services more effectively, the objectives of this project are
two folds:
• To improve the federal government’s economic and financial
management systems and processes; and
• To firmly establish a reform process of the Federal Civil
Service to improve professionalism and the government’s
ability to deliver services.
The project has four broad areas of support:
a. Public resource management and targeted anti-corruption
initiatives;
b. Pilot civil service administrative reforms;
c. Pensions reforms; and
d. Statistics and statistical capacity.
33.6 Treasury Single Account (TSA)

Treasury Single Account (TSA) is a unified structure of government
bank account that gives consolidated view of government cash
resources. This could be one account or several accounts but linked
to main account. It is part of the Public Financial Management
(PFM) reforms under the World Bank-funded Economic Reforms
and Governance Project (ERGP) whose implementation started
in 2004. It is essentially a banking arrangement. Revenue and
expenditure are classified using a well-developed Chart of Accounts
and using technology-based platform. This will enable sub-ledger
controls to be maintained for each MDA transactions, which can be
consolidated automatically.
Structurally, the TSA may be centralised or decentralised. In terms

of operations, it may be centralised transaction processing system
or decentralised processing system. Treasury Single Account is a
financial policy in use in several countries all over the world. It was
proposed and partially implemented by the Federal Government
of Nigeria in 2012 under the Jonathan Administration — and fully
implemented by the Buhari Administration.
The IMF, in a 2010 paper titled, “Treasury Single Account: Concept,
Design, and Implementation Issues”, outlined the benefits of
operating a Treasury Single Account. It started by explaining that the
primary objective of a TSA is to ensure effective aggregate control
over government cash balances. The federal government officially
commenced the operation of a Treasury Single Account on Monday,
17th of September 2015. This effectively moved about N1.2 trillion
from Nigerian banks to the Central Bank of Nigeria. For most
Nigerians, this decision was a bold attempt at stifling corruption and
ensuring government revenue if effectively mobilised and monitored.
However, the TSA does have well documented advantages and have
been implemented in so many countries around the world.
Issues TSA is intended to address as regards FGN cash management

i. Multiple bank accounts
ii. Countless dormant accounts with huge balances
iii. Inability to determine consolidated cash position of
government
iv. Borrowing and incurring charges when there are idle
balances in MDA accounts
v. Lack of coordination among key fiscal agencies
vi. Poor cash planning
vii. Inability to fund government budget
viii. Non/delayed remittance of revenue/collections
ix. Over N70 billion of FG funds lost to failed banks
Benefits of TSA
(i) Allows complete and timely information on government
cash resources. In countries with advanced payment and
settlement systems and an Integrated Financial Management
Information System (IFMIS) with adequate interfaces with
the banking system, this information will be available in real
time. As a minimum, complete updated balances should be
available daily.
(ii) Improves appropriation control. The TSA ensures that the
Ministry of Finance has full control over budget allocations,
and strengthens the authority of the budget appropriation.
When separate bank accounts are maintained, the result is
often a fragmented system, where additional cash resources
that become available through various creative, often extra-
budgetary, measures augment funds provided for budgetary
appropriations.
(iii) Improves operational control during budget execution.
When the treasury has full information about cash
resources, it can plan and implement budget execution in
an efficient, transparent, and reliable manner. The existence
of uncertainty regarding whether the treasury will have
sufficient funds to finance programmed expenditures may
lead to sub-optimal behaviour by budget entities, such as
exaggerating their estimates for cash needs or channeling
expenditures through off-budget arrangements.
(iv) Enables efficient cash management. The TSA facilitates
regular monitoring of government cash balances. It
also enables higher quality cash out-turn analysis to be
undertaken (e.g., identifying causal factors of variances and
distinguishing causal factors from random variations in cash
balances).
(v) Reduces bank fees and transaction costs. Reducing the
number of bank accounts results in lower administrative
cost for the government for maintaining these accounts,
including the cost associated with bank reconciliation, and

reduced banking fees.
(vi) Facilitates efficient payment mechanisms. The TSA ensures
that there is no ambiguity regarding the volume or the
location of the government funds, and makes it possible
to monitor payment mechanisms precisely. It can result in
substantially lower transaction costs because of economies
of scale in processing payments. The establishment of a TSA
is usually combined with elimination of the “float” in the
banking and the payment systems, and the introduction of
transparent fee and penalty structures for payment services.
Many governments have achieved substantial reductions in
their real cost of banking services by introducing a TSA.
(vii) Improves bank reconciliation and quality of fiscal data.
The TSA allows for effective reconciliation between the
government accounting systems and cash flow statements
from the banking system. This reduces the risk of errors in
reconciliation processes, and improves the timeliness and
quality of the fiscal accounts.
(viii) Lowers liquidity reserve needs. The TSA reduces the
volatility of cash flows through the treasury, thus allowing it
to maintain a lower cash reserve/buffer to meet unexpected
fiscal volatility.
(ix) Reduces ways and means advances. The TSA also assists
the government to make significant savings in terms of cost
that would have been incurred through financing of ways
and means which is averaged at N4.7 billion on monthly
basis.
Note: Ways and Means charges are the interest being charged
on any overdraft given by the Central Bank of Nigeria when
there is shortage of funds to pay salary from Consolidated
Revenue Fund.
Summarised Benefits of TSA Implementation

• Provides complete and timely information on cash position
of government.
• Strengthens budget execution as government has full
information about available cash
• Enables efficient cash management due to ease of having
regular cash position and higher quality cash analysis
• Eliminates idle balances in MDAs’ bank accounts
• Minimises borrowing requirements
• Minimises bank fees and transaction costs
• Facilitates efficient payment mechanism (e-payment)
• Eliminates floats and introduction of transparent fee and
penalty regime
• Increases the ability of the FGN to undertake central control
and monitoring of expenditures and receipts in the MDAs
• Facilitates access to information on financial and operational
performance
• Improves internal control to prevent, detect potential and
actual fraud
• Strengthens governance and accountability, through efficient
and effective service delivery
• Establishes government cash position at any point in time
• Eliminates fragmental banking arrangements leading to
efficiency and elimination of charges
• Ensures that domestic debt and borrowing are aligned to
need
• Reduces cases of idle cash balance/unspent balance in
MDAs bank account, these have considerably been reduce
to the minimum
• Enhances government liquidity management as Warrant/
AIE releases are now based on cash plan
Following the directive of President Muhammadu Buhari in August

2015, federal ministries, departments and agencies (MDAs) had
to implement the Treasury Single Account (TSA) with immediate
effect.
The TSA has been defined as a process and tool that unifies all
government accounts in a single unit for the effective management
of its finances, bank and cash position. Therefore, MDAs that
are yet to comply must close all revenue accounts maintained in
different banks or branches and transfer the proceeds to the TSA
maintained by the CBN. Under this directive, it is only by the
TSA that MDAs can access funds approved in their budget. It is
noteworthy that the directive is based on sections 80 and 162 of the
1999 Constitution (as amended) which presumes that all revenue
expended are captured in the national budget and are authorized by
the National Assembly. It is also in accordance with a directive to
the National Economic Council to ensure MDAs comply with the
relevant laws of accounting, allocation and disbursement of funds.
Therefore, MDAs are to close all the revenue accounts they maintain
in different Banks and transfer the proceeds to the TSA maintained
by the CBN.
TSA Implementation Challenges

i. There are some form of opposition by some arms of
government and interest groups desirous of return to status
quo.
ii. Lump sum transfer of MDA balances by Deposit Money
Banks (DMB) thereby creating temporary cash illiquidity in
the banking system.
iii. Difficulty in accessing bank statements and associated
reconciliation issues.
iv. Although the TSA directive involves all government
agencies including partially funded establishments like
teaching hospitals and medical centres, there have been
fears that its effect may be averse to certain agencies such
as the Nigerian National Petroleum Corporation (NNPC)
and the Nigerian Ports Authority (NPA), if special rules or
conditions are not drafted to take their numerous operations
and cash obligations into account.
v. There is also the salient point that the executive and

legislative arms of government will have to live up to their
responsibilities by presenting and approving the budget in a
timely manner as late presentation and approval of budget in
Nigeria has become a recurrent theme.
vi. Beyond this, although the implementation of the TSA
presents an opportunity for banks to creatively think of
other means of raising money, there are fears that the
concentration of government funds in the TSA may affect
the liquidity of some banks leading to their collapse and an
increase in unemployment.
vii. However, while the influence of banks to maintain
government revenues is reduced under a full implementation
of the TSA, it should be remembered that the funding of
projects by the government as well as the sale of treasury
bills and bonds approved by the CBN still pass through
commercial banks.
Scope of the Treasury Single Account (TSA)
S/N MDAs Categories Implementation Strategies

i. MDAs that are fully funded through a. All collections from these agencies to be paid
the federal government budget including directly into the CRF/TSA.
all ministries and foreign mission. b. Expenditure to be drawn from CRF/TSA
based on annual budget.
ii. MDAs partially funded through the a. All collections from these agencies to be paid
federal government budget but directly into the CRF/TSA, except which are to
generate additional revenues such be paid into sub-account at CBN, which are
MDAs are teaching hospitals, medical linked to TSA.
centers, and federal tertiary institutions. b. Platform will be configured to allow access
to funds based on approved budget.
iii. MDAs not funded through the Federal a. All collection from these agencies to be paid
budget but expected to pay operating into Sub-Accounts at CBN, which are linked
surplus 25% of gross earnings to the CRF. to TSA.
Such MDAs are CBN, CAC, NCC, FAAC, b. Platform will be configured to allow access to
NCAA, NDIC, NSC and SEC. funds in the sub-Accounts based on approved
budget.
iv. MDAs that are funded from the Federation i. All federation revenues generated by these
Account, such as NNPC, FIRS, NCS, agencies to be paid into the Federation
MMSD and DPR. Account at CBN.
ii. All independent revenue generated by these
agencies to be paid into CRF/TSA.
iii. FGN share of Federation Account to be paid
into CRF/TSA.
iv. Statutorily approved cost of collection to be
deducted from Federation Account and paid
into sub-account at CBN which are linked to
TSA.
v. Platform will be configured to allow access
to funds in the Sub-Accounts based on
approved budget
v. Agencies funded through the Special i. Sub-Accounts linked to TSA to be maintained

Accounts (Levies) such as NSC, at CBN.
RMRMDC, PTDF, NITDA, etc. ii. All IGR collected to be directly into the
CRF/TSA.
iii. Platform will be configured to allow access
to funds in the sub-accounts based on approved
budget.
vi. Profit-oriented public corporations/ • Dividends from these agencies to be

business enterprises such as BOI, paid into the CRF/TSA.
NEXIM, BOA, Transcorp Hilton, etc
vii. Revenues generated under Public • TSA sub-accounts to be maintained at

Private Partnership, such as all CBN.
incomes from PPP arrangement. e,g • FG portion of the collection to be paid
production of international passports, into CRF/TSA.
seaport, concession arrangement. • Partners portion of the revenue to be
transferred to the partners account.
viii. MDAs with revolving funds and i. Project accounts (Revolving Funds) to
projects accounts, such as Drug maintained at CBN.
Revolving Funds, Teaching Hospitals be ii. Collection (IGR) from these agencies to
Universities), Fertilizer Revolving Fund, paid into CRF/TSA.
Roll-back Malaria, Sure-P iii. Platform will be configured to allow
access to funds in the Sub-Accounts
based on approved budget
Implementation Strategy
For effective implementation of the TSA/E-Collection, the following
must be noted.
• MDA sub-accounts: All receipts in favour of Categories 2,5,7
& 8 above not being revenue or other monies for the CRF
under extant laws, rules and regulations, are to be deposited
directly into their respective sub-accounts. Qualifying MDAs
will be granted access to withdraw funds based on their
approved budget. The sub-accounts will be linked to the TSA.
• Sub-accounts for most qualifying MDAs are already opened
at the CBN.
• Sub-accounts will be opened at CBN for qualifying MDAs
who do not currently have one.
• FG portion of the Sub-account balances will be transferred to
the CRF/TSA at intervals.
• Some fully funded MDAs may also require sub-accounts at
CBN in exceptional circumstances
• Requests for the opening of Sub-account shall be made to the
Accountant-General of the Federation for consideration and
approval.
• For all agencies having project/revolving fund account

there should be sub-account linked to the TSA to be
opened for each affected agencies at the CBN
Suggestions on TSA Implementation

a. Some analysts think that the implementation of the TSA should
be followed by the passage of a “Fiscal Sunshine Bill” which
will open up the financial activities of the government in the
budgetary process and its implementation.
b. There have also been calls for strong legal sanctions where
money is being spent outside the purpose it is appropriated for.
c. It is also clear that a major challenge of the implementation of
the TSA will lie on the political will for its enforcement, as it
will be recalled that the call for its use had emerged under the
framework of Government Integrated Financial Management
Information System (GIFMIS) in former President Olusegun
Obasanjo’s regime.
d. Manpower development is essential for the implementation of
successful TSA/GIFMIS.
So far, the general arguments for the implementation of the TSA
appear to induce better governance in addition to having other
statistical, economical and financial benefits.
33.7 Integrated Payroll and Personnel Information System

(IPPIS)
Integrated Payroll and Personnel Information System (IPPIS) is
one of the federal government reforms conceptualised as a central
payment process for all civil servants on the payroll of the federal
government. The scheme was approved in 2006 and commenced
implementation in 2007. It was designed to improve the effectiveness
and efficiency in the storage of personnel records and administration
of monthly payroll so as to enhance confidence in staff emolument
cost and budgeting.
The Integrated Payroll and Personnel Information System (IPPIS)
is an Information Communications Technology (ICT) project
initiated by the Federal Government of Nigeria (FGN) to improve

the effectiveness and efficiency of payroll administration for its
ministries, departments and agencies (MDAs).
IPPIS Secretariat is a department under the Office of the Accountant-
General of the Federation responsible for payment of salaries and
wages directly to government employees’ bank accounts with
appropriate deductions and remittances of 3rd party payments such
as Federal Inland Revenue Service, State Board of Internal Revenue,
National Health Insurance Scheme, National Housing Fund, Pension
Fund Administrators, Cooperative Societies and Trade Union dues.
Operation of IPPIS
The main stakeholders in the operation of IPPIS are:
(a) Federal Civil Service Commission;
(b) Head of Service of the Federation; and
(c) The Accountant-General of the Federation.
The operation of IPPIS is to generate reliable and comprehensive

database of public servants. This is done through the collection
of existing individual records and capturing the records of new
personnel with their photographs and the fingerprints called
biometric data. The banks used by individual employees and the
corresponding account numbers will be captured. The records are
stored in the centralized database. Even though a photograph is
submitted, direct image will be taken also. The records are updated
from time to time to reflect the current qualification obtained and
promotions and even when there is any change in the banks details.
Date of birth and first appointment are not changeable or cannot
be altered until one retires from the service. It is from the updated
records that payrolls are processed. Registration must be made with
the following important documents:
a) Appointment letter
b) Confirmation letter
c) Birthday declaration/certification
d) All credential including primary six certifications
e) Promotion progressions with evidence
The Role of Desk Officers in the MDAs

It is the responsibility of the MDAs to monitor the payment of the
staff salary to ensure that there is no payment made to unauthorized
person. It is noted that most of the MDAs’ accounting officers
have not been paying attention to personnel cost. They are of the
view that IPPIS Department has taken over the payment of the
salary forgetting that all payment made are charged to the MDA’s
concerned.
Objectives of IPPIS
i. To centralise database of public servants to know the total
number of public servants on the payroll.
ii. To reduce ghost worker syndrome.
iii. To ensure integrity of employees data.
iv. To minimize wastage of public funds.
v. To ascertain actual personnel emoluments of FGN staff.
vi. To facilitate easy storage, updating and retrieval of personnel
records for administrative and pension purposes.
Advantages of IPPIS
i. Biometric data capture of personnel under IPPIS ensures
reduced fraud.
ii. Storage of records in a centralised personnel data base.
iii. Prompt deduction and remittance to pension funds, co-
operative societies and other union dues.
iv. Easy retrieval of personnel information.
v. Easy payment of civil servants entitlements.
vi. Monitoring of unutilised funds derived from unpaid staff
salaries.
Process of IPPIS Payment

The major account being maintain for the payment of the public
servants salary is IPPIS Transaction Account (ITA) and it is
operated as follows:
▪ Budget office issues warrant on-line

▪ IPPIS authorized users generate payment orders to transfer
funds into IPPIS Transaction Account (ITA) using the GIFMIS
platform
▪ Funds department issues mandate to enable the CBN debit ITA
and remit funds to respective beneficiaries (both employees
and third parties)
▪ Soft data containing the pay-out details is also forwarded to
CBN
▪ CBN processes payment through Nigeria Inter-Bank
Settlement System (NIBSS), the switching company that
provides such services
▪ NIBSS execute payments and report to CBN and IPPIS
Department, providing details of amount paid and amount
returned as un-applied
▪ Another importance of this account is to hedge these funds
from lapsing
▪ The account also allows for monitoring and control of the un-
applied funds returned
▪ The account is reconciled on a monthly basis
Un-applied Fund
(a) Under GIFMIS platform or e-payment system, not all
payments sent for payment succeed due to some reasons; for
instance, with a wrong account number, such a payment will
not go. Such items are regarded as un-applied funds and must
be returned to IPPIS Transactions Account.
(b) Schedules of un-applied funds are updated in Funds
Department. Once any payment fails, it must be updated in
the schedules of un-applied fund before it can be sent for
payment to avoid double payment.
(c) Corrected data will be received from IPPIS department before
Funds Department effects payments.
(d) Payment mandate will be prepared by the Funds Department
based on the corrected data from the IPPIS Department for
submission.
(e) Payment will be effected from IPPIS Transaction Account.
33.8 National Chart of Accounts (NCOA)

The National Chart of Accounts is an integrated budget and accounting
classification system which is primarily for implementation by any
system that is IPSAS-compliant. The National Chart of Accounts
(NCOA) may be defined as a complete list of budget and accounting
items where each item is uniquely represented by a code and grouped
into tables of related data for the purposes of tracking, managing and
reporting budgetary and accounting items in an orderly, efficient
and transparent manner.
However, NCOA was designed after due consultations with all the
local government councils, states and federal government of Nigeria
taking into consideration their peculiar needs. It is designed in line
with the provisions of Government Financial Statistics (GFS) of the
International Monetary Fund (IMF). The NCOA is to be used for
IPSAS Cash Basis and also IPSAS Accrual Basis. It is expandable,
flexible and it is to be used in budgeting and accounting.
It facilitates the preparation of uniform financial statement — that
is, statements that may be reliably compared to that of other entities.
Because of this aim, it is especially important that transactions are
entered in a consistent manner to fulfil statutory requirements for
the presentation of the GPFS. It also enhances the classification of
financial transactions leading to meaningful and relevant accounting
reports for users. It further provides a listing of different accounts
used by the government entity according to their intended purpose
and to comply with the provision of IPSAS in ensuring full disclosure
of all accounting transactions.
33.8.1 Objectives of NCOA

The NCOA is an effective reporting system with significant
objectives which includes but not limited to the following:
• to give ample opportunity for comparability with other entities;
• unification and harmonisation of coding, budgeting, and
accounting system;
• to bring about global interpretation of Nigeria GPFS;

• nationally consistent financial reporting that are useful to all
the stakeholders;
• improvement in transparency and accountability;
• to ease computerisation of accounting system;
• expandable/flexible/adaptable to accommodate additions,
modifications and update new discovery;
• each item has a unique code that can be easily identifiable;
• it provides sufficient structure for fiscal management to cater
for administrative, economic, functional, programme, fund
source, and Geo-code segment;
• to facilitate the data entry; and
• To facilitate IPSAS Cash and Accrual Basis compliant.
33.8.2 Structure of the National Chart of Accounts

The National Chart of Account has six segments made up of
administrative, economic, functional, programme, source of funds
and geographical code segments.
a. Administrative Segment
The administrative segment assigns responsibility for each
transaction whether revenue centres (receipt) or cost centre
(payment).
It addresses the “Who” element of each transaction.
The administrative segment identifies the government entity
that is responsible and accountable for performing the job
assigned to it by the government whether it is for revenue
collection or as a cost centre.
b. Economic Segment
The economic segment answers the “What” question of
every transaction.
Every receipt must be from a particular source, e.g. contractor
registration fee. Likewise, every expense must be on a
particular item or object, e.g. purchase of drugs and medical
supplies.
The focus on economic segments is to identify the type

of account and the details of the account for reporting of
financial transactions.
c. Functional Segment
i. Functional classification categorizes expenditure according
to the purposes and objectives for which they are intended.
ii. Functional classification or Classification by Functions of
Government (COFOG) is defined as a detailed classification
of the functions or socio-economic objectives, that general
government units aim to achieve through various kinds of
outlays.
iii. A “Functional” classification organises government
activities according to their broad objectives or purposes
(for example, education, social security, housing, etc.).
iv. Government expenditure measured according to
internationally recognised functional categories.
v. A functional classification is especially useful in analysing
the allocation of resources among sectors.
vi. Functions and sub-functions will be assigned at the point
of budget and planning for every transaction or initial set
up.
d. Programme Segment
Programme segment answers the “Why” question of every
transaction according to the purpose or objective. Does the
transaction relate to a specific project and if so, what type of
activity?
i. Policy is a deliberate plan of action to guide decisions
and achieve rational outcomes.
ii. Programme may be defined as a long-term outline of a
government function that is designed to meet specific
policy objectives of the government.
iii. Projects – Programmes are further broken down into
projects. Budgeting and accounting are carried out
along project lines.
iv. Objectives represent the specific result desired within

a fixed period of time.
e. Fund Segment
i. The fund segment addresses the “Financed by” element of
a transaction.
ii. Fund refers to the various pools of resources for financing
government activities.
iii. The fund segment will fast track the implementation of
IPSAS particularly with respect to the full disclosure of
government revenue including external assistance.
f. Geographic Code Segment

• The geographic code segment addresses the “Where”
(location/station) element of every transaction. It is for
location or physical existence of transaction so that an
analysis of government budget and expenditure along the
various geo political zones, states, and local government
councils in the country can be done.
• The use of Geo Codes will make it easier for agencies with
oversight function like monitoring and evaluation (M&E)
mandates to locate projects across the country.
33.8.3 Issues and Challenges

i. Misclassifications of accounting transactions;
ii. Timeliness of submission of transcripts/trial balances from
MDAs to Accountant-General office leading to seamless
consolidation of the financial statements;
iii. Bridging the knowledge gaps in using the national
classification system;
iv. Need for computerised accounting IT training and re-
training;
v. Resistance to change;
vi. Re-engineered business process;
vii. Migration of clean data;
viii. Back up devices and data restoration; and

ix. Continues Management and political support.
33.9 Fiscal Sustainability Plan

World Bank State Fiscal Transparency, Accountability and
Sustainability (SFTAS) Programme.
The main objective of this section is to evaluate the assistance of the
World Bank in its efforts to support the country in strengthening the
Public Financial Management. Fiscal sustainability or public finance
sustainability is the ability of a government to sustain its current
spending, tax and other policies in the long run without threatening
government solvency or defaulting on some of its liabilities or
promised expenditures.
The Fiscal Sustainability Plan, the framework for the sustenance
of the state governments in Nigeria, is a product of an agreement
between federal and state governments which has been hailed as
a strategic game-changer for fiscal governance at the state level.
The aim of Fiscal Sustainability Plan (FSP) is to address the issue
of fiscal responsibility, or financial prudence, as part of the federal
government’s on-going fiscal responsibility reform.
In response to the fiscal challenges, the Federal Ministry of Finance
requested the World Bank to prepare a programme to support states
to strengthen fiscal performance and sustainability. The programme
builds on and complements the states’ commitment and reform
efforts under the 22 action plans. The FSP has 5 key strategic
objectives, followed by 22 recommended action points, with a view
to achieving objectives around improved fiscal behaviour that will
align both short-term and long-term sustainability objectives of the
federal and state governments.
From 2016 onwards, all state governments were expected to abide by
the Fiscal Sustainability Plan’s strategic objectives around the five
key elements of Accountability and Transparency, Increase in Public
Revenue, Rationalisation of Public Expenditure, Public Financial
Management Reforms, and Sustainable Debt Management.
33.9.1 Fiscal Sustainability Plan Key Strategic Objectives

i. To improve accountability & transparency: Fiscal
accountability and transparency help to improve the level
of accountability of sub-national governments to citizens
and the federal government. It also helps to enforce good
governance and reduce opportunistic behaviour as a result
of information asymmetry.
ii. To increase public revenue: Fiscal Sustainability Plan focuses
on the need to create a sustainable system of revenue generation
for the states by increasing independently generated revenues
and improving the viability of states as “stand-alone” entities
that can, on the back of their own revenues, raise capital and
receive support from development institutions.
iii. To rationalize public expenditure: Fiscal Sustainability Plan
rationalise every naira of public expenditure by establishing
and implementing systems aimed at improving efficiency,
reducing costs and plugging leakages.
iv. To improve Public Financial Management: Fiscal Sustainablity
Plan focuses on setting of laws, rules, systems and processes for
state governments to mobilise revenue, allocate public funds
and undertake public spending, account for funds and audit
results to achieve targeted objectives. Achieving this objective is
hinged on three key pillars of (i) efficiency (ii) transparency and
(iii) accountability.
v. Sustainable debt management: The goal of sustainable
debt management is to keep State debt and cost of debt
at sustainable levels in a way that is healthy for both the
states and the federal government.
In view of the above, there are action plans to meet the objectives
which have been broken into 22 recommended action points by the
Minister of Finance. In order to make the state governments pay
attention to the 22 action plan, the World Bank was brought in to
ensure that the state government buys into the Fiscal Sustainability
Plan.
In response to the fiscal challenges, the Federal Ministry of Finance

(FMF) requested the World Bank to prepare a programme to support
states to strengthen fiscal performance and accountability. The
programme was to build on and complement the states commitment and
reform effort under the 22-point Fiscal Sustainability Plan. Therefore,
provisions of loans were made available to the state but on the condition
that they will meet some of the 22 action plans. The advice is that the
World Bank should assist the states to ensure that they are able to
comply with the action plan. Once the states are able to carry out the
action plans, the standard of the states will change as regard PFM.
In addition, for federal government to ensure that state government
complies with the Fiscal Sustainability Plan, granting loans and
grants will depends on the compliances of each state to be eligible
to qualify to access the loan or grants. Therefore, the means of
evaluating/accessing the eligibility of the states based on the 22
action plans is questionable.
The 22 action plans broken into the five core objectives of the FSP
is hereby enumerated.
33.9.2 Objective 1: To improve Accountability & Transparency
o The states are expected to publish audited annual financial
statements within 6 months of the financial year end.
o The states are also expected to introduce and comply with
the International Public Sector Accounting Standards
(IPSAS).
o The states are to publish state budget online annually.
o In the same vein, states are to publish budget implementation
performance report online quarterly.
o Federal government is expected to develop standard IPSAS
compliant software to be offered to states for use by state
and local governments.
Comments
It is instructive to mention that none of the states have
complied with the above action plans. What all the
states did to qualify for the loan was to publish the front
pages of their reports. A review of the published report
will reveal unreliable contents. It is recommended that
the World Bank should review and scrutinise these

reports more thoroughly before granting loans to public
sector entity.
Note: This is the recommended template of budget
implementation performance report each government
entity is expected to prepare for easy evaluation.
2018 Quarterly Budget

Implementation Performance Report for the 3rd Quarter
June – September 2018
S/N Activities Actual budget Amount released % of amount Remarks

(N) up to date released

1. Construction of 12,000,000.00 9,000,000.00 75%
two blocks of
classrooms of six
classes each.
Note: From the above, the monitoring officer knows

what he/she is expecting to see at the site. Most of the
budget implementation reports are academic exercise,
which does not serve the purpose it is meant for.
33.9.3 Objective 2: To Increase Public Revenue

The states are to:
o Set realistic and achievable targets to improve independently
generated revenue (from all revenue generating activities of
the state in addition to tax collections) and ratio of capital
to recurrent expenditure.
o Ensure implementation of targets as well as implement a
centralised Treasury Single Account (TSA) in each state.
o Hold quarterly financial reconciliation meetings between
federal and state governments to cover VAT, PAYE
remittances, refunds on government projects, Paris Club
and other accounts.
o Share the database of companies within each state with the
Federal Inland Revenue Service (FIRS). The objective is to
improve VAT and PAYE collection.
o Introduce a system to allow for the immediate issue of

VAT/WHT certificates on payment of invoices.
o Review all revenue related laws and update of obsolete
rates/tariffs. Set limits on personnel expenditure as a share
of total budgeted expenditure.
33.9.4 Objective 3: To Rationalise Public Expenditure

The states are to:
i. Ensure the biometric capturing of all states’ civil servants to
eliminate payroll fraud.
ii. Ensure the establishment of efficiency unit. Federal
government online price guide to be made available for use
by states.
iii. Introduce a system of continuous audit (internal audit).
Comments
None of the states has established efficiency unit and the internal
audit in all the states are just formalities. They must take a cue from
the experiences of the 1990s when no payment was effected without
the Internal Audit pencil. It is recommended that the World Bank
should engage PFM experts to handle most of the assignment of
the states regarding the multi-state performance – based operation
to strengthen state fiscal performance with consultation with State
Commissioners of Finance.
33.9.5 Objective 4: To Improve Public Financial Management

The states are to:
i. Create a fixed asset and liability register.
ii. Consider privatisation or concession of suitable state owned
enterprises to improve efficiency and management.
iii. Establish a Capital Development Fund to ring-fence capital
receipts and adopt accounting policies to ensure that capital
receipts are strictly applied to capital projects.
iv. Domesticate the Fiscal Responsibility Act (FRA).
Comments
Manpower development is required to be able to meet these
objectives. It is therefore recommended that the consultant must
be a PFM expert not just a chartered accountant. The World Bank
should take note.
33.9.6 Objective 5: Sustainable Debt Management

i. Attainment and maintenance of a credit rating by each state
of the federation.
ii. Federal government to encourage states to access funds from
the capital markets for bankable projects through issuance
of fast-track municipal bond guidelines to support smaller
issuances and shorter tenures.
iii. Full compliance with the FRA and reporting obligations,
including: no commercial bank loans to be undertaken by
states; routine submission of updated debt profile report to
the DMO. Publish a benchmark rate for municipal loans to
achieve greater transparency.
iv. Ensure total liabilities do not exceed 25% of total revenue
for the preceding year. In the same vein, monthly debt
service deduction is not to exceed 40% of the average FAAC
allocation for the preceding 12 months.
v. In addition to the sinking fund, states are encouraged to
establish a Consolidated Debt Service Account to be funded
from the state’s Consolidated Reserve Fund Account to a
minimum of 5% of IGR.

Comments
Compliance to the above guidelines is still very poor. It
is recommended that the World Bank should carry out a
programme to support states to strengthen fiscal performance
and sustainability by engaging experts in PFM to handle the
manpower development. It is true that a lot of funds had been
spent on the improvement of accountability and transparency,
increase public revenue, improve Public Financial Management
and Sustainable Debt Management. However, the impact is yet
to be felt by any state government.
33.9.7 Observations on World Bank Public Financial Management

(PFM) Activities in Nigeria
There has not been any detailed review or quality assurance to
evaluate performances of state governments to determine their
eligibility for loans or grants. It was observed that the yard sticks
being used by the World Bank to assess most of the government
agencies of states or federal government are inadequate. For
instance, the Fiscal Sustainability Plan (FSP) and the twenty-two
(22) action plans are effective to enhance fiscal prudence and
public expenditure, transparency, but the means of evaluating the
performance of the agencies or state government eligible for grants
and loans are questionable.
Consider for instance, the World Bank multi-state performance-
based operation to strengthen state fiscal performance consultation
with state Commissioners of Finance.
Under this programme

Component 1: Programme for Result (PforR) Performance/Results-
based financing;
Total $700 Million over 2019-2021 available
Component 2: Capacity building/Technical assistance funding;

Total $50 Million over 2018-2020
P for R disbursements: start April 2019 (based on evaluation of state
performance in 2018)
Eligible for PforR financing: States individually have to achieve the
Global Disbursement Linked Indicator (DLI) –a minimum common
performance standard each year.
Therefore, the Global DLI are:
(i) Annual approved state budget published online; and
(ii) Latest annual audited financial statement.
Comment
These criteria are weak. The existence of an annual approved State
Budget that is published online should not be the qualification for
the loan or grant. Has the contents of the budget been reviewed to
ensure that they meet the set standard? Has quality assurance been
carried out? Again, the mere submission of the audited financial
statement is not enough. Quality assurance needs to be carried out
to ensure that the account is in line with the standard. These are
critical issues that need to be taken into consideration before any
loan is approved. Because of the approach adopted to evaluate
the states, front page of the audited accounts can be published to
meet World Bank guideline; whereas, the real account is breach
of set standards. Auditor-General and Accountant-General at both
the federal and state levels are adopting the same World Bank
approach. Until the real evaluation are carried out where accounts
are returned for failure to meet the laid down standard, all the World
Bank’s effort on loans and grants given for the enhancement of
public financial management in Nigeria will not achieve the desired
results. The question that needs to be answer is: What are the bases
of the evaluation of the states for eligibility for the loan or grant?
The way forward

i. Effort should be made to ensure that experts on PFM are
engaged, especially whatever that relates to Accountant-
General and Auditor-General both at federal and state levels.
ii. Mere presentation of document should not be accepted, it needs
to be reviewed.
iii. Quality assurance needs to be enforced to ensure that all
financial statement presented meet the required standard.
iv. The World Bank should assist the Financial Reporting
Council of Nigeria to establish the Public Sector Directorate
as entrenched in the Act. This will accelerate the development
of expertise in PFM such that the resources committed by the
World Bank to various public sector reform initiatives will
yield the desired results.
Practice Questions
1. Discuss the objectives of government financial reforms.

2. Enumerate the various reform initiatives.
3. Discuss the purpose, objectives and scope of GIFMIS.
4. Enumerate and discuss the critical success factors of
GIFMIS.
5. Explain the origin and thrust of the Economic Reforms and
Governance Project (ERGP).
6. Discuss the concept and benefits of TSA and the issues it
was designed to address.
7. Explain the purpose of Integrated Payroll and Personnel
Information System (IPPIS).
8. Discuss the objectives and structure of the National Chart of
Accounts (NCOA).
9. Give insight into the thrust of the World Bank-sponsored
Fiscal Sustainability Plan.

Chapter Thirty Four
Types of Vouchers
Learning Outcomes
i. discuss the concept of payment vouchers;
ii. specify the types of voucher forms;
iii. discuss the features of a payment voucher;
iv. explain the procedure for the preparation of a payment
voucher;
v. enumerate the accounting documents maintained for the
preparation of salaries/wages;
vi. discuss the importance of unclaimed wages register;
vii discuss the processes for the preparation of salary vouchers/
pay roll; and
viii. discuss how to use adjustment voucher.
34.0 Introduction
A payment voucher is documentary evidence used to discharge
obligation through disbursement of money. It is prepared to show
evidence that the obligation to pay for services rendered has
been discharged. This evidence is available for future reference,
accounting and auditing purposes. There are three main types of
vouchers:
(a) Payment Voucher
(b) Receipt Voucher
(c) Adjustment Voucher
1164
1165 Types of Voucher
34.1 Types of Payment Voucher Forms

All payments must be vouched on a prescribed form. Some of these
forms are as follows:
TF 1 - Other charges payment voucher;
TF 4 - Payment voucher pensions;
TF 5 - Travelling allowance payment voucher;
TF 27 - Capital expenditure payment voucher;
TF 210-212 - Payroll, summary vouchers.
Separate vouchers will be used for separate sub-heads and for

different services. Payment voucher can be grouped into two: Other
Charges Vouchers and Salary Vouchers.
Features of Payment Vouchers
(a) Departmental number.
(b) Station of payment.
(c) Head & sub-head (classification/economic code).
(d) Amount both in figure and words.
(e) Home address of the payee (Postal Address are not allowed).
(f) The original payment voucher must bear the full signature of
officer controlling the vote.
(g) The voucher must contain the full particulars of each service
such as date, numbers, quantities, distance and rates, so that
checking could be carried out without reference to any other
document.
(h) All relevant documents should be attached e.g., LPO,
contract agreement, invoice, delivery note, SRV, etc.
(i) Certificate to confirm that the amount on the voucher is
correct and was incurred under the authority granted and the
services have been duly performed.
(j) The financial authority used must be quoted on the voucher.
(k) Date of the voucher must be stated and the officer controlling
expenditure should also sign with date. This is very
important as the liability of a voucher is counted from the
date it is signed up to a period of three months after which
the voucher becomes stale for payment.
(l) If the voucher relates to a contract, reference to such contract

and details of any previous payment under it must be made.
(m) Only the originals of Local Purchase Order and invoice must
be used to support voucher. If copies are used, there should
be a letter of indemnity from the payee.
Note: It should be noted that the new GIFMIS platform being used
does not over rule the use of payment vouchers.
34.2 Procedure for the Preparation of Vouchers

i. There must be an instruction from the appropriate officer
in form of minutes before a payment voucher can be
raised and a request for payment directed to such officer
that would authorise the payment.
ii. The officer must ensure that the requests made are
correctly chargeable to the ministry’s vote from which it
is to be paid.
iii. The officer must ensure that funds are actually available
to meet the expenditure and where it is below-the-line
account, to ensure that the recipient is qualified for such
payment.
iv. When all these have been confirmed, the voucher can
then be raised on the appropriate treasury form.
v. The voucher should be allocated a departmental number
through the payment voucher register.
vi. The voucher should be entered into the vote book.
vii. Officers that participated in the preparation of the voucher
should then sign the voucher certificate. (See specimen
in the next page).
viii. The voucher is then forwarded to the checking section,
which is solely responsible for the checking and passing
of payment voucher under a covering voucher schedule
prepared in a serial order from where it will be passed to
the Internal Audit Section, if found to be in order.
ix. The Internal Audit will carry out its own exercise on the
vouchers, by cancelling all the attached documents to
avoid reuse and forward same through a schedule to the
central pay office for payment.
x. It is worthy to note that the position of Internal Audit
has be played down under the platform of GIFMIS as no
function of internal audit is required before payments are
made.
xi. The vouchers would then be entered in the Treasury Cash
Book where a treasury voucher number is allocated to it.
With the e-payment system in use, the mandate number

will be indicated in the cash book.
xii. Those states that are yet to embrace e-payment system,
cheque will be used. Cheque would then be written with
the cheque number also written on the voucher.
xiii. If the voucher is to be taken away pending when the
original voucher is returned, the cashier would retain the
Cash Order Form.
xiv. The cashier also will sign the voucher certificate column
PAID BY or the person who actually paid out the money.
Specimen of Voucher Certificate
Details Signature Name Date

Prepared by:
Checked by:
Entered into the Vote Book by:
Passed by:
Paid by:
34.3 Salary Vouchers

In the past, salary vouchers were usually prepared either monthly or
half monthly. But now, due to cost of materials, salaries are prepared
once a month. In most states, including federal government where
IPPIS department in the Office of the Accountant-General of the
Federation is saddled with the function of the payment of the
salary electronically, there is need to prepare the pay roll relating to
individual MDAs.
Before the commencement of the electronic payment of salaries
across the states, the relevant accounting documents and records,
which are maintained in the Personal Emolument Section for the
preparation of salaries/wages, are as follows:
(a) Personal Emolument Form
(b) Personal Emolument Record Card TF 174A
(c) Salary Variation Advice

(d) Variation Control Sheet
(e) Payment Voucher Register
(f) Group Register
(g) Unclaimed Wages Register
It is important to state that all the above accounting documents and

records which are maintained in the personal emolument section are
still relevant in the present electronic process of paying salaries. The
only difference is that all the necessary information concerning the
individual officer are now in soft, rather than hard copy.
34.3.1 Personal Emolument Form

All information in the personal emolument form will be made
available during the biometric data capturing which are permanent
in the system. During the biometric capturing process, finger print
and photo will be taken. Under this IPPIS, this personal emolument
form is not applicable. This is the form given to every officer at the
beginning of each year which should be forwarded to the Head of
Salaries and Wages Section by every sectional head. These forms
will be forwarded with the list of officers in his section. Every officer,
irrespective of his grade or status, must complete the Personal
Emolument Form, stating the particulars as required on the form. It
is a means of confirming that the officer is still in the service. The
aim is to eliminate ghost workers. So passport photograph of each
officer must be attached.
Specimen of Personal Emolument Form
To all officers Federal Ministry of: ………………………………
Salaries Section
Passport
Photograph
Personal Emolument Form

In keeping with the Accountant-General's instructions and in order to maintain correct and
comprehensive records of all officers in the ministry, you are requested to complete this
form and return it to …………… ……………………………………………….not later
than……………………………………………… Failure to return completed form on/or
before ………………………may lead to non-payment of salaries to the affected officers for
the month of January 19……… All completed forms must be countersigned and submitted
through the Head of Division/Section/Units. Any completed form not submitted through the
Sectional Head will not be accepted.
Name (Surname first, in BLOCK letters)............................................................

Rank……………………………………………………………………………
Ministry/Division……………………………………………………..……….
Date of first appointment ……………………………………………………..
Date of birth…………………………………………………………………...
Residential address ……………………………………………………………
Government Quarter Occupied (if any) ………………………………………
Date of occupation of Government Quarters …………………………………
Pay point (Cash payment) …………………………………………….………
Bankers and Addresses ………………………………….……………………
Bank Account Number …………………………………………….…………
I certify that the particulars given above are correct to the best of my knowledge
---------------------------------
Signature of Head & Date
…………………………….. …………………………….
Signature of Officer & Date Name of Sectional Head
…………………………….
34.3.2 Personal Emolument Record Card TF 174 A&B

This card is used to calculate the officer’s salary, including all
the deductions to be made. The calculation for the month will be
transferred to the payroll according to the pay point. The completion
of the Personal Emolument Record card is not applicable now
due to the electronic method of salary payment. The payment in
previous record will be reproduced. Except for promotion and
annual increment, all figures in the previous month will be the same.
The total amount in each type of deduction is supported by advise of
deduction from salary. Payment voucher TF 1 is used for on-payment
in favour of the receiving authority. The following information are
provided on individual ledger for the production of pay roll:
i. Salary per annum
ii. Incremental date
iii. Advances granted
iv. Income tax relief
v. Name and Rank
vi. Date of Birth
vii. Acting Allowance
viii. Contract
ix. Date of first appointment
Personal emolument record cards should be kept under strict
arrangement; and when they are not in use, should be locked up in a
fire-resistant cabinet, safe or a strongroom. In the same vein, the soft
copy should be stored in another server outside the building where
the salary is being paid.
34.3.3 Salary Variation Advice

This is used to inform the Accounts Section of any change that may
affect the salary/wages of any officer. Such changes may arise as
a result of increment, resignation, promotion or termination and
should be informed at the earliest possible time. Salary variation
advice emanates from Administration to the Accounts Section. The
desk officer of IPPIS of each ministry now handles this function.
However, the copy of the advice should be distributed. This is to

serve as safe keeping, in case there is problem in the system.
(i) One copy to IPPIS department
(ii) One copy to internal audit division
(iii) One copy in the officer’s personal file
Note: The copy in the personal file is very important.
34.3.4 Variation Control Sheet (TF 208)

The importance of variation control cannot be overemphasized.
However, form TF 208 may not be used because of the electronical
method being used. The purpose is to show variation in each month.
It is also used to analyse the difference between the previous month
salary and the current salary total. The sum total of the variations
should be added to or subtracted from the relative total of the
previous month. The figure so obtained must correspond with that on
summary payroll of each pay point. Independence in the preparation
of the variation control record should be strictly maintained to
ensure the effectiveness of internal check.
34.3.5 Payment Voucher Register

This is used to control the vouchers prepared in a unit by allocating
numbers to them. This register is kept to ensure that vouchers are not
duplicated and to prevent fraud. This is a very important document
that should be kept in all the accounts divisions of MDAs. It is one
of the memorandum accounts that must be maintained. It should
contain the following information:
i. Date of the voucher
ii. Departmental number
iii. Name of the payee
iv. Service rendered
v. Classification
vi. Schedule number
Entries in the register should be strictly entered in numerical

order starting from the beginning of the financial year. The officer
controlling expenditure where possible, must initial each entry in
the register.
34.3.6 Group Register

This is the register where all the names of officers receiving salaries
in that organisation should be entered. The register should contain
the Personal Emolument Card, Number, Name, Rank and the Pay
Point.
Note: Nominal roll contains the names of officers serving in a unit
or organisation and not all staff on the nominal roll receive salary
from that agency.
34.3.7 Unclaimed Wages Register

This is used to record the names of officers that could not collect
their salaries on payday, detailed records of payment to chest and
subsequent payment to employees whenever they come forward for
their salaries.
In the same vein, under the electronic salary payment system (IPPIS)
and GIFMIS platform or e-payment system, not all payments sent
for payment are successful due to some circumstances. For instance,
with a wrong account number, a payment will not go through. Such
items are regarded as un-applied funds, which must be returned to
IPPIS Transactions Account.
Specimen of Unclaimed Wages Register

Ministry/Department …………………………………………
Date Pv/No. Amount Payee Section T.R.V. Particulars Withdrawal D.P.V. Payable at
Station Particulars
No. Date No. Date Amount
34.4 Preparation of Salary Vouchers/Pay Roll

i. The completed Personal Emolument Cards form is required to be attached
to the Personal Emolument Record Cards from the first month of the year.
ii. Previous year’s Personal Emolument Card must be attached to the new card
to ensure that all information therein have been transferred.
iii. The officer’s salary must be computed on the Personal Emolument Card and
transferred to the payroll.
iv. These would then be transferred to the payment voucher, i.e., summary
payment voucher. On this voucher, analysis of the total amount would be
made, such as total deduction and net payment.
v. Each type of deduction should be supported by advice of deduction from
salary (TF 209) and the payment vouchers TF1 for on-payment in favour of
the receiving authority.
vi. All these will then be scheduled to checking section - Audit section - Central
pay office where cheques will be written.
vii. Bank schedules would then be prepared to pay the salary cheques of officers
operating bank accounts to their respective banks.
viii. For all cash payments, cheque(s) would be written with which cash will be
drawn from the Central Bank of Nigeria and paid to the officers collecting
cash.
ix. Cheques for on-payment of deductions will be made to the receiving
authority in the same month as the payment of the net emoluments.
Under the Electronic Payment and e-Payment System

i. The pay rolls are generated electronically based on the stored
data.
ii. All deductions are made equally and transferred to individual
third parties concerned.
iii. Any variations emanate from the MDAs desk officer in
conjunction with Human Resources department.
iv. It is only the desk officer that has access to view the agency
transactions.
v. The use of cheque is abolished under the e-payment system.
vi. Mandate and payment voucher numbers are very important.
34.5 Other Important Matters

a. Last Pay Certificate: This is the certificate issued to an officer
who is transferred to another station or another ministry or
department by the salary section. This is to inform the new
station of the date the last salary was made with full details
of deductions, outstanding balances on any loans or advances
enjoyed by the officer. This has to be audited by the Internal
Audit Section to ensure that no important information in
respect of the emolument of the officer is omitted. However,
the use of Last Pay Certificate is no more applicable under the
electronic salary payment system.
b. Honour Certificate: Honour Certificate is given on the face
of a payment voucher to certify the following:
i. that a job requested has been performed satisfactorily
and according to specification;
ii. that the goods being paid for have been supplied and
according to agreed price; and
iii. in case of minor expenditure on behalf of government
for which no receipt was issued, that the expenditure
was incurred in the public interest and that no receipt
was issued.
c. Indemnity Certificate/Letter: This is given on the face of
a payment voucher or in the form of written letter by the
supplier of goods as protection against double payment where

the original local purchase order issued to the supplier got lost
after the goods have been supplied but before payment was
effected.
d. Personal Income Tax: Tax is a burden which every citizen
must bear to sustain the government. Personal Income Tax is
a tax on the income of employee, sole trader, partnership and
pensioner. Therefore, it is mandatory for all offices to deduct
Personal Income Tax from the employee at source and remit
same to the relevant Tax Authority. Employees are expected
to fill Tax form at the beginning of the year to enable the Tax
Authority give the required tax relief to the employee which
must be indicated on the Personal Emolument Cards.
e. Schedules: There are three main schedules:
i. Voucher Schedule: This is a treasury form used in
transferring vouchers from one section to the other and
it contains the following information:
• Date
• Voucher Departmental Number
• Name of Payee
• Amount
It must be prepared in duplicate. While the receiving
section retains the original after acknowledging receipt
of the vouchers listed, the duplicate must be returned
and retained as evidence that the receiving department
has received such vouchers.
ii. Bank Schedule: This is a treasury form, which
accompanies any bank payment to the bank in duplicate.
The original is retained while the duplicate will be
stamped by the banker and signed before returning to
the payer as an acknowledgement of the payment to the
bank.
iii. Security Schedule: This is used to transfer checked
and passed vouchers from one station to another for
payment under registered cover. The security schedule
number should be serially controlled and inserted on

the original copy only. It can also be use to transfer
important documents from one state office to another.
The officer issuing the security schedule will maintain
a register for controlling the security number. The
register will be kept under lock and the key and number
will only be known to himself only.
f. Officer Interdicted: This is an officer banned from performing
his normal duties for alleged involvement in fraud and as such
a proportion of his salary would be impounded pending the
outcome of the investigation. In the event that there is no
recovery, the amount of the fraud committed shall be deducted
from that proportion of his salary that was not paid to him.
g. Cash Order Form: It can be described as a temporary voucher
kept by the central pay office pending the time the vouchers
are returned. It is attached to a payment voucher introducing
the name and signature of the person authorised to collect
the cheque and the voucher. Paid vouchers must be returned
within seven days so that the cash order form is released.
34.6 Receipt Voucher

Receipt Voucher is documentary evidence that the sum stated on the
voucher has been received. Any receipt into the government purse
must be supported with Treasury Form 15 (Pay-in-Form), which
is the actual receipt voucher. Although, Treasury Form 15 is not
a Security Book, it cannot be regarded as authentic until Treasury
Book 6 accompanies it. Therefore, all receipts to be recorded in the
Treasury Cash Book must be supported by both the receipt voucher
Pay-in-Form (TF 15) and the Treasury Book 6.
With the introduction of e-collection, the receipt issued by the bank
will be used by the agency to issue receipt to the client.
34.7 Adjustment Voucher (TF 23)

Adjustment vouchers are affected by means of journal entries, which
enable transfers to be made from one account to another without
actual receipt or payment of cash. In Government Accounting, it is

used in any of the following circumstances:
• Payment for inter-ministerial services.
• Correction of accounting errors arising from mis-
classification.
• Ultimate allocation of unallocated stores.
• Carrying out adjustments or transfers between accounts.
How to Use Adjustment Voucher

Adjustment Voucher are often initiated by the creditor’s department
and sent to the debtor’s department for acceptance of the charges.
On return of the voucher duly accepted by the debtor, the creditor
department will be responsible for ensuring its dispatch to the
Accountant-General by means of the supplementary transcript.
The adjustment voucher must show the head and sub-head of the
debtor’s department to be charged and the head and sub-head of the
estimate to be credited.
It must also indicate the reason for the transfer and make full
reference to the original debit or credit being adjusted e.g., voucher
number and month of account and particulars of Treasury Adjustment
Vouchers are usually in quadruplicate, out of which two copies must
be signed in full.
Note: Supplementary transcript contains an analysis of various
inter-departmental transactions, which are normally accepted into
the relevant ministry’s accounts by means of adjustment vouchers.
Worked Example
Mr. Ojo was in the Ministry of Education before he was transferred
to the Ministry of Agriculture. In May 1993, Mr. Ojo’s family was
still in his formal station, as such he did not collect his last pay
certificate until 30th Nov., 1993. Mr. Ojo’s total emolument was
3,500 per month. Note that Mr. Ojo’s salary for seven months was
paid by Ministry of Education while he was serving in the Ministry
of Agriculture.
Therefore, the Ministry of Education will raise the adjustment

voucher of N24,500.00 (3,500 x 7) and send it to the Ministry of
Agriculture which will accept it and return it to the Ministry of
Education. By means of supplementary transcript, the Ministry
of Education will forward the endorsed vouchers to the treasury
where the adjustment will be carried out by crediting Education and
debiting Agriculture.
34.8 Journal Entries

Journal entries are used to carry out adjustments, which enable
transfers to be made from one account to another without resorting
to actual receipt or payment of cash.
There are two main types of journals used in the Federal Treasury
Final Accounts Section, namely:
• Supplementary Journal Voucher (SJV); and
• Principal Journal Voucher (PJV).
Supplementary Journal Voucher (SJV)

This is used for all adjustments and transfers made before the below-
the-line statement is extracted. A supplementary journal voucher is
used in two ways:
(a) To adjust the differences between ministry’s transcript’s
figure and those contained in the bank transfer prepared by
the sub-treasurer of the federation.
(b) To reclassify account before the drawing up of the Trial
balance.
Example
After the Federation Account Department has determined the amount
due to each state of the federation from the federation Account, the
accounting entries will be effected by SJV as follows:
Dr Cr
Federation Account (Dr) xxx
To the particular state
Current Account (Inward) xxx
Being shares due to the various states
from the Federation Account for the
month of (x) 199x
Principal Journal Voucher (PJV)

These are used on all subsequent transfers and adjustments after the
supplementary journal voucher has been prepared and posted. It is
used in four ways:
• To correct mis-classification of accounts detected by the main
accounts.
• Adjust the accounts e.g., when funds rightfully belonging to
one state have been wrongly credited to another.
• Effect month-end transfer of account from Above-the-line
Account to Below-the-line Account.
• Effect annual transfers: e.g., Surplus and Deficit Account to
CRF, Capital Receipt Account to Development Account.
Example
After the Below-the-line statement for a particular month has been
extracted and there is the need to transfer a surplus in the Surplus
and Deficit account to the Consolidated Revenue Fund, the PJV is
used to effect the transfer as follow:

Dr Cr
Surplus and Deficit Account xxx
To Consolidated Revenue Fund xxx
Being transfer of surplus for the month
of (x) 201x
Practice Questions
1. Discuss the concept of payment vouchers.

2. Specify the types of voucher forms.
3. Discuss the features of a payment voucher.
4. Explain the procedure for the preparation of a payment
voucher.
5. Enumerate the accounting documents maintained for the
preparation of salaries/wages.
6. Discuss the importance of unclaimed wages register.
7. Discuss the processes for the preparation of salary vouchers/
pay roll.
8. Discuss how to use adjustment voucher.

Chapter Thirty Five
The Subsidiary Accounts:

Deposit Account, Advances, Remittances, and Imprest
Learning Outcomes
i. discuss the components of subsidiary accounts;
ii. distinguish between deposit in government and bank deposits;
iii. enumerate and discuss the various types of advances;
iv. explain the procedures for remittance of advances;
v. state and explain the types of imprest account and their limits;
and
vi. discuss the internal check procedure for imprest account.
35.0 Introduction
A subsidiary account is an account that is kept within a subsidiary
ledger, which in turn summarizes into a control account in the
general ledger. A subsidiary is used to track information at a very
detailed level for certain types of transactions, such as deposit,
advances, remittances and imprest account. The subsidiary account
section of any ministry or department is responsible for maintaining
the below-the-line accounts, rendering returns and reconciliation
statements thereof.
It is a very important arm of the accounts unit in the ministry
through which the treasury department measures or assesses the
effectiveness of the control function of the various below-the-line
accounts assigned to the ministry. The effectiveness of the ministry
or department depends, to a large extent, on the organisation of its
subsidiary accounts section.
1182
1183 The Subsidiary Accounts: Deposit Account, Advances, Remittances, ...
The failure of this section may not only create problems for the
ministry in terms of rendition of account or reconciliation of
statement but it may also result in loss of government funds which
may arise through non-availability or inadequate records to monitor
and recover advances made to officers or corporate bodies.
35.1 Subsidiary Accounts of MDAs

Ministries and departments are often enjoined to set up their own
subsidiary account section with the responsibilities for keeping the
following accounts:
(i) deposits;
(ii) advances;
(iii) remittances/cash transfers; and
(iv) imprest.
In addition to the above which are still maintained in total as a

measure of control, the Consolidated Account Department also
maintains a number of accounts which cannot be decentralized to
ministries and departments. These are personal ledger accounts
maintained for agencies, other government corporations and special
funds, etc. Therefore, it is the responsibility of the subsidiary
accounts section to open and maintain proper control ledger and
subsidiary ledger accounts for the proper recording of transactions
on these accounts in total in the control ledger and in detail in the
subsidiary ledgers.
35.1.1 Deposits
The word “Deposit” in government accounting is not the literal
meaning of deposit account in the banks. Deposits in government
accounting are monies paid to government for safe keeping for
special purpose. It is an item in the consolidated statement of
financial position under liabilities. Deposits are usually made for
specific purposes and can be withdrawn by the depositors at maturity
and if withdrawal is no longer required, it may be paid to revenue as
the case may be. There are some receipts of money that must be in
the custody of government but are not part of government revenue.

For instance:
a. Prison In-Mates Money: Any convict or anyone in the
Police, ICPC or EFCC custodies is precluded from holding
any cash inside the cell. As a result, any money in their
possession will be collected and registered in the appropriate
books/registers. In the same vein, the officers are not allowed
to keep cash after 24 hours in the safe; it must be paid to
government account classified as ‘Deposit.’ In line with the
new National Chart of Accounts, the economic code is 4101,
under the code the following liability were listed including
those in the Judiciary. Other codes include:
• 41010101- Contract retention fee
• 41010102 - Prison in-mates deposit
• 41010103 - Caution fees
• 41010104 - Undisbursed scholarship
• 41010105 - Bonds & sureties- These are bonds
and sureties in the courts where the sureties are
asked to deposit the moneys with the court. Such
deposits must be banked and accounted for at the
end of the year.
This is also applicable to ICPC and EFCC but it is doubtful if the
deposits in both agencies are captured in the federal government
financial statement and the individual audited financial statement
being agencies of federal government.
35.1.2 Accounting for Deposits

The Accountant-General of the Federation is the Chief Accounting
Officer of the federal government. Therefore, he must account for
all receipts of money wherever it may be kept and it is through the
financial statements of the federal government he does that. Any
amount, wherever it may be, not captured in the financial statement
renders the financial statement unreliable. The books and records,
maintained in the subsidiary accounts for the proper recording of
deposits are: the Deposit Ledger and the Deposit Register.
• The Deposit Ledger: It is kept to record the account of deposits
received and withdrawals made. Its entries are posted from
the voucher schedules and vouchers received from the final accounts.
• The Deposit Register: Records in detail, particulars of all deposits received
and the withdrawals made. It is ruled thus:
Deposit Withdrawal
Date Name of Purpose of TRV No. Amount Date PV No. Amount Remarks
Depositor Deposit
Once the transactions in the two books are correctly recorded, the balances in the
deposits ledger and register should agree at all times.
35.2 Receipt and Withdrawal of Deposits

All deposits should be paid into the agency’s TSA sub-account and treasury
receipt obtained. The original treasury receipt will be given to the depositor while
the duplicate together with the voucher schedule will be forwarded through the
final accounts to the subsidiary accounts for posting purposes.
Similarly, part of the amount deposited may also be withdrawn as desired. All that
is required is the paper work on the voucher. For example, assuming that N50,
000 was deposited and N30,000 is required; the N30,000.00 will be credited in
the new treasury cash book. The ledgers will be posted to reflect the transactions.
Deposits which have remained for more than five years should be transferred by
adjustment voucher to revenue. The exceptions to this are prisoner’s deposits
and court deposits. Any request for withdrawal for the lapsed deposits should be
referred to the Accountant-General of the Federation.
Commentary: It is therefore sad and shocking to note that inspite of the full
details what deposit in public sector is all about in the National Chart of Account,
the preparer of the financial statement of the Federal Government does not
understand the word “Deposit” as it is different from deposit account. The Deposit
in the Accounting Policies No. 30 in 2016 financial statement is unfortunate story.
Efforts should be made to carry out quality control of the financial statement
before published.
35.3 Advances
Advances consist of two classes:
(i) personal advance; and
(ii) non-personal advance
35.3.1 Personal Advance

This is the cash advance granted to an individual officer or employee
in the service for his personal benefit. The major advances falling
under this category are:
a. Salary/rent advance
b. Motor vehicle advance
c. Correspondence advance
d. Spectacle advance
On no condition should new advance be granted to an officer where
the previous one has not been fully recovered.
35.3.2 Non-Personal Advance

This is the advance granted to an officer to carry out certain tasks for
the organisation. For example, N50,000.00 advance to enable the
officer purchase tyres and tubes for the organisation, the receipt to
be attached will be far higher than the actual value of the item. Due
to the abuse, this form of advance has been pegged at N200,000.00
FR 1402.
35.3.3 Conditions for Granting Advances

i. Salary/Rent Advance: This is granted to an officer who
has just been appointed or an officer who has just returned
from his annual leave. He is only entitled to one month
basic salary and to be recovered in three equal installments.
While rent advance is also part of salary advance that is
often granted to an officer who is on transfer to a new
station and needs to rent a house which involves advance
payment. Therefore, the rent advance to be granted will
not exceed two months basic salary and to be recovered in
six equal installments. The request for salary/rent advance
is difficult to be granted now, since the payment of salary

process is not domiciled in the agency.
Comment
This is one of those provisions made by our forefathers to
make life comfortable for the public servant as such the
tendency of corruption was very low. For instance, they
know that after annual leave, one must have exhausted
his/her money and provision was made to obtain advance
to be paid in three equal installment. Until proper welfare
of public servant are taken serious, the issue of fighting
corruption will be a mirage.
ii. Payment Procedures: Payment Voucher TF 1 is used for

payments. The LEFT SIDE must be filled in red ink by
the officer in charge of the advances in the unit, certifying
that he/she has recorded the advance in all the necessary
records such as TF 174 (PE Cards), advances ledger or
register, before checking and passing for payment and the
commencement of deductions.
Specimen of Advances Ledger or Register
Name of officer----------------------------------------------
Type of advance: -----------------------------------------------
DEPT:…………………………………………
No. of installments: .......................
Date PV No. RV No. Dr Cr Balance

Note
• PV is the payment voucher number in paying the
officer.
• RV is the receipt voucher number for the deduction
made or the receipt.
iii. Duty Tour Allowance: Presently, touring advance has been

replaced with duty tour allowance in which the officers
are not required to retire the amount given and no receipt
is required to be submitted. (FR 1411) The allowance is
given according to an officer’s status as follows:
Duty Tour Allowance within Nigeria

Status Amount per night
(N)
Ministers/HOS/SGF 35,000.00
Permanent secretaries 20,000.00
GL15-17 16,000.00
GL 7 -14 12,000.00
GL 06 and below 5,000:00
Duty Tour Allowance (estacode) for Officer on Oversea Tour

Status Amount per diem
(i) Minister/HOS/SGF $900 per diem
(ii) Permanent Secretaries $600 ,, ,,
(iii) Officers on GL. 15-17 $425 ,, ,,
(iv) Officers on GL.07-14 $381 ,, ,,
(v) Officers on 01-06 $206 ,, ,,
The above rates cover only lodging and feeding expenses.

The transport allowance shall be paid to all officers that
embank on the tour. Officers on duty tour, locally or
overseas, shall not over stay the number of days approved
without obtaining prior approval from their accounting
officer. (FR1414)
iv. Motor Vehicles, Motorcycle and Bicycle Advance: Motor

vehicles, motorcycle and bicycle advances are now granted
by each ministry/department and charged to Above-the-line
Vote provided in the estimate of each ministry/department.
An officer may not be considered for the advance when the
cost of maintaining that car and repaying the installments
are likely to cause him financial embarrassment.
No officer is eligible for an advance until after three
years of previous advance, except where the vehicle so
purchased had become a write off from an insurance
point of view. An officer to whom an advance is given
to purchase a motor vehicle will be required to insure the
vehicle comprehensively with an insurance company.
Separate ledger cards must be maintained in respect of
individual advances issued. The ledger cards must be
posted and balanced each month.
Presently, motor vehicle advance has been changed to
car refurbishing loan. Therefore, only those who own
cars are entitled to the advance. Officers on GL 07 and
above who can produce evidence of ownership of car will
be granted the loan. Maximum period of repayment is 60
months. The total amount recoverable which will include
the principal and interest and the number of installment
recoveries must be noted on the officer’s advances ledger
card and the Personal Emoluments Records Card.
Comment: Since refurbishing loan is above-the-line, no provision
was ever made in the budget. So an officer who owns a car that
is old must find ways to replace it, once more, welfare and human
development must be taken care of in the budget.
v. Correspondence Advance: This is the type of advance

granted to officers that want to improve on their academic
standard. The advance is interest free. The conditions for
granting the advances are as follows:
• That the ability and efficiency of the officer warrants his

taking the course.
• That the subjects are related to his work.
• That the study is likely to increase his efficiency.
vi. Spectacle Advance: This is granted to officer(s) who want
to obtain lenses that will aid their vision.
Note: Since the commencement of IPPIS, the electronically
payment of salary, granting of advances has not been possible to
be granted.
35.4 Remittances/Cash Transfers

Remittance is the transferring of fund from one office to another
through the bank. The bank through the credit advice will inform
the receiving station. Cash transfer is the movement of cash from
one station to another. Such remittances and transfers are as stated
below:
• Remittance of funds to meet the transactions in Federal
Pay Offices, Police Pay Offices, Customs Area Pay
Offices, Overseas Missions and Armed Forces.
• Transfer of revenue collected from the outstations to
Head Offices or from ministries/departments to the Sub-
Treasurer of the Federation.
35.4.1 Sources of Authority

The following are the various sources of authority:
(a) Fund Department in the Office of the Accountant-General
of the Federation in respect of remittance to the Federal
Pay Offices and Sub-Treasurer of the Federation (Annex)
at Lagos;
(b) Head of Accounts in ministries/departments in respect
of remittances to Police Pay Offices, Customs Area Pay
Offices, Overseas Missions and Units of Armed Forces;
(c) Head of Account for authority to incur expenditure issues;
and
(d) Bank advice as per standing order with the bank.
35.4.2 Procedures for Remittances

On receipt of the authority to remit cash, a payment voucher is to be prepared
and processed for payment in the subsidiary accounts section. When the payment
voucher is received, the payment will be made by e-payment in favour of the
officer, through a mandate to the bank. It should be noted that the internal audit
must have checked and passed same for payment. When money is to be remitted
to more than one station, a single mandate can be issued with different account
details of the states.
A remittance register as shown below must be maintained both by remitting and
the receiving stations.
Remittance Register
Issues Reciprocation
Date b/f whom PV Acct. Amount Date RV CR Acct. Amount Remarks
Remittance made No. Head Acknowledged Head
On receipt of credit advice from the bank by the receiving station, treasury/
custom receipt is to be issued and classified to the appropriate below-the-line vote.
The original receipt should be sent immediately to the forwarding station as an
acknowledgment of the remittance received.
Note: With the e-payment and GIFMIS platform, the alert from the bank is an
evidence of both receiver and payer.
35.4.3 Cash Remittance/Transfer to Station(s) Outside Nigeria

Exchange Control Form “A” Application to purchase foreign
currency is to be prepared in respect of cash to be transferred to
a bank account of an officer in foreign country. The Application
Form “A” shall be forwarded through the Head of Accounts to the
Ministry of Finance, Foreign Exchange Department for approval.
After the approval, payment voucher should then be raised, checked
and passed for payment. On receipt of the checked and passed
payment voucher with the approved Form “A”, the mandate will be
issued in favour of the embassy designated bank overseas. A letter
would then be issued advising the foreign office of the transfer and
requesting for the original receipt classified to the appropriate head
of accounts to be forwarded when money is received.
35.5 Imprest
Imprest is the money set aside for disbursement when vouchers
cannot be immediately prepared or raised. It can also be defined as the
sums advanced to officers to meet expenditures under the recurrent
estimates for which vouchers cannot be presented immediately
to sub-accounting officer. The holder of such money is regarded
as imprest holder. He is an officer other than the sub-accounting
officer. He is expected to keep an Imprest Cash Book. Treasury
Form 10 is the imprest voucher which would be in duplicate. The
original of the TF 10 with the receipts (if available) will be attached
to the voucher for the reimbursement, while the duplicate is kept for
auditing purposes.
Note: Separate imprest voucher should be used for different sub-

head for easy reimbursement.
35.5.1 Types of Imprest

There are two types of imprest, namely: standing and special.
a. Standing imprest: This is the type of imprest issued to the
ministry/department by the Accountant-General to meet
various expenses to which vouchers cannot be immediately
raised. This has to be retired at the end of the financial year.
b. Special imprest: This is an imprest issued to a ministry/

department for a specific purpose. Unlike the standing
imprest, it can last for more than a year. It can only be retired
when the purpose of issuance has been completed.
35.5.2 Specimen of Imprest Sub-receipt
Treasury 10……………………………….
Pay Office ---------------------------------------
Federal Government of Nigeria-Sub-Receipt
Name of Payee Particulars of Services Amount Signature

Recipient
N K
…………………20………..
……………………………………….
Signature of officer making payment
Rank: …………………………
35.5.3. Authority for the Issuance of Imprest

The authority for the issuance of imprest is usually conveyed in
the Annual General Imprest Warrant issued by the Ministry of
Finance to the Accountant-General of the Federation. Imprest can
be obtained by application to:
(a) Accountant-General
(b) Accounting Officer
Accounting officer will apply to the Accountant-General while
officers controlling expenditure will apply to accounting officer
of their ministry/departments/agencies. Payment is effected on a
departmental imprest warrant (TF 9) and a copy of each warrant is
forwarded to the Auditor-General.
35.5.4 Re-imbursement of Imprest

This is to obtain reimbursement of amount paid from the imprest.
The imprest holder is required to submit the properly completed
sub-receipt TF 10 with the cash receipt (if available) attached to
(TF 1) payment voucher for the amount expended to the officer
controlling expenditure. The voucher would then be checked and
passed for payment. After the submission of the details, the mandate
will be issued to the bank. The voucher will be classified directly to
the expenditure head and sub-head concerned and not to imprest.
Note: The replenishment must not exceed the total imprest issued
to the department.
35.5.5 Internal Check Procedure for Imprest Account

a. The imprest holder must be a responsible person of not below
Grade Level 07.
b. The imprest money must be used for the purpose for which it
is meant.
c. Any unused balance must be kept underlock and key.
d. Imprest cash book must be periodically examined and the
balance certified by a senior officer.
e. Imprest Cash Book must be properly kept and regularly

balanced.
f. An Imprest account should be operated through sub-account
of the agency.
g. The imprest money must be separated from other cash and
under no circumstances should any employee be allowed to
borrow from it.
h. No payment should be made without a proper voucher
prepared.
35.5.6 Limits of Reimbursable Imprest

The limit of reimbursable standing imprest shall be as follows:
Caterories of Officers Limit of Imprest

(N)
Honorable Minister 300,000.00
Permanent Secretary/Director-General 200,000.00
Director/Head of Department 100,000.00
Head of Formation 60,000.00
The frequency of obtaining reimbursement of any standing imprest

shall be limited to once in a quarter. However, where the need arises,
it should not be more than twice in a quarter.
Practice Questions
1. Discuss the components of subsidiary accounts.

2. Distinguish between deposit in government and bank deposits.
3. Enumerate and discuss the various types of advances.
4. Explain the procedures for remittance of advances.
5. State and explain the types of imprest account and their limits.
6. Discuss the internal check procedure for imprest account.
Chapter Thirty Six
Office of the Auditor-General for the Federation
Learning Outcomes
i. discuss the reforms in the Office of the Auditor-General for
the Federation;
ii. discuss the appointments of Auditors-General for the
Federation and States, their mandates and responsibilities;
iii. the roles played by Auditor-General in the prevention of loss
of funds and other functions;
iv. enumerate and discuss the various types of audits; and
v. discuss entrance and exit conference in performance audit.
36.0 Introduction
The first statutory authority for audit in Nigeria came in 1956 with
the publication of the Audit Ordinance passed by parliament on 1st
April, 1957. Now Audit Act CAP 17 of the Laws of the Federation
2004, gave the necessary statutory basis for Nigeria’s audit on the
achievement of internal self-government. This Act was amended
following the achievement of independence in 1960 to remove the
last trace of UK control.
In 1990, all the Laws inherited before Nigeria’s independence and
those promulgated by decree were converted to Laws of Nigeria.
However, either by omission or commission, the Audit Act was
omitted.
Audits serve a vital economic purpose and play an important role in
serving the public interest to strengthen accountability and reinforce
trust and confidence in financial reporting. As such, audits help to
1196
1197 Office of the Auditor-General for the Federation
enhance economic prosperity, expand the variety, number and value

of transactions that people are prepared to enter into.
This is regrettable because since that omission of 1956 from the
consolidated Laws of Nigeria, it can be inferred that there is no audit
law in existence today. This is a challenge to the anti-corruption
programme of the government. Since prevention is better than cure,
adequate funding of the audit process and institution will achieve
better results.
36.1 Information Asymmetry and Need for Audit

Audits serve a fundamental purpose in promoting confidence
and reinforcing trust in financial information. The principal-
agent relationship, as depicted in agency theory, is important in
understanding how the audit has developed. Principals appoint
agents and delegate some decision-making authority to them. In so
doing, principals place trust in their agents to act in the principals’
best interests. However, as a result of information asymmetry
between principals and agents and differing motives, principals may
lack trust in their agents and may therefore need to put in place
mechanisms, such as the audit, to reinforce this trust.
Agency theory is a useful economic theory of accountability, which
helps to explain the development of the audit. However, this simple
model of the role of audit, depicted through agency theory, is
complicated by the following factors:
i. Auditors are also agents of principals, which can lead to further
concerns about trust, threats to objectivity and independence.
ii. An ongoing need to find further mechanisms such as regulation
to align the interests of Public Accounts Committee, Chief
Executives of agencies and staff of Office of the Auditor-
General.
iii. There are other stakeholders, such as creditors, private companies,
etc., who have an interest in the audit and agency theory, and does
not provide a simple or complete explanation of their expectations.
iv. Furthermore, whilst agency theory would suggest that principals

do not trust their agents, we know that there must be some
trust in agents because of the volume of unaudited information
that Executive Arms of Government provide to general public
representing the citizens.
Therefore, in line with the agency theory, which is a useful economic

theory of accountability, any fund allocated to any agency of
government should be accounted for. There is also the need to have
oversight on the fund allocated. More often than not, what it takes
to carry out the oversight functions by the office of the Auditor-
General are not being made available. The Office of the Auditor-
General lends credence to the accountability and probity of any
government agency. Therefore, the need to build the capability of
the office to carry out its mandates cannot be overemphasised.
36.2 Reforms in the Office of the Auditor-General for the

Federation
The objective of the on-going reforms in the Office of the Auditor-
General for the Federation is to ensure that the country’s Supreme
Audit Institution (SAI) meets the international standard through
adoption and compliance to global financial auditing standards. As
part of the on-going reforms, three manuals were produced with
the assistance of the AFROSAI-E (African Organisation of English-
speaking Supreme Audit Institution) for the implementation of the
new reforms. AFROSAI-E has been a part of these reforms and the
manuals were to be used by SAIs across Africa and beyond. The
manuals are:
i. Financial Audit Manual
ii. Compliance Audit Manual
iii. Regularity Audit Guide
In addition to the above, International Organisation of Supreme
Audit Institutions (INTOSAI) has contributed to the reforms in all
the SAIs including Nigeria. The reform recognised that audited
entities are going through a transition to accrual based International
Public Sector Accounting Standards (IPSAS) and the understanding

of the staff of the SAI of the extant financial system was not left out.
36.3 International Organisation of Supreme Audit Institution

(INTOSAI) Standards and Guidelines
INTOSAI financial audit guidelines were developed in response
to the needs expressed by both SAIs and stakeholders. The project
was initiated in 2002, and the governing board throughout the
development period has confirmed the direction and approach of the
existing project. The point must be made that INTOSAI’s standards
and guidelines need to reflect the professional core of all financial
audits as well as the specific considerations related to public sector
audits.
To achieve this, dual approach was introduced by the INTOSAI
governing board in 2002 and further clarified by the Professional
Standards Committee (PSC) during its Steering Committee meeting
in Washington DC, in 2006. According to the dual approach;
a. INTOSAI’s guidelines should be based on standards that
are widely accepted to SAIs by recognising, utilising and
building on standards issued by other standard setting bodies
to the maximum extent possible and appropriate. Therefore,
Professional Standard Committee (PSC) needs to harmonise
public sector audit internationally.
b. INTOSAI will develop complementary guidance where
there is a special need and/or a pressing concern in the SAI
environment and will seek to influence international standards
to address issues of particular interest to SAIs. This approach
is used to, among other things, allow INTOSAI to focus its
efforts and resources on public sector issues.
Note: International Organisation of Supreme Audit Institutions
(INTOSAI) is the organisational body of all the Supreme Audit
Institutions in the world while African Organisation of English-
speaking Supreme Audit Institutions is the organisational body
of Supreme Audit Institutions in English-speaking countries in
Africa.
36.4 Appointments of Auditors-General for the Federation

and States
The appointment of Auditor-General for the Federation and States
is enshrining in the Nigerian Constitution as in the case of other
nations. In part E-powers and control over public funds of the 1999
Nigerian Constitution:
a. Sections (85) & (125) provide that there shall be an Auditor-
General for the Federation (State) who shall be appointed in
accordance with the provisions of sections (86) & (126) of
this Constitution.
b. Sections (86) & (126) states that the Auditor-General for the
Federation (State) shall be appointed by the President (Governor)
on the recommendation of the Federal (State) Civil Service
Commission subject to confirmation by the Senate.
c. On issue of appointment of an acting Auditor-General, sections
86 (2) &126 (2) state that the power to appoint persons to act
in the Office of the Auditor-General shall vest in the President
(Governor). In addition, sub-section (3) states that except with
the sanction of a resolution of the Senate (State Assembly),
no person shall act in the Office of the Auditor-General for a
period exceeding six months.
d. On the removal of the Auditor-General, sections (87) & (127)
state that a person holding the office of the Auditor-General
for the Federation (State) shall be removed from office by the
President (Governor) acting on an address supported by two-
thirds majority of the Senate (State Assembly) praying that he
be so removed for inability to discharge the functions of his
office (whether arising from infirmity of mind or body or any
other cause) or for misconduct.
e. On the audit of parastatals, commission and agencies, the
Constitution states that nothing in subsection (2) of this
section shall be construed as authorising the Auditor-General
to audit the accounts of or appoint auditors for government
statutory corporations, commissions, authorities, agencies,
including all persons and bodies established by an Act of the

National Assembly, but the Auditor-General shall:
a. Provide such bodies with –
i. a list of auditors qualified to be appointed by them
as external auditors and from which the bodies
shall appoint their external auditors; and
ii. guidelines on the level of fees to be paid to
external auditors.
b. Comment on their annual accounts and auditor’s
reports thereon.
f. The Auditor-General shall have power to conduct periodic
checks of all government statutory corporations, commissions,
authorities, agencies, including all persons and bodies
established by an Act of the National (State) Assembly.
g. The Auditor-General shall, within ninety days of receipt of the
Accountant-General’s financial statement, submit his reports
under this section to each House of the National Assembly
(State Assembly) and each House shall cause the reports to
be considered by a committee of the House of the National
Assembly (State Assembly) responsible for public accounts.
h. In the exercise of his functions under this Constitution, the
Auditor-General shall not be subject to the direction or control
of any other authority or person.
Note: From the above constitutional provisions, even though
the Auditor-General cannot audit the parastatals directly, he
has authority of periodic checks.
36.5 Mandates of Auditors-General for the Federation and

States
Sections (85) & (125) of the Constitution of Federal Republic of
Nigeria, 1999 guides the mandates of the Auditor-General. From
all current legal instruments, the statutory functions of the Auditor-
General can be summarised as below:
a. Examination and audit of all public accounts of government
ministries and extra-ministerial departments.
b. Audit of revenue accruing from all sources.

c. Submitting report annually to the legislative arm of the
government on the audited accounts together with the Auditor-
General’s Certificate on the financial statements rendered by
the Accountant-General.
d. Provide MDAs with a list of auditors qualified to be appointed
by them as external auditors and from which the bodies shall
appoint their external auditors.
e. Provide a guideline on the level of fees to be paid to external
auditors.
f. Provide comments on the audited annual account of
government parastatals, corporations and companies and
submit to the State House of Assembly.
g. Carry out periodic checks of government parastatals,
corporations and companies and submit reports to the
legislative arm of the government.
h. Attend all sessions of the Public Accounts Committee of the
legislative arm of the government and serves as a technical
adviser to the Committee.
i. Undertake research activities on how to modernise auditing
and reporting; evolving techniques on value for money audit.
j. Attend and chair Losses and Investigation Committee
meetings in conjunction with the Civil Service Commission
and the Accountant-General to review cases of losses of
government cash and property.
k. Undertake pre-payment audit of pensions and gratuities for
the civil servants.
l. Carry out in house training for staff, including staff professional
development programmes.
36.6 Auditor-General Responsibilities

In line with Part E of the 1999 Constitution, the Auditor-General
for the Federation is the person responsible for the audit of the
accounts of all accounting officers and all persons entrusted with the
receipts, custody, issue, sale or payment of federal public moneys,
securities, stores or other property(ies) of the federal government.
He is required to transmit the accounts and report to the National
Assembly. In addition,
a. He is to carry out surveys of the cash, stamps, securities,
stores or other property held by such officers or persons.
b. He shall examine in such manner as he may think fit, the
accounts relating to public funds and property and shall
ascertain whether the objectives of government auditing has
been met and to ascertain whether in his opinion, which is
equally the objective of auditing in government:
• The Accounts have been properly kept.
• All public money(ies) have been fully accounted for
and the rules and procedures applied are sufficient to
secure effective check on the assessment, collection
and proper allocation of revenue.
• Monies has been expended for the purpose(s) for
which they were appropriated and the expenditures
have been made as authorised.
• Essential records are maintained and the rules and
procedures applied are sufficient enough to safeguard
and control public property and funds.
• Finally, to ensure that the accountability of the
government (Executive) to the National Assembly
for the proper administration of public programmes,
functions of agencies, activities or operations is
enforced.
36.7 Auditor-General Statutory Functions As per Financial

Regulations (FR) 109
The following are the statutory functions of the Auditor-General for
the Federation:
i. Financial Audit is to ensure whether government accounts

have been satisfactorily and faithfully kept in accordance
with extant laws.
ii. Appropriation Audit is to ensure that funds are expended as
appropriated by the National Assembly.
iii. Financial Control Audit is to ensure that laid down procedures
are being observed in tendering contracts and storekeeping
with a view to preventing waste, pilferage and extravagance.
iv. Value-for-Money (Performance) Audit is to ascertain the
level of economy, efficiency and effectiveness derived from
government projects and programmes.
Apart from being responsible for the audits of the accounts of
the accounting offices and all persons entrusted with collection,
custody and issue of receipts, sale, transfer or delivery of any
stamps, securities, stores or other property of the government of
the federation, the Auditor-General may undertake as a special
assignment, examination of the accounts of any organisation
receiving fund from government including corporations, voluntary
agencies or commercial institutions in which government has
interest. However, in the exercise of his functions, he shall not be
subject to the control or direction of any other person or authority.
36.8 Auditor-General’s Scope of Work

The following scope of work of the Auditor-General should be
noted:
a. audit of the books, accounts and records of federal ministries,
extra-ministerial offices and other arms of government;
b. vetting, commenting and certifying audited accounts of
all parastatals and government statutory corporations in
accordance with the Constitution of the Federation;
c. audit of the accounts of federal government establishments
located in all states of the federation including all area councils
in the Federal Capital Territory, Abuja;
d. audit of the Accountant-General’s Annual Financial Statements;

e. auditing and certifying the federation account;
f. deliberation, verification and reporting on reported cases of
loss of funds, stores, plants and equipment;
g. pre- and post-auditing of the payment of pensions and
gratuities of the retired military and civilian personnel;
h. periodic checks of all government statutory corporations,
commissions, authorities, agencies, including all persons and
bodies established by an Act of the National Assembly; and
i. revenue audit of all government institutions.
36.9 Auditor-General’s Free Access to Books As per Financial

Regulations (FR) 110
It is important to note that by virtue of the responsibilities and
functions, the Accountant-General and the Auditor-General or their
representatives shall, at all reasonable times, have free access to
books of accounts, files, safes, security documents and other records
and information relating to the accounts of all federal ministries/
extra/ministerial offices and other arms of government or units.
They shall also be entitled to require and receive from members
of the public service, such information, reports and explanations
as they may deem necessary for the proper performance of their
functions.
36.10 Government Auditing

Government auditing is divided into three parts as follows:
a. Accountant-General of the Federation–Treasury and Federation
Account.
b. Ministries/Departments and Agency.
c. Statutory Corporations, Parastatals or Enterprises.
36.10.1 Accountant-General of the Federation - Treasury and

Federation Account
The objectives of auditing of treasury and other accounts maintained
by Accountant-General are to ascertain whether:
a. the financial statement has been prepared in accordance with
accepted Government accounting system;
b. the information contained in the financial statement is
properly classified as reliable, accurate and complete;
c. the fund flow of the federation account is presented in such a
way to show the accurate transactions that took place in the
period under review, indicating the total amount shared to
each state for the financial year; and
d. the inflow and outflow of the special fund maintained by the
Accountant-General show the true position of affair of the
fund.
36.10.2 Ministries/Departments and Agency

The objectives of auditing of ministries/department and agency
accounts are to ascertain whether:
a. the agency is carrying out only those activities or programmes
authorised by the National Assembly and are conducting them
in the manner contemplated to accomplish the objectives
intended;
b. the programmes and activities are conducted and expenditure
is made in an effective, efficient and economical manner and
in compliance with the requirements of applicable laws and
regulations;
c. the resources of the agency, including funds, property
and personnel are adequately controlled and utilised in an
effective, efficient and economical manner;
d. all revenues and receipts arising from the operations under
review are collected and properly accounted for;
e. the accounting system in operation provides financial
information that is reliable and free from material errors
to facilitate the preparation of the accounting and financial
statements required by law; and
f. the accounting and financial statements presented to the

prescribed authorities disclose properly the information
required to various users both internally and externally.
36.10.3 Statutory Corporation (Parastatals) or Enterprises

The objectives of auditing of the accounts of statutory corporations
and parastatals are to ascertain whether:
i. proper accounts have been prepared in accordance with
the financial and accounting clauses in the respective legal
instruments setting up the enterprise;
ii. proper accounting records have been kept;
iii. adequate controls exist to ensure the safety and proper use of
funds, property and other assets;
iv. all revenues and receipts are duly collected and properly
accounted for;
v. the Chief Executive carries out only those functions,
programmes for which the corporation were set up;
vi. the Statement of Financial Position (Balance Sheet) shows
a true and fair view of the corporation’s state of affairs as at
the end of the financial year while the Statement of Financial
Performance (Income and Expenditure Statement) also
shows a true and fair view of the results of operation for the
period; and
vii. the corporation’s management conform adequately to the
general level of probity and public accountability.
Generally, auditing of any kind is to add some degree of reliability to
the output of the accounting process by eliminating distortions of facts
caused by personal bias, self-interest, carelessness and dishonesty.
Furthermore, financial statements are free from management bias
if reviewed by an independent auditor. Management policies are
carried out more effectively if procedures governed by the policy
are subject to review.
36.11 Auditing in Other Countries

36.11.1 United Kingdom
However, in recent years, and in the light of corporate scandals,
we have witnessed ongoing global demands for improvements
in audit quality. Changes have been made in the UK to promote
greater transparency through audit and accountability but there are
continuing demands for further improvements to be made.
The role of National Audit Office in ensuring accountability in
United Kingdom is uncountable. National Audit Office is the only
office known to be responsible for the oversight function of all the
funds allocated to government agency. It is on record that the level
of fraud or corruption in UK is very minimal compared to other
countries in the world.
36.11.2 United States of America Governmental Accountability

Office and Its Operation
The United States of America, which Nigeria adopted, its type of
system of government has been doing well as regard accountability.
Just like in UK, Government Accountability Office, which is its
Supreme Audit Institution (SAI), is a government agency under the
legislative arm and it provides auditing, evaluating and investigative
service to the United States Congress.
The Budget and Accounting Act of 1921 established the GAO.
The Act required the head of the GAO to, “Investigate, at the seat
of government or elsewhere, all matters relating to the receipt,
disbursement, and application of public funds, and shall make to
the President … and to Congress … reports [and] recommendations
looking to greater economy or efficiency in public expenditures”.
According to the GAO’s current mission statement, the agency exists
to support the Congress in meeting its constitutional responsibilities
and to help improve the performance and ensure the accountability
of the federal government for the benefit of the American people.
The name was changed in 2004 to Government Accountability
Office by the GAO Human Capital Reform Act to better reflect the
mission of the office. The GAO’s auditors conduct not only financial
audits, but also engage in a wide assortment of performance audits.
Over the years, the GAO has been referred to as “The Congressional
Watchdog” and “The Taxpayers’ Best Friend” for its frequent
audits and investigative reports that have uncovered waste and
inefficiency in government. News media often draw attention to
the GAO’s work by publishing stories on the findings, conclusions
and recommendations of its reports. Members of Congress
also frequently cite the GAO’s work in statements to the press,
congressional hearings, and floor debates on proposed legislation.
In 2007 the Partnership for Public Service ranked the GAO second
on its list of the best places to work in the federal government and
Washingtonian magazine included the GAO on its 2007 list of great
places to work in Washington, a list that encompasses the public,
private, and non-profit sectors.
a. Appointment of Comptroller-General of the U.S.

The Comptroller-General of the U.S., a professional and non-
partisan position in the U.S. government heads the GAO. The
comptroller-general is appointed by the president, by and with the
advice and consent of the senate, for a 15-year, non-renewable
term. The president selects a nominee from a list of at least
three individuals recommended by an eight-member bipartisan,
bicameral commission of congressional leaders. During such term,
the comptroller-general has standing to pursue litigation to compel
access to federal agency information. Congress may only remove
the comptroller-general through impeachment or joint resolution for
specific reasons but not by the president. Since 1921, there have
been only seven comptrollers-general, and no formal attempt has
ever been made to remove a comptroller-general.
The GAO also establishes standards for audits of government
organisations, programmes, activities, and functions, and of government
assistance received by contractors, nonprofit organisations, and other
non-governmental organisations. These standards, often referred to as
Generally Accepted Government Auditing Standards (GAGAS), are
to be followed by auditors and audit organisations when required

by law, regulation, agreement, contract, or policy. These standards
pertain to auditors’ professional qualifications, the quality of audit
effort, and the characteristics of professional and meaningful audit
reports.
b. Core Value of Government Accountability Office (GAO)

(i) Accountability: GAO helps the congress oversee federal
programmes and operations to ensure accountability to
the American people. GAO’s analysts, auditors, lawyers,
economists, information technology specialists, investigators,
and other multidisciplinary professionals seek to enhance
the economy, efficiency, effectiveness, and credibility of
the federal government both in fact and in the eyes of the
American people. GAO accomplishes its mission through a
variety of activities, including financial audits, programme
reviews, investigations, legal support, and policy analyses.
(ii) Integrity: GAO takes a professional, objective, fact-based,
nonpartisan, non-ideological, fair, and balanced approach to
all of its activities and sets high standards for itself and its
work. Integrity is the foundation of reputation, and GAO’s
approach to its work assures both.
(iii) Reliability: GAO produces high quality reports, testimony,
briefings, legal opinions, and other products and services
that are timely, accurate, useful, clear, and candid.
(iv) Value: GAO seeks out and appreciates each person’s
perspectives by seeing everyone as an individual and tapping
into everyone’s skills, talents, and life experiences.
(v) Respect: GAO strives to treat everyone with dignity by
listening, hearing, and acknowledging everyone’s viewpoints,
keeping an open mind, and embracing differences.
(vi) Treat Fairly: GAO fosters a work environment that provides
opportunities for all members of staff to excel by acting with
honesty and integrity, treating all equitably, checking for
bias, supporting equal access to opportunities, and trusting

others to do their part.
c. Responsibility of GAO to the Congress

The work of GAO is done at the request of congressional committees
or sub-committees or is mandated by public laws or committee
reports. It also undertakes research under the authority of the
Comptroller-General. It supports congressional oversight by:
a. auditing agency operations to determine whether federal
funds are being spent efficiently and effectively;
b. investigating allegations of illegal and improper activities;
c. reporting on how well government programmes and policies
are meeting their objectives;
d. performing policy analyses and outlining options for
congressional consideration;
e. issuing legal decisions and opinions; and
f. advising congress and the heads of executive agencies about
ways to make government more efficient and effective.
d. Difference between GAO and Nigeria Auditor-General Office

The difference between the responsibility and the operation of the
two offices is far below the progress made by GAO than that of
Nigeria Auditor-General’s Office.
(i) The major difference is the independence of the Auditor-
General and its appointment. The appointment of Comptroller-
General is done by the congress and the definition of the
office is made known that it is an agency of legislative arm
of government, while the Civil Service Commission does
the selection of Auditor-General, which is an agency of the
executive arm of government. It is not news that funding of
the Auditor-General is worrisome, because members of staff
rely on the auditee for almost everything such as transport,
accommodation and stationeries.
(ii) The Executive arm of government does appointment of

Auditor-General. This brings a lot of influence on the
operation of the Auditor-General and its staff.
(iii) The Congress trusts and relies on the GAO for advice
whereas; the National Assembly does not require the advice
of the Auditor-General before and during the Public Account
Committee session.
36.12 Prevention of Loss of Funds by Auditor-General

It is a known fact that the Auditor-General carries out post payment
audit. But to prevent total loss of government fund, pre-audit has to
be carried out on some payments such as pension and gratuity.
a. Loss of funds may be in the form of cash, stores or any other
assets. Loss of funds can also occur with or without fraud or
theft. It is the responsibility of the auditor to test the internal
control system and other procedures, to ensure losses of any
kind are eliminated.
In order to reduce the incidence of loss of government fund,
the Auditor-General is empowered to carry out prepayment
audit of the calculation and payment of gratuities and pension
due to public servants because once it is paid, it will be very
difficult to recover. In addition, the Auditor-General must
always ensure that there are adequate methods to safeguard
the cash and stores. Therefore, once the auditor highlights
the weaknesses in his report and the individual organisation
complies, losses of fund will be minimised, if not eliminated.
b. Detection of fraud: Although the detection of fraud is
not the primary aim of the auditor, the interpretation of
accountability in government however enjoins the auditor
to be on the lookout at all times during the various audit
exercises for signals or any indication of fraud. The
prevention of fraud is however of primary importance both
from audit and the management points of view.
36.13 Auditing and Reporting

It is the function of Auditor-General to audit and report on the
public accounts to the National Assembly. This can be interpreted
as consisting of the audit of the books, accounts, records, vouchers
and result of operations as prepared by the:
a. Accountant-General of the Federation i.e., Treasury
Account Audit which consists of Federation Account,
Consolidated Revenue Fund and other funds operated by
the Chief Accounting Officer.
b. Federal Government Ministries/Departments i.e., all
agencies within the civil service, judicial service and
legislative service. As stated above, all agencies prepare
their transcript/Trial Balance monthly which must be
audited by the Auditor-General’s staff before transmission
to the treasury.
c. Federal Government Statutory Corporation, Parastatals
and Public Enterprises. Professional firm or practicing
accountants who are adjudged qualified for such audit
carry out these audits. The auditor’s management report
and the audited accounts are forwarded to the Auditor-
General for the Federation for vetting and it is on this
basis that he certifies the accounts that are submitted to the
National Assembly.
36.13.1 Other Functions

a. He is the Chairman of the Losses Committee, which is to
monitor and report cases of loss of funds, stores and other
assets and ensure that necessary action is taken.
b. He must be in attendance during Public Accounts
Committee Session as an adviser.
Generally, audit function is necessary for, “Without audit, no
accountability, without accountability no control, and if there is no
control, where is the seat of power?” E.L. Normanton.
Furthermore, “Without audit, no efficiency; without efficiency, no

development and if there is no development, what is the use of
power?”
Types of Public Sector Audit
36.14 Performance/Value-for-Money Audit

Value-For-Money Audit is also referred to as Comprehensive Audit
or Efficiency Audit. Value-for-Money relates to the extent to which
public funds are expended economically, efficiently and the extent
to which the related programmes are effective in meeting their
objectives. Performance audit relate more on capital expenditure
in which provision of Procurement Act of 2007 is used to ensure
that all the components of the performance audit are present in any
government transaction. The main thrust of performance/efficiency
audit is to examine how a public sector establishment acquires and
uses its scarce resources in achieving its stated objectives.
a. Components of Value-for-Money
Value-for-money has three components. They are economy,
efficiency and effectiveness.
a. Economy: This is to determine whether the organisation
acquired the required project resources at the lowest cost.
b. Efficiency: This is to determine the relationship between
goods and services produced and resources used to achieve
that level. An efficient operation produces the maximum
output for any given set of resources or employs minimum
input for any given quantity and quality of service provided.
c. Effectiveness: Concerns the extent to which a programme
achieves its goal or other intended effects.
b. Steps in Performance Audit

Project Audit Survey:
▪ is carried out to first appraise the nature of the projects, the
goals and the objectives;
▪ ascertain how the project was initiated whether by law,

council memorandum, ministerial directive and public
pronouncement;
▪ how is the project to be funded; and
▪ date of commencement.
Entrance Conference
In starting the audit, the auditor should conduct an entrance conference
with the officials of the agency in most cases with the accounting
officer to intimate them of the purpose of the audit, the general plan
of audit approach, the record required and answer questions from
the auditee regarding the audit. The entrance conference should be
documented in his working papers including the names and positions
of those attending the conference and details of matter(s) discussed.
Documents Required
The following documents should be requested and examined for a
meaningful audit to be carried out.
▪ Annual Approval Budget
▪ Policy or Project Files
▪ Contract Files
▪ Tender Documents
▪ Price Bill of Quantities (BOQ)
▪ Drawings
▪ Soil Test Result for road or building project/contract,
▪ Valuation Certificate
▪ Variation (if any)
▪ Due Process Certificate
▪ Contract Register/Ledger
▪ Payment Vouchers
▪ Cash Book
▪ Bank Mandates Schedule
▪ Bank Statements
▪ Vote Books
▪ Report of Project site Meetings
▪ Report of the PRS
Audit programme on Project

• Audit programme is a very important tool used in achieving
the audit objective. An audit programme is a list of procedures
that are needed to implement the audit plan. The programme
may also contain the audit objectives for each area and should
have sufficient details to serve as a set of instructions to the
assistance involved in the audit, and a means to control the
proper execution of the work.
• The programme provides an opportunity to ensure that
all relevant items of the audit are duly covered and places
responsibility on who performed what aspect of the audit. A
well-prepared programme should provide for the systematic
accumulation of evidences to support relevant audit
observations. The programme must be flexible so as to permit
the inclusion of items not earlier envisage.
• Projects are always long term-plan which may be from 15-20
years; i.e., perspective plan. This perspective plan are broken
into 3 years Rolling Plan or Medium-Term Expenditure Frame-
Work and Annual Budget.
• Obtain the 3-year rolling plan which the project falls into
and ascertain the total amount budgeted and the break down
annually.
• Obtain the policy file to know how the project was initiated
whether by law, council memorandum or ministerial directive.
• The goal and objective of the project should be extracted into
the working paper. Effort should be made to read at least
80% of the policy file to acquaint you with the necessary
information about the project.
• Obtain all contract files relating to the project. Examine the
tender procedure and tender board minutes to ensure that the
spending limit is within the agency or ministry limit.
• Obtain the contract ledger and post all the payment certificate/
payment vouchers into the contract ledger in respect of the
contract in question.
• Obtain the BOQ and extract out some important items to be
verified at the site.
• For road or building project/contract, obtain the soil test result.

• Cast the BOQ to ascertain the total contract sum in the BOQ.
• Examine the valuation certificate for each payment made.
• In case there is any variation, ensure that there is authority for
the variation.
• Ensure that the due processes were followed and all payments
were made with due process certificate.
• All payment vouchers in respect of each contract should be
arranged together according to the date of payment for easy
examination.
• Ensure that payment conforms to the extant regulations in
respect of contract tender procedure.
• Ensure that retention fees are retained.
• Ensure that there are valuation certificates on all payment
made by a competent officer.
• Ensure that there is performance bond from the bank on the
mobilisation fee paid which should not be less than 15% of
the contract sum.
• Verify all payments made into the cashbook to ensure that the
amount on payment voucher tally with the amount recorded
in the cash book. In the same vein, verify the amount with the
mandate number in the bank statement.
• Post the vouchers into the vote book to ascertain the balance
on the project at the end of each payment.
• Obtain the project site meeting report to acquit yourself with
the issue raised during the site meetings.
• Visit the site to ascertain the level of work done with the
amount paid.
• Verify all items listed out from the BOQ.
• The period for completion for the contract stated in the
contract agreement should be noted and commented on base
on the level of work done at the site.
• The quality of the work done at the site must be commented
upon.
• Report of the PRS should be obtained to know the observations
raised by the planning department.
• Ensure that due process is followed to the letter.

• In case where the contractor demands variation, ensure that
there exist strong reasons for variation. Also ensure that the
tender’s board, which awarded the contract, has approved the
variation.

Interaction with Schedule/Project Officers
After examining and evaluating the various records of awards
relating to financing, accounting and related technical matters,
there are some useful facts, information and classification of issues
that can be provided by the officers connected with the project
implementation, both in the office and at the project site. Interaction
with the relevant officers of the project will enhance the auditor’s
knowledge and competence about the project.
Physical Inspection of Projects

Performance audit cannot be completed and meaningful without
a physical visit to the project site where the construction and the
structure itself can be examined and evaluated. It is not necessary to
be an expert on construction before a physical inspection is carried
out. All that is required is common sense and an inquisitive mind
based on all facts obtained from the records examined. During the
inspection:
i. Identify construction defects and ensure that appropriate
materials are used as provided in the Bill of Quantities and
the specifications.
ii. Ascertain whether the project when completed will attain the
intended objectives.
iii. Ensure that the constructions defects observed are noted in
the working paper.
iv. Ensure economy and efficiency in the use of fund.
Exit Conference
Exit conference is a meeting between the auditor and the auditee,
where the auditor is expected to discuss the deficiencies observed
during audit, their effects and possible corrective actions with

responsible official of the organisation, in most cases, the
management team. The primary purpose is to ensure that the auditee
have an opportunity to provide responses/additional data with
respect to the problem areas identified during the audit.
Audit Inspection Report

Audit report is the end result of the audit work and is always
addressed to the accounting officers. The report should convey the
message or information in a way to be understood by the readers,
anything short of this, the purpose of the report would be defected.
When writing performance audit report:

• the historical background of the project must be stated;
• state when it was initiated;
• the amount voted/allocated must be stated;
• state how the project is to be funded;
• state the location of the project; and
• list the goals and objectives of the project.
The report must then highlight the findings on the essential areas,
including making positive recommendations as to how weaknesses,
deficiencies, lapses can be rectified and avoided in future cases.
Executive Summary Report

This is part of the report. In most cases, it is always at the beginning
of the report. It is a known fact that Chief Executives are too busy to
read lengthy reports. Therefore, there is need to provide a summary
of the report with the key findings and recommendations.
c. Challenges of Performance Audit

Performance Audit is also known as Value-for-Money Audit; some
refer to it as Comprehensive Audit, which means total audit right
from the policy of the project to execution. Comprehensive audit
means to evaluate any government policy and report findings, which
will include the defects and recommendations. Research have it that,

despite the adoption of value-for-money audit by all the Supreme
Audit Institutions (SAI), only few countries have been able to carry
out the audit in their jurisdictions. Most of the countries’ Audit Acts
do not include the mandate to carry out Value-for-Money Audit.
Recently, many nations now realise that value-for-money audit is
more valuable to the citizen as it is what they can see and feel. The
following are among the challenges of performance audit:
i. Lack of mandate to carry out the value-for-money audit in
most of the countries Audit Act.
ii. Inadequate resources to carry out the audit.
iii. Lack of political will to enable the Auditor-General carry out
the Value-for-money audit (VFMA).
iv. Lack of skill, knowledgeable and professional officers to
carry out the audit.
v. The independence of Supreme Audit Institution (SAIs) is
inadequate.
Note: It is important to ensure that soil test result is produced
for all road and building projects in line with Procurement
Act. Failure of soil test has resulted in most failed road and
collapsed buildings.
d. The Way Forward

i. There is need to amend the current Audit Act to include
mandate to carry out value-for-money audit.
ii. Training is essential to keep abreast of the latest developments
and to maintain the professionalism of the staff.
iii. The SAIs’ independence must be maintained and protected.
In addition, great care must be taken to guard against being
involved in making government policy, which are the
responsibilities of the legislative and executive branches.
iv. The advisory role of the SAIs should be seen and pounced.
The advisory role includes providing studies, prior reports
and other information to decision makers.
Finally, in view of the huge amount being spent by the government
parastatals coupled with the fact that only financial audits are
carried out, it is necessary that performance audit, like financial

audit, should be an integral part of the work of external auditor and
the audit mandate should include the scope for this kind of audit.
36.14.1 Differences between Performance Audit and Budget

Monitoring and Evaluation
a. Performance audit is always carried out on capital project or
programmes, which are purely for the national development.
Performance audit is the responsibility of the Auditor-
General for the Federation as he is expected to carry out
the audit of the capital budget as approved by the National
Assembly and report back to the house.
b. Budget monitoring is to ascertain the progress made on the
execution of projects, policies and revenue being generated
so as to indicate whether the budget is in focus and if need
be, certain corrective measures may be introduced.
c. Budget evaluation, on the other hand, looks at the impact of
the projects as well as the effective and efficient utilisation
of resources in order to guide formulation of future budget.
It is true that all are towards accountability. However, budget

monitoring and evaluation reports are for management consumption
while performance audit reports are for public consumption.
36.15 Regularity Audit

The term regularity audit encompasses financial audit and
compliance audit. Such audit consists of financial statement, plus
some of the elements set out below:
a. Attestation of financial accountability of entities, involving
examination and evaluation of financial records and expression
of opinions on financial statements.
b. Attestation of financial accountability of the government
administration as a whole.
c. Audit of financial systems and transactions, including an evaluation
of compliance with applicable statutes and regulations.
d. Audit of internal control and internal audit functions.
e. Audit of the probity and propriety of administrative decisions

taken within the audited entity.
f. Reporting of any other matters arising from or relating to the
audit that the SAI considers necessary to disclose.
Generally,
i. regularity audit is conducted in accordance with the laws,
rules and regulations relevant to the institutions;
ii. ensure that expenditure has been in accordance with the
intentions of the legislature; and
iii. ensure that there has been fairness in the administration of
funds.
36.15.1 Regularity Audit Process Flow

Regularity audit process flow refers to the essential stages and/
or processes of carrying out regularity audit, so as to fulfill
the requirements of International Standard of Supreme Audit
Institutions, AFROSAI-E Regularity Audit Manual (RAM) and
extant rules and regulations applicable to public sector accounting
and auditing in Nigeria. For proper auditing of the government
account, the following process flow must be followed:
The regularity process flow consists of the following six steps:
annual overall audit planning, pre-engagement activities, strategic
planning, detailed planning and fieldwork, audit summary and
concluding and reporting.
a. Annual overall audit planning: It is important to carry out
the annual audit plan for the department because planning
will be better if the plan is done on departmental basis. This
is by listing all the agencies under the department, indicating
when the agency was audited last; this will guide when the
audit is due. The agencies to be audited must be known as at
the beginning of the financial year.
b. Pre-engagement activities: This is to assess the resources

required to carry out the assignment. In line with the purpose
of pre-engagement, as stated by the regularity audit guidelines
prepared with the assistance of AFROSAI-E, this may not
yet be relevant in Nigeria now due to lack of political will
of the government and the operational guidelines in place.
For instance, the Auditor-General’s budget is always the
least. As a result of paucity of funds, resources are not made
available to the audit staff even when audit is to be done
outside the station. All audit staff are compelled inevitably
to rely on the auditee for all logistics. This is a challenge to
the code of ethics of the profession. In addition to the code
of ethics, there is the requirement that engagement letter
must be signed before the commencement of the audit. In
practice, this is not done in the Public Sector in the country.
c. Strategic planning: The purpose of strategic planning is
to gain an adequate understanding of the auditee and its
operations. The auditor at this stage identifies and evaluates
risks on a financial statement level and develops an overall
audit strategy. The auditor formulates overall direction and
decides on timing and scope in the overall audit plan in line
with the applicable standards.
d. Detailed planning and fieldwork: Detailed planning involves
obtaining the following documents for the commencement
of the field work:
i. the law that established the agency;
ii. components of the financial statements;
iii. schedules of the notes to the financial statements;
and
iv. identification and assess risk to the components of
the financial statements.
e. Audit Summary: The purpose of audit summary is to
accumulate and evaluate audit findings based on the
materiality of the findings, and conclude on compliance with
the code of ethics by the audit team. At this stage, the auditor
must:
i. Draw conclusions based on the overall audit

programme of work.
ii. Summarise unresolved audit findings.
iii. Evaluate unresolved audit findings based on
materiality.
f. Concluding and Reporting: The purpose of audit report is
to express an opinion on audited financial statement. At this
stage, the auditor is expected to evaluate the audit findings
based on materiality, stating whether the financial statements,
in all material respects, fairly present results of operations of
the audited entity in accordance with prescribed accounting
practice and relevant legislation.
36.15.2 Three Components of a Good Audit

i. Observations
ii. Effect of the observation or risk associated with the
observations
iii. Recommendations of what are to be done to remedy
the observations
36.16 Financial Statement Audit

Financial Statement Audit focuses on determining whether an
entity’s financial information is presented in accordance with the
applicable financial reporting and regulatory framework. It is to
ensure that the accounts presented have been so prepared as to
represent a true and fair view of the state of affairs of the institutions
in respect of the period under review, with due consideration given
to generally accepted accounting principles, applicable laws and
regulations.
Note that for a comprehensive audit of any financial statements,
compliance or regularity audit must be involved. Each transaction
on the financial statement must comply with the extant regulations
and rules guiding the industry of the agency.
36.16.1 Overview of Financial Statement Audit Process

The financial audit manual prepared by the Office of the Auditor-
General for the Federation, with the support of AFROSAI-E, is to
be used by all English-speaking Supreme Audit Institutions (SAI)
in Africa in the audit of government financial statements, both at
the federal and state levels. The following steps or processes are
recommended for auditors:
a. Pre-requisites: Under the pre-requisites for the auditing of
the financial statements, the annual overall audit plan is very
germane and the financial reporting framework must be
ascertained. How the communication of the intent to carry
out the audit of the agency should have been identified and
the various documents required for the effective audit of the
agency must be listed.
b. Pre-engagement activities: This is the assessment of the
technical capacity of staff required for the audit of the
agency intended to visit. In addition, the budgeted time for
the audit will not be left out. However, the issue of gaining
a common understanding and expectation through issuing
an engagement letter is still something that will take some
years before it will be implemented. This is due to the lack
of political will and the inadequate budgetary provision for
the Office of the Auditor-General to carry out the audit of
the agencies. Since there is no sanction for not presenting
audited financial statements, none of the agencies will be
ready to sign any engagement letter. The issue of the agency
budgeting time for the audit may not work because the
auditor is at the mercy of the auditee. Until it is convenient
for them, the auditor may not be invited to commence the
audit. This position is reinforced by the fact that there are no
sanctions for not presenting audited account.
c. Understanding the business: Understanding the environment
of the auditee is very important. Reading the audit file of the
agency will reveal some important information concerning
the operation of the agency from where the audit programme
can be prepared.
d. Materiality: After the audit file has been read and the value
of the items/known, the overall and performance materiality
level will then be set.
e. Risk assessment and response: It is important to assess the
risk associated with the observations made in the previous
audited financial statements and the response made by the
agency. If the response made will reduce the effect of the
risk, it should be noted for confirmation in the current audit
exercise that is about to commence. However, in case the
response will not reduce the risk, effort should be made to
highlight it in the audit report with special emphasis.
f. Performing the audit and evaluating evidence: This aspect
is where the auditor carries out the audit based on the audit
programme which he is expected to follow. Although the
audit programme is flexible and can be changed, the rate of
variance of the programme from the actual should always be
minimal. The working papers containing the evidence need
to be evaluated to enhance the audit report to be submitted.
g. Audit reporting: It should be noted that audit report consists
of the report on the financial statement and management
letter where detailed observations on the financial statement
will be stated.
36.16.2 Conflicts between Regularity and Efficiency Audits

Regularity audit is the traditional function of Public Sector Audit,
which is more on compliance with the rules and regulation. It is a
vital component of financial management in government, which is
geared towards the principle of accountability. It is concerned neither
with the efficiency nor the economy of administrative action. It has
no interest in improvement, simplification, rationalisation or reform.
Rather, it is solely responsible for enforcing the rules or bringing
to light infringements of them. As observed by E. L. Normanton
in The Accountability and Audit of Government, the most wasteful,
extravagant, foolish and ill-planned activities are frequently
“regular in a technical sense”. Also, the most urgent or economical
action may not often be taken in a given situation because it is not in

conformity with laid down procedure and therefore not technically
“regular”.
Therefore, if regularity has such a negative outlook, does it serve
any useful purpose whatsoever and should it not be abandoned
altogether? The answer is no, because the budgeting control enforced
by government audit remains a very important constitutional
device, without which control of the purse by the legislature would
be meaningless and financial discipline within the executive itself
would also be compromised.
In fact, it will never be possible to entirely abandon the regularity
audit because it serves as a major constitutional guarantee essential
for a healthy relationship between the administrative and the political
powers. Therefore, there is an obvious need to strike a balance
between the rigidities of regularity and the essential of efficiency. In
other words, regularity has to be modified and not abandoned.
36.17 Revenue Audit

The audit procedure for revenue in any agency must start from the
budget approved for the agency, though, it is very unfortunate that
revenue budget targets were not set for most of the agencies by
the budget office. This has made the preparation of the financial
statement difficult as nil figures are often indicated for revenue
budgeted columns. This, notwithstanding, revenue audit must still
be carried out to ensure that all revenues collected are paid into the
government coffer. In line with the new reform, the two techniques
will be explained in case an auditor finds himself in any situation,
he/she will not be found wanting.
36.17.1 Revenue Audit under Cash Basis

i. Conduct a cash survey of the revenue collector.
ii. Obtain and ascertain all receipts issued to the revenue
collector after the last audit through the Receipt Book Issue
Note (RBIN).
iii. Post all the triplicate receipts into the revenue cash book
maintained by the revenue collector.
iv. Cast the cash book to ensure that no mistake has been made.
v. Verify that total collection with the treasury receipt book 6
is pasted on the cash book for evidence of payment to the
main cashier.
vi. Examine the teller and confirm at the CPO revenue claimed
not to have been issued with TR 6 by the CPO (Central Pay
Office).
vii. Evaluate the system of internal control for the handling of
the revenue.
viii. For tenement rate, obtain copies of the latest assessment
note and list of outstanding from the previous years.
ix. Ensure that:
• the classification of revenue is in accordance with
the year’s estimates;
• receipts are issued for all money(s) collected and
such receipts must bear the stamp of the office of
issue;
• double-sided carbon is used in connection with the
writing of receipts;
• all entries in the cash book should include the dates
and numbers of all receipts;
• revenue collectors should submit their revenue cash
books and receipt books for examination to the main
cashier;
• the revenue collector does not make payment out of
revenue collected by him;
• the account officer prepares regular returns of
revenue arrears; and
• that where paper money is received by post, entry
of such is made in a paper money register under the
supervision of the officer in charge of opening in-
coming mails in the ministry and that the register
together with the remittance is subsequently passed
to the cashier who will issue the receipts or licenses
in respect of the amount and bring them to accounts

in his cash book.

36.17.2 Revenue Audit under TSA/E-Collection
For proper understanding of revenue audit under TSA/E-collection,
please read chapter ten (Collection of Government Revenue and
Control Mechanism).
(i) Under the e-collection, especially accrual basis of accounting,
each MDA is allocated a TSA sub-account in the name of the
agency. Revenues can be categorised because of their very
nature. For instance,
• Sales of materials/goods: If all stock are sold and
paid for, the transactions are a very simple one. This
may not be so, because some client may collect
goods and pay later. This will bring in receivable,
which is very important.
• Registrations/renewer: Under this economic revenue
code, when a client registers, his name will be
recorded in the register of clients. The registration is
for a year and therefore, he is expected to renew the
licence or whatever it is. List or schedule of the clients
is very important and each client is expected to have
a ledger with folio number to trace the individual
client. For easy identification, the use of alphabetical
order is recommended.
(ii) E-collections scheme is a comprehensive electronic

solution for the remittance, management and reporting
of all federal government receipts (revenues, donations,
transfers, refunds, grants, fees, taxes, duties and tariffs
into the TSA and sub-accounts maintained and operated at
the CBN. It automates the collection of revenue, receipts
and other moneys payable to Ministries, Departments and
Agencies (MDAs) as well as other parastatals directly into
the TSA or designated TSA sub-accounts using the CBN
payment gateway. The CBN payment gateway presently is

REMITA.
To effect payment, the revenue payer needs to obtain a unique

transaction reference (i.e., Remita Retrieval Reference-RRR) after
keying in the revenue/service type before going to the bank. The
bank teller only needs to enter the RRR on the CBN payment
gateway to retrieve the payment details and complete the payment.
Note: Remita Retrieval Reference (RRR) is a unique code that is

generated by the CBN payment gateway platform to a payer after
capturing details of their intended transactions online at www.
remita.net.
Documents Required
a. Waybill or SRV to determine all the goods supplied during
the year under review
b. Opening stock should not be left out
c. Bank receipt file
d. Receipt booklet
e. Cash book
f. Policy file in respect of the licence printing or received
from HQ
g. Bank statement
h. Bank reconciliation statement
i. Register of clients/List of clients
j. Schedule of receivable from good/supplies
k. Schedules of receivables from un-renewed licences
l. Price list of the goods
m. Price list of the licenses
n. Security book register (This is the register where all
receipts printed or received are recorded serially and the
RBIN must be made available to ensure that the number of
receipts printed were received)
o. Job order file/ledger
36.17.3 Audit Procedure

a. Examine the security book register to ensure that the
receipts produced are from the agency.
b. Post all bank receipts/revenues receipt to the cash book.
c. Cast the cash book and compare it with the bank statement
balance.
d. Note that it cannot be equal because there are other
payments made directly to the bank for which receipt
might have not be been brought.
e. Note the economic code (Chart of Account) of each
revenue that were paid into the account.
f. Analysis of the revenue should be made according to the
sources of revenue to identify revenues from each sources.
g. Those revenues from sale of goods should be compared
with the stock to determine if all goods sold had been
paid for; if not, a schedule of receivables from goods sold
should be compiled and compared it with the schedule of
receivable produced.
h. Those revenues from service rendered will be compared
with job order issued to ensure all have been paid; if not,
a schedule of receivables from service rendered should be
compared to the one provided.
i. Those revenue from licenses will be compared with the
register of clients, the analysis made will be posted to
the ledger to determine those who have not renewed the
licence and for the receivable schedule.
j. Read the policy file on printing of receipt to know the
source of the revenue receipt and the number of receipt
printed or received.
k. Job order files need to be studied to know the type of job
given and the costing mechanism.
l. Examining the bank reconciliation statement.
36.17.4 Expected Report from the Revenue Audit

a. Total revenue collected during the period under review
according to each sources.
b. Schedules of receivables from all sources; goods sold,

services rendered and licences.
c. Comment on missing receipt, if any.
d. Amount of income received which receipts have not been
issued. This is from the bank reconciliation statement.
36.18 Expenditure Audit

a. Obtain approved estimates for various head and sub-head.
b. Obtain a copy of the financial warrant/AIE issued to the
ministry/department.
c. Post the warrant to the vote book to ensure that there is
authority for the entries made.
d. Ascertain who is authorised to control and spend the votes.
e. Ensure that all vouchers are posted into the vote book,
including the liabilities.
f. Ensure that correct adjustments are made in the balance
available column when the actual cost is greater or less
than the liability figure.
g. Ensure that the payment vouchers are correctly classified
to the approved estimate.
h. Ensure that the computations have been verified and are
arithmetically correct.
i. Ensure that all necessary attachment e.g., LPO, Job Order,
Contract Agreement are attached to the vouchers.
j. Conduct physical inspection of items purchased or projects
for which the payment is meant to ascertain proper
utilisation of government’s fund.
k. In case of contract, check contract agreement with the
minutes of the Tender Board members.
l. Monitor the interim payments to ensure that they are in
accordance with the contract agreement.
m. Examine the completion certificates to ensure that payment
is made on the certificates given.
n. Ensure that the retention fee is retained.
o. Obtain the Bill of Quantities to ascertain the work done.
36.19 Audit of Personnel Salaries and Wages

The following procedures are for the audit of salaries and wages
record based on manual payment. The manual principle needs to
be applied in the audit of electronic payment because this basic
principle must be applied in the new electronic payment. Ensure that
all important items are present in the programme for the electronic
payment procedures.
a. Obtain comprehensive staff list of nominal roll at the
beginning of the year and update the record regularity.
b. Obtain the group register.
c. Obtain the PE card of each officer, which must agree with
the personal emolument form, filled and signed by the
Head of Department at the beginning of the year.
d. Check the Personnel Emolument card with the salary
voucher for names, grade, steps and amount to ensure that
the correct rate was applied.
e. Check the nominal roll with PE card. Note omission and
addition of staff.
f. Verify the existence of the operation of internal check by
ensuring that appropriate officers duly sign the certificate
on the summary voucher.
g. Ensure that on-payment vouchers are raised for all
deductions and correctly classified.
h. Verify the agreement of PE card with the group register.
i. Check that the total number of employees on payrolls
agree with the total number of employees as per live PE
cards.
j. Ensure that summary voucher is entered into the vote book
which should be signed by the officer controlling vote.
k. Ensure that the transfers from payroll to summary vouchers
are correct.
l. Check the arithmetical calculations on the payroll and
summary voucher for their accuracy.
m. Ensure that unclaimed salaries are correctly paid back to
treasury.
n. Check the variation control sheet to ensure that all

variations are accounted for.
36.20 Bank Reconciliation Audit

The auditor must take the following steps during the verification of
bank reconciliation statement:
a. Obtain the most recent bank reconciliation statement
prepared by the organisation.
b. Call for the bank statement and certified bank balance as at
end of the month.
c. Post all entries in the credit side of the cash book to the
debit column of the bank statement in detail.
d. Similarly, post all entries in the credit side of the cash book
to the debit column of the bank statement in detail.
e. Scrutinise the cash book and bank statement to observe
some unticked entries both in the cash book and bank
statement. These unticked entries represent transactions
for which two-way entries have not been made.
f. Among the areas requiring special audit attention are:
(i) debit in the bank statement not reciprocated in the
cash book; instance of stolen and forged cheques/
mandates;
(ii) receipts in cash book not yet reflected in the bank
book: Cases of receipt entries of cash book through
the fraudulent stamping of bank tellers;
(iii) Unpresented cheque/mandate: Usually the Bank
Reconciliation Statement will furnish the list of
such cheques. The audit officer is required to trace
each cheque number to its entry in the cash book,
thus ascertaining its source or month of issue and
confirming the authenticity of its inclusion in the
reconciliation statement. Also, all stale cheques
should be recommended for re-entry into revenue.
g. Prepare a report reflecting all observations made during
the above exercise.
36.21 Payment Vouchers Audit

The following steps should be taken to audit payment vouchers:
a. ensure that the payment voucher is correctly classified
according to the approved estimate/chart of account;
b. examine the documentation to determine whether the
purpose of disbursement is authorised and agrees with
original reasons;
c. ensure that the proper persons sign voucher and certificate;
d. ensure that the computations have been verified and are
arithmetically correct;
e. ensure that all necessary attachment e.g. LPO, Job Order,
Contract Agreement are attached to the voucher;
f. conduct physical inspection of items purchased or projects
for which the payment is meant to ascertain proper
utilisation of government’s fund;
g. ensure that the person named (payee) in the voucher is the
one entitled to receive payment as stated;
h. ensure that the payment voucher bears the “Voucher
Certificate” with the signatures or initials of the officers
who participated in putting up the voucher;
i. ensure that payment voucher, for an advance, has been
noted on the PE cards of the officer and the certificate on
the top-left hand corner on TF 1 is completed to that effect;
and
j. ensure that advance is recorded in the Advance Register
Ledger.
36.22 Audit of Security Documents

The audit of security book register should be undertaken as follows:
a. Check if order for new supplies of cheques or printing
receipts are authorised by the designated senior officer in
the finance department.
b. Ensure that all deliveries of new supplies are recorded in

the Cheque Stock Register or Security Book Register.
c. Check that all issues from stock are recorded in the Security
Book Register and signed by authorised recipient.
d. Request to see all cancelled cheque for audit inspection.
e. Check the entries in the Stock Book with the Receipt Book
Issues Notes (RBIN).
f. Ensure that all books held and the one in use are kept in a
safe under lock and key.
g. The audit officer appends his signature on the stock
register.
h. Ensure that there is a prior written approval/consent of the
Accountant-General of the Federation for the transfer of
receipt books between two sub-accounting officers.
36.23 Imprest Audit

The audit of imprest account should take the steps mentioned below.
However, we are not unaware of the way imprest is being used now.
Whatever way it is being used, is not backed by extant regulation.
a. Obtain the particulars of the imprest warrant.
b. Get to the imprest holder and carry out the cash survey and
request him or her to open the safe/cash tank and bring out
all money inside the safe.
c. Ensure that the imprest cash book is posted up to date.
d. Ascertain the value of reimbursement vouchers that are
pending at the C.P.O. or pay office.
e. Check the payment and receipt documents against imprest
cash book for correct and accurate posting since the last
audit inspection.
f. Verify the amount of imprest by addition of the cash
produced, unreimbursed vouchers and the sub-receipt at
hand.
g. Examine the sub-receipt TF10 to ascertain what the

expenditure is all about.
h. Obtain bank certificate and examine the bank reconciliation
statement.
i. Ensure that all standing imprests are retired at the end of
the financial year.
Please note that imprest is the amount set aside for
disbursement when voucher cannot be immediately
raised.
36.24 Contract Audit

The audit of a contract account should be undertaken as follows:
a. check contract agreement with the minutes of the Tenders
Board members;
b. open the contract registers and updates it for control
purpose;
c. monitor interim payments, ensure that they are in
accordance with the contract agreement;
d. examine the completion certificate to ensure that payment
is made on the certificate given;
e. conduct physical inspection of work done to ensure
compliance with terms of contract and completion of work
certificate given;
f. ensure that the correct retention fee is retained and on the
payment date;
g. ensure that necessary deductions are made before
payments; and
h. check the cheque drawn with the voucher.
36.25 Verification of Assets

The audit procedure for the verification of government assets are as
follows:
a. Ensure creation of an asset register or master inventories.
b. Hanging of inventory board in each office and government

quarters.
c. Ensure that all assets have departmental numbers to be
controlled by the master inventory or assets register.
d. Inspect all assets against balance shown in the inventory
board hung in each offices and quarters.
e. Any missing item should be reported upon.
f. Check the movements register of all assets which should
be updated in the register/inventory board regularly.
36.26 Cash Book Audit

When examining the cash book of the pay office, central pay office or
cashier in the treasury of local government, the following procedure
shall apply:
i. Trace the receipt vouchers (TR Book 6) to the cash
book. (Note that TRB 6 is issued to revenue collector for
evidence of accountability). Revenue collected paid to
bank are verified by reference to the bank teller.
ii. Ensure that the cash book contain individual treasury
receipt.
iii. Ensure that voucher and payment voucher to the cash book
serially and posting are accurate and correct.
iv. Cast the cash book after ensuring that the receipt and
payment voucher have been properly posted and verified,
every carry-forward from one cash book folio to the next,
until casting the whole cash book covering the period
under audit is completed.
v. Ensure that the cheque numbers are indicated on the cash
book.
vi. Ensure that the amount on the cheque is equal to the
vouchers stated and that the cheque number is written on
the voucher concerned.
vii. Cash survey must have been conducted before all the
above and the cash book (cash column) should agree with
the physical cash produced for survey.
Note: The current cash book does not include cash column
because there is no bases for cash transaction again in the
government with the cashless society.
36.27 Vote Book Audit

The following steps should be taken to audit the departmental vote
allocation books (vote books):
a. Obtain approved estimates for various head and sub-heads
(Chart of Account).
b. Obtain copy of the financial warrant/AIE issued to the
ministry/department.
c. Post the warrant to the vote book to ensure that there is
authority for the entries made.
d. Ascertain who is authorised to control and spend the votes.
e. Ensure that all vouchers are posted into the vote book,
including the liabilities.
f. Ensure that correct adjustments are made in the balance
available column when the actual cost is greater or less
than the liability figure.
g. Ensure that no unauthorised expenditure or liability is
incurred and that over-expenditure is avoided.
h. Ensure that the authorising officer initials each entry.
i. Check also all various instruments for virement.
j. Ensure that where there is a mistake, the entry is reversed
in red or black as applicable.
k. Ensure that all outstanding liabilities at the close of financial
year are cleared as indicated in Financial Regulation 422.
36.28 Store Audit

The following procedure should be taken for the audit of store:
a. Randomly conduct physical survey of some items in the
store (Note that the visits should be unscheduled).
b. Obtain all the LPOs and contract agreement on supplied
items.
c. Obtain all the store receipt vouchers indicating the LPO
numbers on the SRV.
d. Obtain the SRV file and requisition files.
e. Check ordering procedure either by LPO or transfer from
other stores.
f. Post all the SRV/LPO into the store ledger to ensure that
all goods purchased are accounted for.
g. Ensure and ascertain that issuance of items are authorised
by appropriate officers (SIV).
h. Trace the issues to ensure that it was not diverted to private
use.
i. Any surplus found in the store during the physical survey
should be taken on charge and any shortage should be
made good.
j. Examine the bin card to ensure that it agrees with the store
ledger.
k. Minimum and maximum levels should be observed.
l. Ensure that the store keeper signed the survey sheets
together with the audit officer.
m. Ensure that the arrangement of the store facilitates easy
check.
n. Security of the store should be noted.
36.29 Guidelines on Audit Queries and Sanctions

a. Irregularities resulting in losses to government due to either
fraudulent activities of the functionaries or due to their negligence or
incompetence.
Offences Time limit Sanctions

for reply to
query
1. Inflation of 5 days If committed by accounting officer, make

contracts reports to Mr. President. If any other commits
the offence, appropriate surcharge shall be
imposed and the officer removed from the
schedule.
2. Unauthorised 21 days If commited by the accounting officer, make

variation of contract report to Mr President. If any other officer
commits the offence, appropriate surcharge shall
be imposed and the officer removed from the
schedule.
3. Inflation of prices 30 days Impose appropriate surcharge. Refer case to

of procurements police for prosecution.
4. Payment for jobs 30 days Recovery from beneficiary and blacklisting of

not executed: the affected contractor.
a) mobilisation
fee; and
b) payment 21 days Refer case to police for prosecution
through false
certificate of
completion.
5. Poor quality work 42 days Blacklisting contractor; demote official who

(buildings, tarred certified the job.
roads, etc.)
6. Irregular or wrong 21 days Recovery of the amount involved and removal of

Payments the officer from the schedule.
7. Shortages or losses 14 days Surcharge the affected officer and transfer to

of stores by officer another schedule.
and storekeeper.
8. Shortages or losses Recovery of the amount involved and transfer of

of cash by cashier 7 days the amount and officer to another schedule.
9. Assets paid for but 21 days Recover the amount involved and blacklist the
not collected supplier and transfer of officer to another schedule
where collusion has been established.
10. Payments to ghost 7 days Interdict the officer(s) and report matter to police.
workers

11. Overpayment of 21 days Recovery of the amount involved and transfer of
salaries and the negligent officer.
allowances to staff
12. Failure to collect 21 days Surcharge the affected officer and transfer him to
government another schedule.
revenue
13. Failure to account 7 days Recover amount involved and report to police for
for government prosecution.
revenue
14. Non-payment for 30 days Recover the amount soonest.

use of government
property
15. Premature scrapping 30 days Demotion in rank of the affected officer.

of government fixed
assets and selling
name at ridiculously
low price.
16. Poor cash 30 days The affected officer shall be formally warned and/
management or surcharged.
(b) Irregularities and directly or immediately resulting in losses to the

government, but which infringe upon budgetary control and proper
financial management.
1. Splitting of 21 days Demotion in rank of the officer and

contracts to transfer to another schedule of work.
side-tract
tender
2. Irregular award 21 days Demotion in rank of the officer, and

of contracts, i.e., transfer to another schedule.
contract awards
not in compliance
with the normal
tenders procedure
(c) Irregularities arising through poor or inefficient management of accounts

which may result in losses.
1. Non-recovery of 21 days All losses should be recovered from or

advances surcharged against the defaulting officer
if he is a civil servant. Where no losses
are involved, the defaulting civil servant
would be warned.
2. Non-posting of 21 days All losses should be recovered from or

ledger accounts surcharged against the defaulting officer
would be warned.
3.
Cash in transit (Over 3 All losses should be recovered from or
for too long months) surcharged against the defaulting officer
would be warned.
4. Failure to prepare 14 days All losses should be recovered from or

bank reconciliation surcharged against the defaulting officer if
statements. he is a civil servant. Where no losses are
involved, the defaulting civil servant
would be warned.
5. Non-rendering of 30 days All losses should be recovered from or sur-

statement in charged against the defaulting officer if he
support of A.I.E. is a civil servant. Where no losses are
granted involved, the defaulting civil servant
would be warned.
6. Non-retirement of 21 days All losses should be recovered from or

touring advances surcharged against the defaulting officer if
he is a civil servant. Where no losses are
involved, the defaulting civil servant
would be warned.
7. Non-rendering of 21 days All losses should be recovered from or

monthly or periodic surcharged against the defaulting officer, if
return apart from he is a civil servant. Where no losses are
annual accounts. involved, the defaulting civil servant
would be warned.
Chapter Thirty Seven
Internal Audit
Learning Outcomes
i. discuss the principal functions of internal auditors;
ii. discuss the roles of the internal audit unit of MDAs;
iii. explain the procedures for the preparation of internal audit
report;
iv. discuss the hindrance to internal audit efficiency;
v. discuss and explain the procedures for sustainability of the
effectiveness of internal audit and the way forward;
vi. discuss the status, organisation and legal backing of internal
audit; and
vii. discuss the role of internal auditors in combating fraud and
corruption.
37.0 Introduction
The internal audit, as a part of internal control measure and a
service to management, is a check to determine the accuracy and
validity of accounting records, which is done by an employee of an
organisation. According to the Institute of Internal Auditors, it is an
independent appraisal/activity within an organisation for the review
of accounting, financial and other operations as a basis for service to
management. It is managerial control which functions by measuring
and evaluating the effectiveness of other controls.
Internal audit provides a valuable service to management in the
effective discharge of their duties and is an important part of the
internal control in an organisation. The role of auditors both in Private
and Public Sector in combating corruption to enhance development
1245
in the economy cannot be over emphasised. Corruption is dishonesty

and illegal behaviour by people in positions of authority or power
and it is only an independent internal audit that can reduce the
malaise in the system. Internal audit’s pre-payment activities serve
as prevention. It is common knowledge that prevention is better
than cure.
In the opening chapter of the website of ICPC on the Internet, under
the heading “Forms of Corruption” it states that:
Corruption is deep seated and complex in Nigeria. It is so pervasive
that both the Private and Public Sectors are affected. Corruption
now permeates every aspect of Nigeria life, government business
at various levels. Corruption is a constant topic of conversation,
everybody talks about it, and everybody appears to be involved.
Yet nobody, up till recently, took any concrete and non-hypocritical

step to hip the malaise in the bud. A systematic approach has to
be used to eradicate this cankerworm from the society. The EFCC
and ICPC cannot do it alone. It requires a collective action so that
corruption does not destroy our society.
37.1 Principal Functions of Internal Auditors Are to:

(a) Provide assurance to management that:
(i) there is an adequate system of internal control which
is functioning properly;
(ii) the policies and procedures established by management
are being complied with; and
(iii) The accounting records form a reliable basis for the
production of the final account.
(b) Draw attention of management to:

(i) deficiencies in the organisation or system of control;
and
(ii) instances of duplicated functions and suggest remedy
where possible, and follow up to ensure that corrective
action is taken.
1247 Internal Audit
37.2 Roles of the Internal Audit Unit of MDAs

The internal audit unit of any ministry/department is responsible
for the audit of all financial transactions of the ministry/department
before payment is made. The head of internal audit is responsible
to the accounting officer. He is required to submit to his accounting
officer and the Auditor-General detailed audit programme and
thereafter he shall report monthly to the management as well as
the Auditor-General on the true progress of the audit. Half-yearly
report must always be prepared by the internal audit, which should
be forwarded to the Auditor-General and Accountant-General. He
is also responsible for raising the audit alarm when the need arises.
Therefore, the general responsibilities of the internal audit at all
levels of government as contained in the existing regulations are as
follows:
i. It carries out a continuous examination of all accounting books
and records maintained in the ministry/department and the
agency.
ii. It is to determine the adequacy of the system of internal control.
iii. It is to ensure that an adequate system of securities exists in the
establishment.
iv. It is to check all payment vouchers emanating from any section
of the ministry/department before payments are made.
v. It is to check the reliability of the accounting and reporting
systems.
vi. It is to carry out any special review or assignment, which may
be required by management.
vii. Cooperate with and assist the Auditor-General’s office/
External Auditor in making available necessary documents for
the final audit of the organisation.
37.3 Status and Organisation of Internal Audit

The internal Audit section should have independent status within
a department. This is to ensure that the internal audit operates
effectively.
a. The audit section should be a separate entity within a

department, quite independent of the accounts and policy
branches.
b. The head of internal audit should be a person of high standard,
properly trained and experienced.
c. The head of internal audit should be responsible to high level
management, normally the chief executive.
d. The audit section should have no executive or line management
responsibilities i.e. it should be completely independent of all
financial systems operating within the organisation.
e. The audit section should only be informed or consulted when
there is any proposal to change the existing management
system or the implementation.
37.4 Legal Backing of the Internal Auditors

Despite the existence of a law establishing the functions/office of
internal audit in agencies, internal auditors still face a lot of problems
in their various agencies. It is pertinent to remind all and sundry of
the existence of the Finance (Control and Management) Act CAP
144 Law of the Federation of Nigeria 1990, which stipulates that
internal control and other control measures, should be in place in the
Public Service. Any agency without internal audit, self-accounting
status will not be granted. It means where the internal audit is not
functioning as it should be, the self-accounting status of the agency
will be withdrawn.
37.5 The Role of Auditors in Combating Fraud and Corruption

a. The internal audit is to assure management that the internal
checks and the accounting system are effective in design and
in operation and to add some degree of validity and credibility
to the accounts, eliminating or reducing distortion of facts
caused by self-interest, carelessness and dishonesty.
b. It is to review, evaluate and report on the adequacy or
otherwise of the financial control framework existing in
the organisation and its efficiency in assuring the propriety,
1249 Internal Audit
security, completeness and accuracy of the organisation’s

activities and transactions.
c. It is to carry out a complete and continuous audit of the
accounts and records of revenue, expenditure, plants, stores
and other properties to evaluate whether actual performance is
within the established financial control framework.
d. It was noted and investigation equally revealed that some of
the internal auditors were not allowed to carry out post-audit
of the vouchers passed for payment and checking of the cash
book. It is recommended that a memo on this must be sent by
the Head of Internal Audit to intimate the Chief Executive.
e. In an environment where the salaries and wages were
computerised without the input of the internal auditor and
the internal auditors are not trained to get acquainted with the
system, such a lapse should be brought to the attention of the
Chief Executive, highlighting the implications of the action.
f. Effort should be made to carry out physical inspections of
all projects and report accordingly. On no occasion should
payment on project should be paid without inspection.
g. It should be noted that the main function of internal audit is the
pre-payment audit.
37.6 Internal Audit Report

a. The internal auditor needs considerable skill in marshalling
facts and expressing his conclusion in correct, current,
comprehensive, dignifying and persuasive language. A well-
planned, well-written, professional report is a permanent and
highly visible testimony to the auditor’s abilities. No auditor
should overlook the prestige this brings about.
b. The heading of the report should indicate the period covered
and in the body of the report each paragraph should be sub-
headed.
c. Each report shall be as concise as possible and at the same
time be clear and complete enough to be understood by the
users.
d. Present factual matters accurately, completely and fairly.

e. Present your observation, the effect of the observation and
give recommendation. That is, the three component of audit
report must be present.
f. Include only factual information, findings and conclusions that
are adequately supported by enough evidence in the auditor’s
working papers to demonstrate or prove when called upon,
the basis for the matter reported and their correctness and
reasonableness.
g. Should include recognition of note-worthy accomplishments,
particularly when management improvements in one programme
or activity may be applicable elsewhere.
h. It is important to highlight any payment made before audit and
explain the effect and recommend that such act be discontinued.
This is to exonerate the internal audit incase of any fraud occur
from payment made before auditing.
37.6.1 Audit Report Writing Rules

The following basic rules must be followed in audit report writing:
a. Be sure you are right.
b. Avoid words that have unpleasant connotations, such as
mistakes, fraud, wasted time, incompetence and laziness.
There are other words to give the same meaning.
c. Make the approach to the subject through the advantages that
will result from the change rather than dwelling on the evils of
present method. That is, stress the cure rather than the fault.
d. Do not try to be clever or superior.
e. Imagine yourself in the place of the person being criticised,
and think of how you would feel if someone used those words
about you.
37.6.2 Some of the Personal Deficiencies of the Internal Auditor

and System Failures that Reflect in the Reporting are:
a. lack of integrity;
b. lack of confidence;
1251 Internal Audit
c. lack of dedication;
d. lack of courage;
e. connivance and collusion;
f. collaboration and compromise;
g. direct involvement in fraud;
h. incompetence and ignorance;
i. professional decadence;
j. divided interest and fear of maltreatment;
k. marginalisation and persecution;
l. reliance on old audit programmes and archaic reporting
model;
m. inability to appraise the internal control weakness;
n. failure of chief executive to address recommendations;
o. encroachment on function by others; and
p. lack of adequate funding and lack of total independent.
37.7 Hindrance to Internal Audit Efficiency

There are some hindrances to the efficiency of the internal audit.
These are caused by:
a. the management;
b. the employees; and
c. the internal auditors themselves.
37.7.1 The Management

i. Although internal auditors are the eyes of the management,
research has revealed that 90% of the top management see
the internal auditors as obstacles to their unhealthy access
and use of public funds. The management sometimes over-
rides set controls ignorantly or on purpose. This affects the
effective performance of the duties of the internal audit.
ii. Another way by which management hinders the work of the
internal audit is the non-recognition of the internal audit.
One way to frustrate a unit is to give little or no recognition
to its importance. This will definitely lead to poor funding
and staffing of that unit. This has been the case for many
internal audit departments in most of the organisations. If

the top management fails to apply rules universally, it will
destroy the effectiveness of the control in existence.
37.7.2 The Employees

i. The employees can hinder the work of the internal auditor
especially the Finance & Account/ Bursary Department by
not making available the accounting records as well as the
inadequacy of the accounting system. They are aware that
the easiest way to hinder the work of an auditor is not to
make available the necessary documents and by operating
an inadequate accounting system.
ii. Lack of appropriate sensitisation. Other employees usually
see the internal auditor as a threat to their existence. This
thinking on the part of other employees usually affect the
internal auditor’s duties and by extension the effectiveness
of the internal control.
37.7.3 The Internal Auditor

It is also observed that often-times the internal auditors hinder the
efficiency of the internal audit department if:
i. they are not competent;
ii. they are not current on issues ( e.g. where they are operating
on the provisions in an old circular or already amended
rules) no recognition will be given to the department; and
iii. if they are not tactful in dealing with other members of
staff.
37.8. Sustaining the Effectiveness of Internal Audit and the Way

Forward
37.8.1 The Management
a. The management should avoid over-riding the control in
the organisation. It must also ensure that bad precedents
through exceptions are not created. Procedures and policies
1253 Internal Audit
must be followed at all times. Failure to follow laid down

policies may be exploited by employees to perpetrate
fraudulent acts.
b. Management should constantly review the internal control
system to ensure that it is capable of meeting the current
needs of the operation.
c. The management should sensitise other members of staff on
the importance of the Internal Audit Department. Sensible
observations made and useful recommendations proffered
by the audit department should always be implemented.
d. Concentration of duties in the hands of a few people
because they are “trustworthy” may give room for collusion
and may hamper the smooth operations of internal control
which invariably may affect the efficiency of the internal
audit.
e. Policy statements and changes in procedures should be
communicated to the internal auditors to enable them
enforce adherence.
f. Management should not give the internal auditor an
assignment that has a concluded and known result. It should
not make the internal auditor appear as the organisation’s
policemen, he is not and should not be made one.
g. The internal auditor should be made to have a sense of
belonging. He needs management support and constant
assurance to enable him cope with any social rejection
that may accompany his work through the activities of
uninformed persons and employees.
37.8.2 The Other Employees

a. The Finance and Accounts Department should endeavor
to co-operate with the Internal Audit Department by
providing all documents required for the audit exercise.
The finance department should know that it is still the duty
of the internal audit to carry out post-audit of the cash book
and payment vouchers. The employees should be made to
understand that there is no need to hate the internal auditor.
b. The internal auditor does not take pride in faulting people’s

work and he is not a bloodhound either. They must all
recognise that all he does is to ensure compliance with the
rules and regulations.
37.8.3 The Internal Auditor

For the audit to be effective in any organisation and overcome
personal deficiencies, the following should be borne in mind by the
internal auditors:
a. They should be current in any issue being reviewed and
ensure that all the latest circulars are in their possession.
b. They should ensure that they read current audit reports
issued by other professional colleagues and attend important
training programmes;
c. They should not be overzealous. Those with open mind and
large heart should carry out internal auditing.
d. They should never resort to victimisation but spread the
gospel of comradeship. Do not victimise or pursue anybody
with your position and authority.
e. They must remain objective and maintain balance in the
report. They should also not concentrate on problems only
but give commendation where it is deserved.
37.9 Scope of Internal Audit and Statutory Audit in Government

Parastatals
The internal auditor, being an employee of the organisation, may not
feel free enough to write on certain issues and even when he writes,
the management may not implement the suggestions. The internal
auditor should therefore make available to the statutory Auditor
all the observations and recommendations made which were not
implemented by management. The statutory auditor recognised by
the National Assembly is the Auditor-General for the Federation for
all federal government parastatals. Although section 85(2) of the
1999 constitution empowers parastatals to appoint their own external
auditors from the list provided by the Auditor-General for the
1255 Internal Audit
Federation, the provision does not imply the removal of the powers
of the Auditor-General as the statutory auditor of the parastatals. It
is therefore very disturbing to find some internal auditors who do
not know the Auditor-General’s functions as regards the control of
public funds in government parastatals.
Section 9(2) (b) of the Audit Act of 1958 (Cap17 Laws of the
Federation of Nigeria) empowered the Auditor-General to employ
firms of professional accountants to carry out the audit on his
behalf. But in 1985, the Constitution (Suspension and modification)
Amendment Decree (1985 No 17) removed the power of appointing
the practicing accountants to audit government parastatals from
the Auditor-General and placed it on the board of the corporation.
This provision was retained in the 1999 Constitution as section
85 (3) which reads as follows: “Nothing in sub section (2) of this
section shall be construed as authorizing the Auditor-General to
audit the accounts of or appoint auditors for government statutory
corporations, commissions, authorities, agencies, including all
persons and bodies established by an Act of the National Assembly,
but the Auditor-General shall;
i. Provide such bodies with
a. a list of auditors qualified to be appointed by them
as external auditors and from which the bodies shall
appoint their external auditors and
b. guidelines on the level of fees to be paid to external
auditors; and
ii. Comment on their accounts and auditors reports thereon.”
In order to check the external auditor or confirm the observations

raised by them, section 85 (4) empowers the Auditor-General to
conduct periodic checks of all government statutory corporations,
commissions, authorities, agencies, including all persons and bodies
established by an Act of the National Assembly.
37.10 Submission of Report to Auditor-General

All government parastatals are expected to submit 6 copies each of
the auditor’s report and management letter to the Auditor-General
for the Federation in compliance with Section 83(5)(b) of the 1999
Constitution. All the copies must be signed and photocopies are not
acceptable. It is the responsibility of the Auditor-General to vet the
audited accounts and management letter submitted and comment on
them. The Auditor-General’s certificate and his comments will be
forwarded to the National Assembly. To distinguish the certificate
and report issued by the Auditor-General on the account from those
issued by examining external auditors, they are designated as the
AUDITOR-GENERAL’S CERTIFICATE and the AUDITOR-
GENERAL’S COMMENTS.
From the foregoing, it is very clear that the Auditor-General is the
statutory auditor of the federal government.
37.11 Failure of Financial Accountability in Nigeria System

Despite all laws and regulations put in place, the Office of the
Auditor-General of the Federation and the Internal Audit in various
Ministries and Departments have not been able to absolutely avert or
promptly detect the various sharp practices occurring in the public
sector for the following reasons:
(a) Management fraud: It is very difficult for the office of
the Auditor-General and the internal audit to detect such
frauds because the most senior management staff of the
organisation perpetrates them. Persons in position of
authority abuse their privileged positions by embezzling
public funds.
(b) Internal audit position: The position of the internal audit
will not permit him to detect such fraud as he is under the
accounting officer. Espirit de corp is often at play while
some are wary of job insecurity. The independence of the
internal auditor is doubtful in all government agencies.
Until recently, the rank of the head of internal audit was
1257 Internal Audit
always below that of Director of Finance & Accounts

and from the same Accountant-General’s Office. It will
therefore be difficult for the internal auditor to have the
courage to write any adverse report. With the upgrading of
internal audit to director’s cadre, it is strongly believed that
there will be an improvement.
(c) Lack of training: Most of the auditors were not properly
trained, as such they could not detect such fraud due to the
sophisticated ways used in perpetrating the fraud. Now that
more chartered accountants are taking up employment in
the Public Service, the standards of performance of internal
auditors will rise.
(d) Non-production of Public Account Committee’s report:
There has not been committee report concerning those
that have been found guilty for punishment or act on audit
queries as the PAC has not submitted report to the executive
for implementation.
(e) Lack of resources to work with: This is the most important
cause of why auditors could not detect most of the frauds
and misappropriations perpetrated by the public officers.
37.12 A Hypothetical Case Study

This is a case study to explain the situation. In the Lagos headquarters
of a ministry, there was a voucher of N2.5M for the construction of
six (6) bedrooms flat in Sokoto. It is the duty of the internal auditor
to verify all claims before payments are effected. Therefore a Duty
Tour Allowance is required to enable him travel down to Sokoto to
carry out the verification before passing the voucher for payment.
The Duty Tour Allowance is to be approved by the Chief Executive
who awarded the fake contract. The Duty Tour Application was
in the Chief Executive’s Office for two weeks without approval.
On the third week, the Chief Executive phoned the accountant to
enquire from him the progress of the voucher and the accountant
told him that the voucher was still with the internal auditor. He then
phoned the internal auditor directing him to pass the voucher as the
contractor was waiting in his office to collect the cheque. As the
boss, who determines his transfer and promotion, he had no choice

than to pass it for payment.

Solution
Although the federal auditors are not under the Chief Executive
of the Ministry, the amount approved under the Travelling and
Transport is so small that it will make it impossible for any of them
to embark on a journey to Sokoto for the verification. In the light
of the above, it will be very difficult for the auditor to express any
opinion on the contract sum of N2.5M as he was not at the site.
Whereas, if an enquiry is set up to probe the activities of the Chief
Executive of the organisation and report to the government, special
advance would be provided with vehicles to enable them carry out
the assignment. In most cases, the amount always provided is about
40% of the total amount approved under Transport and Travelling
for the office of the Auditor-General for the Federation. Once the
report is submitted, it is the general belief that both the Internal
auditor and federal auditor have been bribed, that was why it was
not reflected in the various reports of both internal auditor and
federal auditor. Lack of funds has always hampered the efficient
functioning of the Auditor-General’s office. In view of this, effort
should be made by the Government to adequately fund the office of
the Auditor-General for the Federation.
Practice Questions
1. Discuss the principal functions of internal auditors.

2. Discuss the roles of the Internal Audit Unit of MDAs.
3. Explain the procedures for the preparation of internal audit
report.
4. Discuss the hindrance to internal audit efficiency.
5. Discuss the procedures for sustainability of the effectiveness
of internal audit and the way forward.
1259 Internal Audit
6. Discuss the status, organisation and legal backing of internal

audit.
7. Discuss the role of internal auditors in combating fraud and
corruption.

Chapter Thirty Eight
Pension and Gratuities in the Public Service
Learning Outcomes
i. discuss the provisions of Pension Reform Act 2004;
ii. discuss the objectives of Pension Reform Act 2014;
iii. enumerate the various ways retirement benefit under
Pension Reform Act 2014 can be obtained;
iv. state the conditions for pension and gratuity benefits;
v. enumerate the entitlement of officers that dies in the
course of his/her official duty;
vi. discuss gratuity and pension payable to the President, Vice
President, Governors, Deputy Governors and Judiciary
Officers;
vii. discuss the categories persons exempted from contributory
pension scheme; and
viii. explain the function of Pension, Transitional Arrangement
Directorate of Public Service of the Federation.
38.0 Introduction
The Pension Scheme is one of the most important welfare benefits
provided by government to its employees as it is in the western world.
Generally, pension is the totality of plans and legal procedures of
securing and setting aside of funds to meet the social and welfare
obligations of care, which the employers owe their employees on
retirement or in case of disability or death. The provisions of the
Pensions Act, No.102 of 1979 were applicable to the Federal, State
and Local Governments before the introduction of Contributory
Pension Schemes by the federal and some state governments in
2004.
1260
1261 Pension and gratuities in the Public Service
The new Pension Reform Act of 2004 was designed, amongst others,
to address the challenge of lack of funds needed by the government
to meet the financial obligations to pensioners, a situation that
was compounded by corruption and sharp practices in pension
administration.
The conditions of pensioners started to dent the image of government
and this led to the passing into law the Pension Reform Act, 2004.
As passed, there was a cut-off period in which those who had two
to three years to retire were allowed to continue with the non-
contributory pension scheme while others started the contributory
pension scheme.
The National Pension Commission was established to handle the
contributory scheme, which requires both the employee and employer
to contribute certain percentages of employee emoluments to a
dedicated account to be opened and operated solely by the employee.
The funds contributed will be managed outside the government
purse. The commission was required to provide guidelines to ensure
that retired officers live well after retirement.
One of the objectives of the Pension Reform Act 2004 was to abolish
the payment of pension by the government alone. In its place, the
employer and employee are required to contribute, on monthly
basis, the percentages specified by law and the total sum will be paid
into the employee’s Retirement Savings Accounts (RSA) managed
by a Pension Funds Administrator (PFA). Although the enactment
of the Act has brought relief to pensioners, operators of the scheme
are less than transparent in their dealings with contributors. For
instance, the exact initial percentage to be received by a retiree is
not clearly defined.
38.1 Thrust of the Pension Reform Act 2004

The Act:
i. ensures that every person who worked in either the Public
Service of the Federation, FCT, or Private Sector receives his
retirement benefits as and when due;
ii. assists improvident individuals by ensuring that they save in

order to cater for their livelihood during old age; and
iii. establishes a uniform set of rules, regulations and standards
for the administration and payments of retirement benefits for
the Public Service of the Federation, Federal Capital Territory
and the Private Sector.
38.2 Section 4 (1) - Retirement Benefit

A holder of a retirement savings account upon retirement or
attaining the age of 50 years, whichever is later, shall utilize the
balance standing to the credit of his Retirement Savings Account for
the following benefits:
a. programmed monthly or quarterly withdrawals calculated on
the basis of an expected life span;
b. annuity for life purchased from a life insurance company
licensed by the National Insurance Commission with monthly
or quarterly payments; and
c. a lump sum from the balance standing to the credit of his
Retirement Savings Account, provided that the amount left
after that lump sum withdrawal shall be sufficient to procure
an annuity or fund programmed withdrawals that will
produce an amount not less than 50 per cent of his annual
remuneration as at the date of his retirement.
Comment
From the perspective of practical applications, these provisions
are not measureable and imprecise. How do you determine
the expected life span of officers? The implication is that the
calculation of the benefit of the same officers on the same
salary will not be the same based on the clauses inserted in the
Act. Due to some lapses in the Pension Act 2004, the Pension
Reform Act, 2014 was enacted to make provision for the
uniform contributory pension scheme for both the Public and
Private Sectors in Nigeria. The new Act was not better.
38.2.1 Categories of Persons Exempted from the Contributory

Pension Scheme are:
a. the categories of persons mentioned in section 291 of the
Constitution of the Federal Republic of Nigeria, 1999 (as
amended) including members of the Armed Forces, the
intelligence and secret services of the Federation;
b. any employee who is entitled to retirement benefits under any
pension scheme existing before the 25th day of June 2004,
being the commencement of the Pension Reform Act, 2004,
but as at that date had 3 or less years to retire; and
c. any person who falls within the provisions of the above
provision shall continue to derive benefit under existing
pension scheme in accordance with the formula provided
for in the second schedule to this Act or under the second
schedule provisions of enabling laws.
38.3 The Objectives of Pension Reform Act 2014 are to:

i. establish a uniform set of rules, regulations and standards for
the administration and payments of retirement benefits for the
Public Service of the Federation, States, Local Governments
Councils and the Private Sector;
ii. make provision for the smooth operations of the Contributory
Pension Scheme;
iii. ensure that every person who worked in either the Public
Service of the Federation, States and Local Governments
or the Private Sector receives his retirement benefits as and
when due; and
iv. assist improvident individuals by ensuring that they save in
order to cater for their livelihood during old age.
38.4 Section 7(1) Retirement Benefit under Pension Reform

Act, 2014
A holder of a Retirement Savings Account shall upon retirement or
attaining the age of 50 years, whichever is later, utilise the amount
credited to his Retirement Savings Account for the following benefits:
a. withdrawal of a lump sum from the total amount credited to
his Retirement Savings Account provided that the amount
left after the lump sum withdrawal shall be sufficient to
procure a programmed fund withdrawals or annuity for life in
accordance with extant guidelines issued by the Commission,
from time to time;
b. programmed monthly or quarterly withdrawals calculated on
the basis of an expected life span;
c. annuity for life purchased from a life insurance company
licensed by the National Insurance Commission with monthly
or quarterly payments in line with guidelines jointly issued
by the commission and National Insurance Commission;
d. professors covered by the universities (miscellaneous
provision amendment) Act 2012 shall be according to the
University Act; and
e. other categories of employees entitled buy virtue of their
terms and conditions of employment to retire with full
retirement benefits shall still apply.
Comment
Incidentally, the compositions of the governing board of the
Commission and the membership of the Commission made
provisions for key officers of the Public Service that ought to
have raised the issues at the inauguration meeting. Even since
2014 there was no comment by them concerning the method of
payment of retirement benefits.
The key officers are:
i. Representative of Head of Civil Service of the Federation
ii. Representative of Federal Ministry of Finance
iii. Trade Union Congress of Nigeria
iv. Nigeria Union of Pensioners
v. Nigeria Employer Consultative Association
With the inclusion of public servants on the Board and

membership of the Commission, the interest of pensioners was
well protected. But the reality is different. Pensioners are yet to
enjoy their entitlement seamlessly. The Law has made provisions
to protect the retired officers by including those officers listed
above both at the Board and Membership of the Commission.
But how did this happen?
38.5 Historical Background of Non-Contributory Pension

Scheme
The non-contributory pension scheme was funded by government,
covered by the provisions of the Pensions Act, No.102 of 1979 and
was applicable to the Federal, States and Local Governments before
the introduction of Contributory Pension Schemes by the Pension
Reform Act 2004 and subsequently amended in 2014.
38.5.1 Beneficiaries/Eligibility
According to the repealed 1979 Act,
a. The provisions of this Act shall apply to an employment
in the Public Service in the Federal, States, and Local
Governments.
b. Only employees on pensionable appointment are covered
by the Scheme. However, transfer can follow mere
temporary contract or daily non-pensionable appointment
to pensionable appointment. Both services will be regarded
as continuous for pension’s purpose.
38.5.2 Minimum Entry Age into the Public Service

Minimum entry age into the Public Service is 18 years i.e. service
before the age of 18 years will not be counted. Maximum entry age
is 45 years. No employee over 45 years of age will be appointed
on pensionable terms as the officer will not have served for the
minimum qualifying period before retiring on statutory age limit.
38.5.3 Qualifying Pensionable Service

a. Only continuous and unbroken pensionable service
is normally taken into consideration in determining
pensionable service. All pensionable service stands
forfeited on resignation and shall not count subsequently, if
the officer returns again to the Public Service.
b. The only exceptions to this are where:
(i) the officer voluntarily resigned from pensionable
service to pursue a course of study and is subsequently
re-employed in the Public Service in a circumstance,
which makes the break in service condonable;
(ii) the officer was retired from the service on ground
of ill-health, abolition of office or re-organisation
in a Public Service agency and is subsequently re-
engaged in the Public Service on pensionable terms;
(iii) the appropriate government agency decides that the
break in service should be taken as leave of absence
on grounds of public policy. Examples are:
• Leave of absence granted public servants
wives of External Affairs Officers.
• Restoration of the period of the Nigerian
Civil War.
c. Any period of sick leave without hospitalisation in excess
of maximum aggregate period of 6 weeks in a year shall not
count as pensionable service in addition to not being salary
earning.
d. Once an officer retires from the service other than on grounds
of abolition of office or ill health, he is no longer eligible for
employment in the Public Service on pensionable terms.
38.5.4 Definition of Terms

The following were the applicable definition of terms:
a. Pension: It is the monetary reward offered monthly to
an officer who has served the government of the Federal
Republic of Nigeria for a certain period and retired until his

death.
b. Gratuity: It is the bulk sum of money payable to a retiring
public servant who has served for an approved length of
service.
c. Pensionable Emolument: This is the salary and allowances
attached to the last substantive rank held by the officer.
d. Withdrawal: It is disengagement from service after an
officer has served for a minimum of 5 years but below 10
years and qualifying the officer only for gratuity.
e. Retirement: Means cessation of service after an officer has
served for a period of not less than 10 years being period
qualifying the officer for a pension and gratuity.
f. Qualifying Service: Means service after an officer has served
for a period of not less than the minimum qualifying years,
which is 5 years for gratuity and 10 years for gratuity and
pension. Qualifying service determines the qualification or
otherwise of the person for pension and gratuity.
g. Next of Kin: Means those persons whose names were
furnished by the deceased officer on his record of service
kept in the Records Office of the Establishment or furnished
by him to the Ministry, in writing, at any time before his
death.
h. Public Service: Means any service or employment under
the Government of the Federal/State in a civil position,
recognised as such by the Establishment. It shall include
employment declared as approved service, by the Pension
Act (as updated).
38.5.5 Conditions for Pension and Gratuity Benefits

The conditions for granting retirement benefits may be listed as
follows:
1. On voluntary retirement after qualifying service of 10 years.
2. On compulsory retirement for the purpose of facilitating
improvement in the department.
3. On compulsory retirement for attaining the retiring age of

60 years or 35 years in service whichever is earlier
4. On health ground i.e. on the advice of properly constituted
Medical Board certifying that the officer is no longer
mentally or physically capable of carrying out the functions
of his office.
5. Public interest.
6. On abolition of his office under Section 7 of Pension Act
1979.
7. On total or permanent disablement while in the service.
38.5.6 Statutory Age of Service

a. All officers shall retire on reaching the age of 60 years or
after 35 years of service whichever is earlier.
b. Qualifying service for Pension/Gratuity
i. For gratuity only: the officer must serve for at least 5
years but below 10 years.
ii. For gratuity and pension: the officer must serve for
at least 10 years. Please note that pension is payable
when the retiring officer reaches the age of 45 years
with exception of the following:
• On compulsory retirement for the purpose of
facilitating improvement in the department
• On health ground
• Abolition of his office
• On public interest
Under these scenarios, he shall be entitled to pension immediately
on retirement, notwithstanding whether he has attained the age of
45 years or not.
38.5.7 War Service: Means any or all of the following:

a. Service in the Armed Forces after 27th May, 1967 and
ending immediately before 16th January. 1970.
b. Service in connection with internal security operations; that
is, all operations in aid of civil authority in the maintenance
of law and order.
c. Any other service as may be so declared from time to time
by the Head of the Federal Government.
i. For each completed year of war service, it is counted
as 2 years.
ii. Period of war service exceeding 4 months but below
6 months is counted as 6 months.
iii. Period of war service exceeding 6 months is counted
as one year.
d. A period of service (other than war service for over six
months) would be approximated to one year, provided the
officer has served the qualifying service in the first instance.
38.5.8 Contribution and Funding

The Public Service Pension Scheme was non-contributory before the
Pension Act 2004 was enacted. The pension cost of the employee
was fully borne by government, the employer. The scheme was not
funded, as is the practice in the Private Sector or statutory corporations.
Payment was based on the principle of current assessments (i.e.
pay-as-you-go) and it was chargeable to the Consolidated Revenue
Fund Account, which was disbursed by the Federal Ministry of
Establishments and Management Services.
38.5.9 Types of Benefits

The following benefits are accruable to employee under the non-
contributory pension, which is not available under the contributory
scheme:
(a) Withdrawal Gratuity: A short-term lump sum (gratuity)

benefit of terminal pensionable income for pensionable
service from 5 to under 10 years.
(b) Nominal Retirement Benefits:
[i] a lump sum benefit (gratuity) of 100% — 300% of
terminal pensionable annual income is payable for
pensionable service from 10—35 years.
[ii] annual pension is calculated at the rate of 2% of
terminal pensionable annual income for every year
of pensionable service.
Note: The minimum length of service required to secure a
right to pension is 10 years while the maximum is 35 years.
Minimum pension is 30% of terminal pensionable income
while maximum pension is 80% of that amount.
(c) Compulsory Retirement: An officer who is retired

compulsorily on the grounds of discipline or similar other
grounds before attaining the statutory retiring age of 60
years or completing 35 years service shall be entitled to
three months notice of retirement or in the alternative, three
months’ salary in lieu of that notice. Pension and gratuity shall
be based on length of service as at that date of compulsory
retirement. In any case of compulsory retirement, pension
shall mature immediately, notwithstanding that the officer
has not attained the age of 45 years as at the date of the
compulsory retirement.
Note: In normal retirement, gratuity is payable immediately
on withdrawal, but pension does not mature until the retired
officer has attained age of 45 years. However, where a
retired officer dies before attaining that age, the pension shall
become payable at once and shall be treated as pre-retirement
death benefit.
(d) Retirement on Ground of Abolition

(i) If an officer retired as a result of re-organisation
where it becomes necessary to abolish an office and
the incumbent cannot be transferred to another office,
the officer shall be entitled to three months’ salary in
lieu of notice.
(ii) In addition to his normal retirement benefits, he
shall be entitled to 10% of his gratuity and pension
for premature retirement, subject to his total reward
not exceeding 300% of his terminal pensionable
annual income as gratuity and 80% of that income as
pension.
(iii) Where the officer has not served enough time to
qualify for a gratuity or pension, he shall be paid a
gratuity equal to his one-year’s terminal pensionable
annual income.
(e) Incapacity Pension
(i) Where an officer in the course of his official duty is
incapacitated to the extent of entitlement to injury
pension, the injury pension shall be payable together
with his normal pension and gratuity, but the total
maximum pension shall not be higher than 80% of
terminal pensionable annual income.
The officer shall be granted incapacity pension at the following rates

with effect from the date of termination of his service.
Degree of Incapacity
Category Incapacitation Pension Payable

A Not less than 70% 30% of final pay at date of injury
B 50% to 69% 15% of final pay at date of injury
C 30% to 49% 10% of final pay at date of injury
(ii) Where the officer’s retirement is materially accelerated

by injury and the resultant incapacity is of the extent
that he has to leave the service, his benefits shall mature
immediately on retirement, notwithstanding that he has
not attained the age of 45 years.
(iii) Where the officer has not completed 10 years
qualifying service for the award of a pension on the
termination of his service as a result of incapacity,
he may be awarded, in lieu of gratuity, a pension
calculated at the rate of 2% of terminal pensionable
income for every absolute year of service as at the
date of the injury.
(iv) The provisions under this section shall not apply to
any officer who by reason of injury is entitled to an
award under the Weakness Compensation Act.
(f) Pre-Retirement Death Benefits

Where a pensionable officer dies in service, provided he has
completed the minimum period of qualifying service, there shall
be paid to his next-of-kin or designated survivor, or to his legal
personal representative, such gratuity or gratuity and pension which
would have been payable to him had he withdrawn or retired at the
date of his death.
However, where the officer dies before completing the minimum
qualifying period of 5 years, a death gratuity equal to his one year’s
terminal pensionable income shall be paid to his next-of-kin or
designated survivor or legal personal representative.
(g) Death in the Course of Duty

Where an officer dies in the course of his official duty and without
his own fault, there shall be paid to his next-of-kin or legal personal
representative a gratuity to which he would have been entitled at the
date of his death as in (f) above. In addition there shall be paid:
(i) a dependent pension to the officer’s spouse for life at

the rate not exceeding one third (1/3) of the deceased
officer’s accrued pension at death;
(ii) a dependent pension of one-ninth (1/9) of the
deceased officer’s accrued pension to each child
under the age of 18 years (and unmarried, if female)
subject to a maximum of six children;
(iii) if the deceased left a spouse to whom a pension is
granted as (i) above and only one child, the child
shall be entitled to a dependent pension of two-third
(2/3) of the deceased officer’s accrued pension, until
age 18 (provided that the child, if female, remains
unmarried till that age);
(iv) if the deceased officer leaves a child or children and a
widow to whom a pension is granted under paragraph
(i) of this sub-section and the widow subsequently
dies, a pension in respect of each child as from the
date of death of the widow until such child attains the
age of 18 years, one-sixth of the accrued pension of
the deceased officer, provided that:
a. No pension shall be payable under this sub-
section at any time in respect of more than six
children.
b. A pension granted to a female child under this
section shall cease upon the marriage of such
child under the age of 18 years.
c. Where a deceased officer leaves more than
one widow, they shall not receive in aggregate
more than would have been granted to a sole
widow.
(v) For the purpose of this section, the word “child”
includes:
(a) A posthumous child;
(b) A child born out of wedlock; and
(c) A step child or a child adopted in a manner

recognised by the law (including customary
or Islamic law) before the death of the officer
and where such child is designated a survivor
as stipulated under this Decree.
(vi) Where the deceased officer does not qualify for a
pension by reason of the length of his service, his
dependants shall be entitled to pro-rata pension
calculated at the rate of two percent per annum of
pensionable service based on the deceased officer’s
final salary.
(h) Post Retirement Death Benefit

Where an officer dies in the service after the completion of the
minimum period of 5 years, his legal personal representative or
survivor shall be paid one year’s salary as death gratuity only, but
if he has served more than 10 years, the dependents will be paid
5 years pension in addition based on completed service period as
shown on the table.
Consequently, where an officer dies after retirement but has either
not received any part of his years pension, or has received only part
thereof, this should become payable to the deceased pensioner’s
next-of-kin either lump or monthly as they may elect.
38.5.10 Minimum and Maximum Pension

The current minimum pension payable is N8000.00 per annum,
while the maximum is 80% of final pay.
38.5.11 Gratuity and Pension Payable to President and vice

President
According to Section 84 (5) of the 1999 Constitution which states
that “any person who has held office as President or Vice-President
shall be entitled to pension for life at a rate equivalent to the annual
salary of the incumbent President or Vice-President, provided
that such a person was not removed from office by the process of
impeachment or for breach of any provisions of this Constitution”.
Any pension granted based on this provision shall be a charge upon
the Consolidated Revenue Fund of the Federation.
38.5.12 Gratuity and Pension Payable to Governor and Deputy

Governor
According to Section 124 (5) of the 1999 Constitution, “Provisions
may be made by a Law of a House of Assembly for the grant of a
pension or gratuity to or in respect of a person who had held office
as Governor or Deputy Governor and was not removed from office
as a result of impeachment; and any pension granted by virtue of any
provisions made in pursuance of this subsection shall be a charge
upon the Consolidated Revenue Fund of the State.
38.5.13 Gratuity and Pension Payable to Judicial Officer

According to Section 291 of Nigeria Constitution a judiciary officer
appointed to the Supreme Court or the Court of Appeal may retire
when he attains the age of sixty-five years and he shall cease to hold
office when he attains the age of seventy years.
A judicial officer appointed to any other court, other than those
specified in subsection (1) of this section may retire when he attains
the age of sixty years and he shall cease to hold office when he
attains the age of sixty-five years. Any person who has held office
as a judicial officer:
a. for a period of not less than fifteen years shall, if he retires
at or after the age of sixty-five years in the case of the
Chief Justice of Nigeria, a Justice of the Supreme Court,
the President of the Court of Appeal or a Justice of the
Court of Appeal or at or after the age of sixty years in
any other case, be entitled to pension for life at a rate
equivalent to his last annual salary and all his allowances
in addition to any other retirement benefits to which he
may be entitled;
b. for a period of less than fifteen years shall, if he retires at

or after the age of sixty-five years or sixty years, as the
case may be, be entitled to pension for life at a rate as
in paragraph (a) of this subsection pro rata the number
of years he served as a judicial officer in relation to the
period of fifteen years, and all his allowances in addition
to other retirement benefits to which he may be entitled
under his terms and conditions of service; and
c. in any case, shall be entitled to such pension and other
retirement benefits as may be regulated by an Act of the
National Assembly or by a Law of a House of Assembly
of a State.
38.6 Contributory Pension Scheme

Pension Reform Act No. 2, 2004 was enacted until it was repealed
and the Pension Reform Act, 2014 was enacted to make provision
for the uniform contributory pension scheme for Public and Private
Sectors in Nigeria; and for related matters.
38.6.1 Establishment of Contributory Pension Scheme

a. The Act establishes the Contributory Pension scheme for
any employment in the Federal Republic of Nigeria, for
payment of retirement benefits of employees to whom the
Scheme applies under the Act.
b. The Scheme shall apply to all employees in the Public
Service of the Federation, the Federal Capital Territory,
States, Local Governments and the Private Sector except
those that were exempted from the scheme.
Comment
It should be noted that it was not on platter of gold they were able to
get exemption because when the contributory pension scheme was
introduced and implemented in the military, it was discovered that
those on the non-contributory were better off, it was then the case
was made before they were exempted. Initially due to the delay in
the payment of pension under the non-contributory, the position
paper submitted by the military supported the contributory scheme,

but the implementation was not favourable as such they opted out.
38.6.2 Categories of Persons Exempted from the Scheme

The categories of persons exempted from the Contributory Pension
Scheme are:
a. Judiciary Officers as their pension is for life as contained in
section 291 of the Constitution of the Federal Republic of
Nigeria, 1999 (as amended);
b. Members of the Armed Forces, the intelligence and secret
services of the Federation;
c. Any employee who is entitled to retirement benefits under
any pension scheme existing before the 25th day of June
2004, being the commencement of the Pension Reform
Act, 2004, but as at that date had 3 or less years to retire.
Any person who falls within the provisions of those categories
listed above shall continue to derive benefit under existing pension
scheme in accordance with the formula provided for in the second
schedule to this Act or under the second schedule provisions of
enabling laws. It is therefore mandatory that all the above categories
of officers shall not be excluded or preclude the right of any person
mentioned to be paid his pension as and when due. It should be
noted that Federal Government Pension Transitional Arrangements
Directorate handles all those exempted under the non-contributory
scheme.
38.6.3 Where an Officer Exempted from Contributory or Those

under Non-Contributory Dies in Service or Retired as a
Result of Mental or Physical Incapacity
a. Where an officer exempted dies in service or in the course
of duty, the Federal Government Pension Transitional
Arrangements Directorate shall cause to be paid, enbloc,
to his next-of-kin or designated survivors a gratuity and
pension to which the officer would have been entitled at the
date of his death calculated in accordance with section 46
of this Act.
b. Where an officer exempted under this section is retired by

his employer as a result of mental or physical incapacity,
the officer shall be paid gratuity and pension in accordance
with section 46 of this Act.
For the purpose of (b) above, a properly constituted medical board
shall advise the employer on the officer’s state of incapacity.
38.6.4 Supervision of Retirement Benefits of Employees Exempted

from the Scheme
a. The administration of the retirement benefits of the
categories of employees exempted from the Scheme
should be under supervision of the Federal Government
Pension Transitional Arrangements Directorate subject to
the supervision and regulation of the Commission.
b. In the case of professors covered by the Universities
(Miscellaneous Provisions) (Amendment) Act, 2012 and
category of political appointees entitled, by virtue of their
terms and conditions of employment, to retire with full
benefits, the Commission shall issue guidelines to regulate
the administration of their retirement benefits provided that
any shortfall shall be funded from budgetary allocations by
the employer.
c. The Accountant-General of the Federation and the FCT
Treasury, as the case may be, subject to the framework
developed jointly with the Commission, shall make
payments of retirement benefits directly into individual
bank accounts of retired persons covered under section
5 (1)(b) of this Act and details of such payment shall be
submitted to the Commission and the Pension Transitional
Arrangements Directorate of the Federation and Federal
Capital Territory established under sections 42 and 44 of
this Act respectively.
38.7 Rate of Contribution by Employee and Employer

The contribution for any employee under contributory scheme shall
be made in the following rates relating to his monthly emoluments:
a. a minimum of ten per cent (10%) by the employer; and
b. a minimum of eight per cent (8%) by the employee.
The rates of contribution mentioned above may upon agreement

between any employer and employee, be revised upwards, from
time to time, and the Commission shall be notified of such revision.
Any employee to whom this Act applies may, in addition to the total
contributions being made by him and his employer, make voluntary
contributions to his Retirement Savings Account. Notwithstanding
any of the provisions of this Act, an employer may agree:
i. on the payment of additional benefits to the employee
upon retirement; or
ii. elect to bear the full responsibility of the Scheme provided
that in such a case, the employer’s contribution shall not
be less than 20 percent of the monthly emoluments of the
employee.
38.8 Operation of Contributory Pension Scheme

For registration under the scheme, the following steps and procedures
must be followed:
i. Individual officer is expected to freely choose his/her own
Pension Funds Administrator (PFA) where a Retirement
Savings Account (RSA) will be maintained.
ii. For those that have more than three years in service as at
June 2004, they were expected to compulsorily migrate
to contributory pension scheme while those that are just
joining the service has to be under contributory pension
scheme.
iii. In line with the new rate, employee and employer are
to contribute 8% and 10% respectively monthly of the
employee’s emolument as defined to a National Pension

Commission-appointed Pension Asset Custodian (PAC).
iv. The employee shall notify his employer of the Pension
Fund Administrator chosen and the number of the
Retirement Savings Account opened.
v. The employer shall deduct at source the monthly
contribution of the employee; and not later than 7 working
days from the day the employee is paid his salary, remit
an amount comprising the employee’s contribution
and the employer’s contribution to the Pension Fund
Custodian specified by the Pension Fund Administrator
of the employee.
vi. Upon receipt of the contributions remitted, the
Pension Fund Custodian shall notify the Pension
Fund Administrator who shall cause to be credited the
Retirement Savings Account of the employee for whom
the employer had made the payment.
vii. Where an employee fails to open such Retirement Savings
Account within a period of six months after assumption of
duty, his employer shall, subject to guidelines issued by
the Commission, request a Pension Fund Administrator
to open a Nominal Retirement Savings Account for such
employee for the remittance of his pension contributions.
viii. An employer who fails to deduct and/or remit the
contributions within the time stipulated shall, in addition
to making the remittance already due, be liable to a
penalty to be stipulated by the Commission.
ix. An employee shall not have access to his Retirement
Savings Account or have any dealing with the Pension
Fund Custodian with respect to the Retirement Savings
Account except through the Pension Fund Administrator.
x. The deduction of the contributions are deducted at source
by the budget office and remitted to the PENCOM, the
salary section/IPPIS will only gross-up the total salary of
individual office and indicate the amount deducted for
record purpose.
xi. The contributions of the federal/state government to the

retirement benefits of employees of the Public Service of
the federation/states shall be a charge on the Consolidated
Revenue Fund of the government concern.
Note: It is important to note the various roles the following play
in the operation of the Contributory Pension Scheme:
• National Pension Commission (PENCOM)
• Pension Funds Administration (PFA)
• Retirement Savings Account (RSA)
• Pension Asset Custodian (PAC)
38.9 Group Life Insurance Policy

It is important to note that in addition to the rates specified above
to be contributed, every employer shall maintain a Group Life
Insurance Policy in favour of each employee for a minimum of three
times the annual total emolument of the employee and premium
shall be paid not later than the date of commencement of the cover.
However, where the employer failed, refused or omitted to make
payment as and when due, the employer shall make arrangement to
effect the payment of claims arising from the death of any staff in its
employment during such period.
Comment : It is mandatory for all employers to pay premium on
the group insurance for all the employees. This is the responsibility
of the Head of Service in line with section 4(5) of Pension Act. It is
interesting to note that there was nowhere in the financial statements
the payment of the insurance premium was reported. The amount of
premium for all the public service is huge that will not be disclosed
in the financial statement either on the face or note to the financial
statement. It then shows that the payable is not correct because
the entire premium for the year couldn’t have been paid as at 31st
December of the year.
38.10 The Pension Reform Act 2014

The objectives of this Act are as follows:
i. establish a uniform set of rules, regulations and standards for
the administration and payments of retirement benefits for
the Public Service of the Federation, the Public Service of
the Federal Capital Territory, the Public Service of the State
Governments, the Public Service of the Local Government

Councils and the Private Sector;
ii. make provision for the smooth operations of the Contributory
Pension Scheme;
iii. ensure that every person who worked in either the Public
Service of the Federation, Federal Capital Territory, States
and Local Governments or the Private Sector receives his
retirement benefits as and when due; and
iv. assist improvident individuals by ensuring that they save in
order to cater for their livelihood during old age.
Comment:
Although the objective of the Pension Reform Act was
attractive to and accepted by public servants, its implementation
appears to have fallen short of expectation. According to one
of the objectives (clause d), the Act is to, “assist improvident
individuals by ensuring that they save in order to cater for
their livelihood during old age”. It is not certain, how well this
goal has been achieved 5 years after the passage of the Act.
38.11 Private Sector

i. In the case of the Private Sector, the Scheme shall apply to
employees who are in the employment of an organisation in
which there are 15 or more employees.
ii. Notwithstanding the provisions of subsection (2) of this
section, employees of organisations with less than three
employees as well as self-employed persons shall be
entitled to participate under the Scheme in accordance with
guidelines issued by the Commission.
38.12 Full Retirement Benefits under Contributory (Part 3

Section 7)
A holder of a Retirement Savings Account shall upon retirement or
attaining the age of 50 years, whichever is later, utilise the amount
credited to his Retirement Savings Account for the following benefits:
i. withdrawal of a lump sum from the total amount credited

to his retirement savings account provided that the amount
left after the lump sum withdrawal shall be sufficient to
procure a programmed fund withdrawals or annuity for
life in accordance with extant guidelines issued by the
Commission, from time to time;
ii. programmed monthly or quarterly withdrawals calculated
on the basis of an expected life span;
iii. annuity for life purchased from a life insurance company
licensed by the National Insurance Commission with
monthly or quarterly payments in line with guidelines
jointly issued by the Commission and National Insurance
Commission;
iv. Professors covered by the Universities (Miscellaneous
Provisions (Amendment) Act, 2012 shall be according to
the University Act; or
v. other categories of employees entitled, by virtue of their
terms and conditions of employment, to retire with full
retirement benefits shall still apply.
vi. Where an employee voluntarily retires, disengages or is
disengaged from employment as provided for under section
16(2) and (5) of the Pension Act 2014, the employee may
with the approval of the Commission, withdraw an amount
of money not exceeding 25 per cent of the total amount
credited to his Retirement Savings Account, provided that
such withdrawals shall only be made after four months
of such retirement or cessation of employment and the
employee does not secure another employment.
vii. Where an employee has accessed the amount standing in
his retirement savings account pursuant to subsection (b) of
this section, such employee shall subsequently access the
balance in the Retirement Savings Account in accordance
with subsection (a) of this section.
Note:
i. Section (b) states that the monthly payment will
depend on the expected life span of the officer, this
would require the services of actuaries to accomplish
this. How many actuaries does Nigeria have?
ii. Section (f) states that where an employee disengaged

voluntarily, the employee shall not withdraw more
than 25% of total amount standing in his retirement
savings account provided is not earlier than four (4)
month. In these days of acute unemployment, this
period of wait should be revisited with a view to
reducing it to one month.
iii. There was no express provision in the law for the
accrued interest to be credited to the individual
retirement savings account. Although the banks will
pay interest, the law should be more precise on this.
38.13 Death of an Employee

a. Where an employee dies in service, his entitlements under
the life insurance policy maintained under section 4 (5) of the
Act, shall be paid by an underwriter to the named beneficiary
in line with Section 57 of the Insurance Act.
b. Upon receipt of a valid Will admitted to probate or a letter of
administration confirming the beneficiaries under the estate
of the deceased employee, the Pension Fund Administrator
shall, with the approval of the Commission, release the
amount standing in the Retirement Savings Account of the
deceased to the personal representative of the deceased or to
any other person as may be directed by a court of competent
jurisdiction, in accordance with the terms of the Will or the
personal law of the deceased employee, as the case may be.
38.14 Missing Employees

Where an employee is missing and is not found within a period of one
year from the date he was declared missing, and a board of inquiry set
up by the Commission makes a determination that having regards to
available information and all relevant circumstances, it is reasonable
to presume that the employee is dead, the provisions of section 8 of
this Act shall apply.
38.15 Exemption from Taxes

a. Notwithstanding the provisions of any other law, contributions
to the Scheme under this Act shall form part of tax deductible
expenses in the computation of tax payable by an employer
or employee under the relevant income tax law.
b. All interests, dividends, profits, investment and other income
accruable to pension funds and assets under this Act shall not
be taxable.
c. Any amount payable as a retirement benefit under this Act
shall not be taxable.
d. Without prejudice to the provisions of subsection (2) of this
section, any income earned on any voluntary contribution
made under section 4 (3) of this Act shall be subject to tax at
the point of withdrawal where the withdrawal is made before
the end of 5 years from the date the voluntary contribution
was made.
38.16 Retirement Savings Account and Remittance of

Contributions
a. Every employee to whom this Act applies shall maintain
an account, (in this Act referred to as “Retirement Savings
Account”) in his name with any Pension Fund Administrator
of his choice.
b. The employee shall notify his employer of the Pension Fund
Administrator chosen and the identity of the Retirement
Savings Account opened under subsection (a) of this section.
c. The employer shall:
i. deduct at source the monthly contribution of the
employee; and
ii. not later than 7 working days from the day the
employee is paid his salary; remit an amount
comprising the employee’s contribution under
paragraph (a) of this subsection and the employer’s
contribution to the Pension Fund Custodian
specified by the Pension Fund Administrator of the

employee.
d. Upon receipt of the contributions remitted under (b) of this
section, the Pension Fund Custodian shall notify the Pension
Fund Administrator who shall cause to be credited the
Retirement Savings Account of the employee for whom the
employer had made the payment.
e. Where an employee fails to open such Retirement Savings
Account within a period of six months after assumption of
duty, his employer shall, subject to guidelines issued by the
Commission, request a Pension Fund Administrator to open
a Nominal Retirement Savings Account for such employee
for the remittance of his pension contributions.
f. An employer who fails to deduct or remit the contributions
within the time stipulated in (b) of this section shall, in
addition to making the remittance already due, be liable to a
penalty to be stipulated by the Commission.
g. The penalty referred to in (f) of this section shall not be less
than 2 percent of the total contribution that remains unpaid
for each month or part of each month the default continues
and the amount of the penalty shall be recoverable as a debt
owed to the employee’s Retirement Savings Account, as the
case may be.
h. An employee shall not have access to his Retirement
Savings Account or have any dealing with the Pension Fund
Custodian with respect to the Retirement Savings Account
except through the Pension Fund Administrator.
i. The Commission shall determine the cost of recovery of
unremitted contributions and the sources to defray the cost,
which may include the amount recovered as penalty pursuant
to (f) of this section.
38.17 Contributions of the Federal Government and Federal

Capital Territory Administration
a. The contributions of the Federal Government to the
retirement benefits of employees of the Public Service
of the Federation under section 11 (3) of the Pension Act

shall be a charge on the Consolidated Revenue Fund of the
Federation.
b. The contributions of the Federal Capital Territory
Administration to the retirement benefits of employees of
the Federal Capital Territory under section 11 (3) of the
Pension Act shall be a charge on the Revenue Fund of the
Federal Capital Territory.
c. The Accountant-General of the Federation/States shall
make the deductions of the contributions mentioned in (a)
of this section.
38.18 Transfer of Account from One Pension Fund Administrator

to Another
An employee is allowed to transfer his savings account from one
Pension Funds Administrator to another subject to guidelines issued
by the Commission. However, a holder of a retirement savings
account maintained under this Act may not, more than once in a
year, transfer his account from one Pension Fund Administrator to
another.
38.19 Transfer from One Employment to Another

Where an employee transfers his employment from one employer or
organisation to another, the same Retirement Savings Account shall
continue to be maintained by the employee.
38.20 Transfer of Entitlement from Non-contributory to

Contributory Pension Scheme (Section 15 of the Pension
Act)
Note that as from 25 June, 2004, being the commencement of the
Pension Reform Act 2004, the accrued pension right to retirement
benefits of any employee who is already under any pension scheme
existing before the commencement of that Act and has over 3 years
to retire shall -
a. In the case of employees of the Public Service of the

Federation where the scheme is unfunded, be recognised in
the form of an amount acknowledged through the issuance
of Federal Government Retirement Benefits Bonds by the
Debt Management Office in favour of the employees and the
bond issued under this subsection shall be redeemed upon
the retirement of the employee in accordance with section
39 of the Pension Act and the amount so redeemed shall be
added to the balance of the Retirement Savings Account of
the employee and applied in accordance with the provisions
of section 7 of the Act.
b. In the case of employees of the Federal Capital Territory
where the scheme is unfunded, be recognised in the form of
an amount acknowledged through the issuance of a bond to
be known as Federal Capital Territory Retirement Benefits
Bond, in favour of the employees. The bond issued under
this subsection shall be redeemed upon retirement of the
employee in accordance with section 39 of this Act and the
amount so redeemed shall be added to the balance in the
Retirement Savings Account of the employee and applied
in accordance with the provisions of section 7 of this Act.
c. In the case of the employees of the Public Service of the
Federation, Federal Capital Territory or in the Private Sector,
where the scheme is funded, credit the Retirement Savings
Accounts of the employees with any fund to which each
employee is entitled and in the event of an insufficiency of
funds to meet this liability the shortfall shall immediately
become a debt of the relevant employer and shall have
priority over any other claim.
d. Where there is such a debt the employer shall immediately
issue a written acknowledgement of the debt to the relevant
employee and take steps to meet the shortfall and such debt
shall not be affected by the provisions of any limitation law
in force for the time being.
e. The employer shall notify the Commission of any written
acknowledgment that arises under subsection (1) (c) of this
section and any step taken or planned to meet the shortfall.
f. The accrued pension rights and entitlements of employees

of the Public Service of the Federation as provided for
under subsection (1) of this section shall be reviewed by the
Federal Government of Nigeria from time to time in line with
the provisions of section 173(3) of the Constitution of the
Federal Republic of Nigeria 1999 (as amended), provided
that the variation so derived from the salary reviews shall be
provided by the Federal Government and credited directly
into Retirement Savings Account of individual retiree.
38.21 Federal Government Retirement Benefits Bonds (Section

39 of the Pension Act 2014)
a. At the commencement of the contributory pension scheme in
2004 which made it compulsory for those who were having
above there years to migrate to contributory scheme, there
was no credit amount standing in favour of the employee as
at the time of migrating to contributory scheme.
b. To take care of those periods when nothing was contributed
toward the retirement, it is the Federal Government’s
responsibility through Federal Government Retirement
Benefits Bond by the Debt Management Office in favour
of the employees to be issued by Central Bank of Nigeria
in line with the provision of Section 39 of the Pension Act
2014.
c. In other to meet the federal government obligation on
payment of pension, Section 39 of the pension Act,
authorized the Central Bank of Nigeria to establish and
manage the fund to be known as Federal Government
Retirement Benefit Bond Redemption Fund in respect of
Federal public service.
d. Section 39(2) of the Act made provision on how the
funds should be generated. The Act states that “Federal
Government shall pay into the Redemption Fund an amount
not less than 5% of the total monthly wage bill payable to
employees in the Public Service of the Federation.
e. In addition to section 39(2) subsection (3) state “without

prejudice to subsection (2) of this section, the Commission
shall by the end of every calendar year, determine the
adequacy of the Redemption Fund against the projected
pension liability of Government arising from voluntary
and mandatory retirements, death of employees in service
and the right of pensioners to pension review in line with
Section 173(3) of the 1999 Constitution (as amended), and
advise the Budget Office of the Federation of shortfall, if
any.
f. The Budget Office of the Federation shall, on receipt of
advice from the Commission pursuant to subsection (3) of
this section, ensure adequate appropriation for the shortfall
and subsequent payment.
g. The amount in the Redemption Fund shall be used by the
Central Bank of Nigeria, as prescribed by the Commission,
to redeem any retirement benefit bonds issued pursuant to
Section 15 (1) (a) of this Act.
h. Payments into the Redemption Fund shall cease after all the
retirement benefit bonds issued under Section 15 (1) (a) of
this Act have been redeemed.
i. Government obligation to the Federal Government Retirement
Benefits Redemption Fund shall be a charge on the Consolidated
Revenue Fund of the Federation.
j. The Accountant-General of the Federation shall effect
the deductions and payment into the Redemption Fund
specified in subsection (1) of this section.
Note
• With this provision, there was no template for the calculation
of the retirement benefit bond for the period that contribution
was not made before the commencement of the contributory
scheme. This is crucial in order to build trust in the scheme.
• With the provision of the Act, the issue of inability to pay
should be a thing of the past. The practical implementation
will confirm if this optimism is appropriate.
• The second schedule provided a template for the
“Computation of Retirement Benefit”. It is recommended
that this should be used for the calculation of the bonds
aspect of the entitlement of the employee.
Second Schedule
38.22 Computation of Retirement Benefits Formula for Calculation
or Pensions and Gratuity in Respect of Retirement
Year of Gratuity as Pension as Year of Gratuity as Pension

qualifying percentage percentage qualifying percentage as
service of final pay of final pay of final service of final total percentage
emolument of final
emolument
- - - 5 100 -
- - - 6 108 -
- - - 7 116 -
- - - 8 124 -
- - - 9 132 -
10 100 - 10 100 30
11 110 - 11 108 32
12 120 - 12 116 34
13 123 - 13 124 36
14 140 - 14 132 38
15 100 30 15 140 40
16 110 32 16 148 42
17 120 34 17 156 44
18 130 36 18 164 46
19 140 38 19 172 48
20 150 40 20 180 50
21 160 42 21 188 52
22 170 44 22 196 54
23 180 46 23 204 56
24 190 48 24 212 58

25 200 50 25 220 60
26 210 52 26 228 62
27 220 54 27 236 64
28 230 56 28 244 66
29 240 58 29 252 68
30 250 60 30 260 70
31 260 62 31 268 72
32 270 64 32 276 74
33 280 66 33 284 76
34 290 68 34 292 78
35 300 70 35 300 80
Illustation
For instance:
i. Mr Gbenga Ogunbayo joined the service of government in
October 1979 on GL 04; by 2004 he was already on GL 13
when the contributory pension scheme was introduced. After 25
years, he retired in October 2014 on GL 16 with last bar. Total
emolument as at 2004 = N1,440,000
ii. Based on the table above assuming he is disengaging from
the service after 25 years, he is expected to be paid 220% of
the terminal salary which should be N1,440,000 x 220% =
N3,168,000.00.
iii. Fixed deposit/Treasury Bill of N3,168,000 just 12% for the 10
years on cumulative will be given approximately N7,500,000.00.
iv. Contribution for the period of ten years from the employee and
employer was estimated approximately as N7,000,000.00.
v. No records of interest on contribution for the period of ten
years which must be added to the total sum (which is purely
dishonesty) as stipulated by section 83(1) of the Pension Act,
2014. It is a known fact that any amount in saving accounts
should attract interest, at least quarterly, and the Pension Fund
Administration did not make this available.
vi. There should be definite percentage of lump sum to be paid
while the rest will be invested from where monthly pension will
be paid.
vii. Minimum pension guarantee Section 84(1) all Retirement

Savings Account holders who have contributed to a
licensed Pension Fund Administrator for a number of years
to be specified by the Commission shall be entitled to a
guaranteed minimum pension as may be specified from
time to time by the Commission.
Note: It is therefore shocking and sad to notice these
imprecise clauses which can deprive the employee
their rightful entitlements from contributory pension as
envisaged by law.
38.23 Withdrawal from Retirement Savings Account

a. An employee shall not be entitled to make any withdrawal
from his Retirement Savings Account opened under section
11 (1) of this Act, before attaining the age of 50 years.
b. Notwithstanding the provisions of subsection (1) of
this section, any employee who retires, disengages or is
disengaged from employment –
i. on the advice of a suitably qualified physician or a
properly constituted medical board certifying that the
employee is no longer mentally or physically capable
of carrying out the functions of his office;
ii. due to total or permanent disability either of the mind
or body; or
iii. before the age of 50 years in accordance with the
terms and conditions of his employment, shall be
entitled to make withdrawals in accordance with
section 7 of this Act.
iv. Persons who retire under subsection (2) of this
section shall be reintegrated into the Scheme upon
securing another employment, subject to guidelines
to be issued by the Commission from time to time.
v. For the purpose of subsection (1) of this section, the
authentic age of an employee entering the Public
Service or any other employment shall be that
submitted by him on entering the service or taking

up the employment.
vi. Without prejudice to subsection (1) of this section,
any employee who disengages or is disengaged from
employment before the age of 50 years and is unable
to secure another employment within four months of
such disengagement may make withdrawal from his
Retirement Savings Account in accordance with the
provisions of Section 7(2) and (3) of this Act.
38.24 Establishment of Pension Transitional Arrangements

Directorate for the Public Service of the Federation
(Section 42)
There is established for the Public Service of the Federation, the
Federal Government Pension Transitional Arrangements Directorate
to handle all non-contributory pension schemes.
a. The Federal Government Pension Transitional Arrangements
Directorate shall be an extra Ministerial Department under
the Federal Ministry of Finance with management team to
be appointed by the Minister.
b. The Pension Transitional Arrangements Directorate shall
be headed by an Executive Secretary and shall be made up
of representatives of the following Departments –
i. The Civil Service Pension Department;
ii. The Police Pension Department;
iii. The Customs, Immigration and Prison Pension Department;
iv. The Treasury Funded Parastatals Pension Department;
v. The Pensioner Service Department;
vi. The Information Technology Department; and
vii. The Support Services Department.
The Pension Transitional Arrangements Directorate shall also

comprise other relevant Departments as may be determined by
the Commission, from time to time. In the same vein, Pension
Transitional Arrangements Directorate for the Federal Capital

Territory was also established to handle all matters relating to
non-contributory pension scheme. The same departments will be
established at the FCT.
38.25 Functions of the Federal Government and Federal

Capital Territory Pension Transitional Arrangements Directorates.
(a). The Federal Government and Federal Capital Territory
Pension Transitional Arrangements Directorates shall,
respectively, carry out the existing functions of the
relevant pension boards or offices in the Public Service of
the Federation and Federal Capital Territory and shall in
particular-
i. make budgetary estimates for existing pensioners
and the officers exempted from this Scheme under
section 5(1)(b) of this Act;
ii. prepare and submit the monthly payroll of pensioners
to the office of the Accountant-General of the
Federation for direct payment from the budgetary
allocation maintained with the Central Bank of
Nigeria to pensioners’ bank accounts;
iii. issue payment instructions to the office of the
Accountant-General of the Federation;
iv. maintain a comprehensive database of pensioners
under their respective jurisdiction;
v. ascertain deficits in pension payments, if any, to
existing pensioners or the categories of officers
exempted under section 5(1)(b) of this Act, and
carry out such other functions aimed at ensuring the
welfare of pensioners as the Commission may, from
time to time, direct; and
vi. render monthly returns to the Commission on existing
staff, pensioners, deceased pensioners, details of next
of kin of deceased pensioners and on any other issue
as may be required by the Commission, from time to
time;
vii. determine the gratuity and pension of exempted

pensioners;
viii. the Federal Government Pension Transitional Arrangements
Directorate and the Federal Capital Territory Pension
Transitional Arrangements Directorate shall determine
and cause to be paid gratuity and pension to the
pensioners in the category of officers exempted under
section 5(1)(b) of this Act, in accordance with the
provisions of section 5 (2) of this Act and relevant
and applicable computations under the existing Pay-
As-You-Go Pension Scheme of the Public Service of
the Federation and Federal Capital Territory.
38.25.1 Transfer of Assets of the Pension Offices Existing Before

This Act.
As from the commencement of this Act, the responsibilities, funds,
assets or liabilities of all pension offices in the Public Service of
the Federation and the Federal Capital Territory existing before
the commencement of this Act shall be vested in the Federal
Government Pension Transitional Arrangements Directorate and
the Federal Capital Territory Pension Transitional Arrangements
Directorate, respectively as provided under this Act to cover for
category of those exempted under section 5(1)(b) of this Act.
a. The Accountant-General of the Federation shall transfer all
funds, meant for payment of pension or retirement benefits
with all pension offices to the Central Bank of Nigeria for
the payment of pension.
b. Power of the Commission to regulate and supervise the
Federal Government and Federal Capital Territory Pension
Transitional Arrangements Directorates.
c. The Commission shall regulate and supervise the
activities of the Federal Government Pension Transitional
Arrangements Directorate and the Federal Capital Territory
Pension Transitional Arrangements Directorate to ensure
compliance with the provisions of this Act.
d. The Commission shall, at the directive of the President of

the Federal Republic intervene to administer and render
technical support and advice on the management of the
various Pension Transition Administration Directorates.
e. The Federal Government Pension Transitional Arrangements
Directorate and the Federal Capital Territory Pension
Transitional Arrangements Directorate shall operate under the
rules, regulations and directives issued by the Commission
from time to time.
f. The Federal Government Pension Transitional Arrangements
Directorate and the Federal Capital Territory Pension Transitional
Arrangements Directorate shall cease to exist after the death of the
last pensioner or employee entitled to pension as specified under
Sections (1) (b )of this Act.
38.26 Comparing the Benefit of Non-contributory and

Contributory Pension Scheme
It can been seen that the retirement benefit in the non-contributory
is definite and straightforward that every retiree can calculated his/
her entitlement whereas the benefit of contributory pension scheme
is not definite, is vague and no template for calculation was made
available regarding contributory pension scheme.
Examples of computation of death gratuity under non-contributory
pension scheme
i. Mr Alain joined the service on 1st April, 1978 and died on
30th June, 1981 and his gross final pay being N24,000.00.
Computation: 1/4/78 — 30/6/81 = 3 years 3 months
Having spent less than 5 years, death gratuity due is N24,000.

ii. Mr Femi Sobiye joined service on 1/4/50 and died on
30/4/80 and his gross final salary being N87,500.
Computation: 1/4/50 — 30/4/80 = 30 years 1 month.

Death gratuity due is 260% of N87,500 = N227,500

Annual Pension due 70% of N87,500 = N 61,250
5 years pension payable 61,250 x 5 = N306,250
Total due to the dependents =
Gratuity N227,500
5 years pension N306,250
N533,750
Examples of Computation of Life Gratuity

i. Mr Ojo was born on 1/4/50, joined service on 1/7/66 and
withdraw his service with effect from 1/3/82. Final Gross
Salary N85,000.
Computation:
Age 1/4/50 — 1/3/82 = 32 years
Computed year = 16 years
Gratuity = 148% of 85,000 = N125,800
Annual Pension = 42% of 85,000 = N35.700
The pension would not be payable until he is 45 years of age.
Note: In computing year of service after the first 10 years any

additional period above six months shall be approximated to one
full year for the purpose of calculating retirement benefits.
38.27 Procedure for the Processing of Benefits by the Retirees

under Non-contributory
i. Condonation of break in service
Officers who break their service and wish to apply for
condonation for the restoration of their resultant forfeited
pension rights are required to apply within three years of
their return to the public service.
ii. Notice of Withdrawal/Retirement

(a) An officer withdrawing his service after completing
not less than 5 years but under 10 years is statutorily
required to give only one month’s notice of withdrawal
from the service or pay one month’s salary in lieu of

such notice.
(b) An officer retiring from the service statutorily having
qualified for pension, is required to give six months
notice so as to facilitate action on his entitlements and
ensure the payment of gratuity to him immediately on
retirement.
(c) An officer who wishes to retire voluntarily on
completion of a minimum of 10 years service is
required, before fulfilling the conditions for statutory
retirement (35 years of service or 60 years old) by the
provisions of pension Act No. 10 of 1979, to give three
months notice or pay three months salary in lieu of that
notice.
iii. Documentation
An officer withdrawing or retiring from the service should
submit his application through his head of department. He
is also expected to complete part 1 of the Pension Form
and the revised Section 62 which shall be given to him by
the pension section. In that form, the officer is required to
furnish information on his full address(es) for the receipt of
his gratuity and his subsequent pension, to give authorisation
that any indebtedness on his part to the Federal Government
be deducted from his entitlement. The form shall be duly
signed and dated.
iv. Missing Officers

Recorded next-of-kin are expected to notify the ministry that
their relation who was an officer of the ministry is missing.
This should be accompanied with:
• police report on the incident;
• newspaper publication, also reporting the incident.
v. Procedure for the processing of benefits by the scheduled

offices under non-contributory
(a) On receipt of letter of retirement, the pension section
checks the age and length of service of the officer to
confirm that the notice has been properly given. The
officer’s retirement is formally accepted. The file is
then referred to the variation officer to issue Variation
Advice for the stoppage of the retiring officer’s salary
against the date of retirement, and to the records officer
to update the officer’s record of service and produce
certified true copy thereof.
Meanwhile, details of the officer’s indebtedness to
government would have been obtained and furnished
by the accounts section. Part II of the computed
benefits and the file is referred to the Federal Auditor
to verify the debt statement and examine the benefit,
which would have been computed in accordance with
the schedule. The pension section will also have made
request to the Federal Ministry of Establishments and
Management Services for the release of AIE for the
payment of gratuity.
(b) After the release of gratuity by the accounts section,
relevant documents are forwarded by the pensions
section to the Federal Ministry of Establishments and
Management Services for subsequent payment of
pension by that ministry to the retired officer.
The relevant documents are:
• Completed Pension Forms, Revised Section 62;
• Certified true copy of Record of Service;
• Debt clearance certificate;
• Photocopy of letter of promotion to the last grade;
• Photocopy of letter of notice of retirement and
acceptance;
• Quadruplicate copy of payment voucher;
• Quadruplicate copy of computation sheet examined

by the Federal Audit (now Office of Auditor-General
for the Federation); and
• Three recent passport photographs.
(c) On notification of the payment of pension by the

Federal Ministry of Establishments and Management
Services, the record officer is advised by the pension
section to update the retired officer’s record of service
in the Ministry before the final disposal of file.
(vi) Processing Death Benefits

(a) Death benefits are computed and paid by the Federal
Ministry of Establishments and Management Services.
Therefore, relevant documents must be forwarded to
that ministry for processing. The relevant documents
are:
• Completed Pension Form Revised Section 62
• Certified True copy of Record of Service
• Debt Clearance Certificate
• Photocopy of letter of promotion to the last grade
• Original and photocopy of death/burial certificate
• Sworn affidavit as to the next-of-kin or legal
personal representative or;
• Letter of Administration obtained from the
Probate Registry where the officer died intestate
• Two recent passport photographs of each next-of-
kin.
(b) Accidental death in the course of duty
The requirement is as in (a) above plus either the report
of Board of Enquiry as to:
• whether the accident occurred in the actual
discharge of duty;
• whether the accident was due to any fault of the
deceased person; and
• whether the accident was specifically attributable

to the nature of the duty being discharged; or the
report of Coroner’s inquest, which should contain
information on the above points.
In addition:
 Evidence of marriage of spouse to the deceased officer;
and
 Age declaration of the dependent children subject to
maximum number of six below the age of 18 years.
38.28 Transitional Provisions for Private Sector (Section 50)

a. Notwithstanding any other provisions of this Act, any
pension scheme in the Private Sector existing before
the commencement of this Act may continue to exist
provided that:
i. the pension scheme shall be fully funded and
in case of any defined contribution scheme,
contributions in favour of each employee including
the attributable income shall be computed and
credited to a Retirement Savings Account opened
for the employee;
ii. the pension funds and assets shall be fully
segregated from the funds and assets of the
company;
iii. the pension funds and assets shall be held by a
custodian;
iv. every employee in the existing scheme shall be
free to exercise the option of coming under the
Scheme established under section 3 of this Act
and his employer shall compute and credit to his
account, his contributions and distributable income
earned as at the date the employee exercises such
an option subject to the regulations, rules and
standards established by the Commission;
v. any amount computed under paragraph (d) of this

subsection shall be transferred to the Retirement
Savings Account of the employee maintained
with a pension fund administrator of his choice;
vi. all investments in assets other than those
specified as permissible investment for pension
funds and assets under section 86 of this Act may
be maintained and from the commencement of
this Act all investments shall be subject to the
regulation, rules and standards established by the
Commission;
vii. the employer shall undertake to the Commission
that the pension fund shall be fully funded at all
times and any shortfall to be made up within 90
days or as may be prescribed by the Commission;
and
viii. the existing scheme shall be closed to new
employees and such new employees shall be
required to open a Retirement Savings Account.
(b) An employer operating any defined benefits scheme
shall undertake, at the end of every financial year, an
actuarial valuation to determine the adequacy of his
pension fund assets.
(c) Nothing in this section shall preclude the right of any
person who has retired before the commencement of
this Act and is receiving benefits from any pension
scheme in the private sector from receiving his pensions
as and when due in accordance with the provisions of
the Trust Deed and Rules of the Scheme.
(d) The management and custody of the pension funds for
the category of pensioners referred to in subsection (d)
of this section shall be undertaken by licensed Pension
Fund Administrators and Pension Fund Custodians
respectively.
38.29 Staff Welfare Scheme

Staff welfare in the Public Service is an important aspect that
should be looked into as part of the strategies of fighting corruption
otherwise, the anti-corruption war cannot be won. Indeed, fighting
corruption should start from the welfare of the public servants;
otherwise, fighting corruption will be a mirage especially with the
contributory pension reforms. This is particularly important from
the perspective of law enforcement officers who are retiring without
accessing their benefits on time.
Consider, for instance, a police officer of the rank of DSP who retires
after 35 years of service and he is paid a lump sum of N2,200,000.00
with N30,000.00 monthly pension. If he still has two children in
the school, how is he expected to meet his financial obligations to
his wife, the two children still in school, landlord and payment of
estimated electricity bills? Would this financial challenge not lure
him to crime as somebody trained to handle weapons? Research has
shown that stealing often starts from hunger; if the feeding of the
children is not taken care of, stealing by those children to survive
is fairly certain. Therefore, failure to look into the welfare of police
officers, especially after retirement, is very dangerous to the country.
In her research into the origin of sharp practices by Public Services,
Mrs Esther Uduehi in her book Motivational Factors in the
Nigerian Civil Service, recalled that it was in an effort to save for
the rainy day when the payment of gratuity and pensions of retired
public servants was ignored and neglected by the government and
job security became uncertain. According to her, over the years,
the service had suffered some reverses and the public servants
consequently experienced a lot of changes under the different
leadership and governments. She alluded to the mass purge that
happened in the 1970s during which permanent secretaries were
sacked without benefits. Such a purge was unprecedented in the
history of the service in Nigeria and since then, the question has
remained: “How permanent is the civil service job?” To crown it,
the government introduced the Contributory Pension Scheme with
clauses that may impair pensioners’ benefits. All over the world,
the contributory pension scheme has helped a lot of countries to

solve the problems of pensioners, but the implementation of Nigeria
scheme is worrisome and yet to produce similar result.
A number of factors other than money are needed to raise the morale
of civil servants. Mrs Uduehi, in her book, examined the non-
economic factors such as achievement, job security, recognition,
advancement, job enrichment of the job itself, responsibility,
decisional participation and management style needed to raise the
morale of the civil servants. These factors are referred to as non-
economic motivators, in the sense that their incentive power is not
necessarily derived from money.
Under the presidential system, the higher civil servants such as
permanent secretaries became and were considered as political
appointees. Section171 (2)(d) and 208 (2)(c) of the Constitution
of Federal Republic of Nigeria 1999 provided that these officers
which include permanent secretaries shall be appointed or removed
by the president and governors as the case may be and they are
to hold office at the pleasure of the president and governor. This
is against the earlier practice where such posts were subject to the
screening of the Civil Service Commission since they were attained
through a selection process of promotion. Since these permanent
secretaries are now political appointees with life pensions, they no
longer care about the welfare of other staff regarding their benefits
after retirement. Until the root causes of corruption, banditry and
armed robbery are checked, it will be a mirage to stop the activities
of these two deadly activities in the country.
38.30 Other Accrued Benefits to Public Servants

There are other accrued benefits/facilities that are available to Public
Servants that if not asked, it may not be available to them. It should
be noted that if a civil servant’s salary was not paid for a period and
the person did not demand for it in writing, it will not be paid. The
situation is similar for benefits that are incidental. It is therefore
advisable that the following benefits of public servants should be
noted otherwise one may lose them.
38.30.1 Death of an Officer/Spouse Overseas (PRS 070401)

The government shall repatriate, at the request of the deceased’s
family, the corpse of a Nigerian officer who dies abroad while on
official duty tour or course of instruction or the corpse of the spouse
of the official who was duly authorised to accompany him/her on
the duty tour or course of instruction. Government’s responsibility
shall be limited to the following:
• preparation of the body (embalmment);
• purchase of a reasonable priced coffin or casket including;
inner zinc and wooden coffin as stipulated by airline
regulations;
• Transportation of the corpse to the officer’s home town at
reasonable cost; and
• Payment of the cost to the family of the deceased, not
exceeding one full page advert in one National Newspaper
for the publication of obituary, at the prevailing rates.
38.30.2 Death of a Serving Pensionable Officer (PRS 070402)

When a pensionable officer dies in the service of the government,
it shall be the responsibility of the government to provide the
following:
i. Cost of burial expenses including: preparation of the body
and embalmment; settlement of mortuary bills; and provision
of coffin/casket subject to the following maximum amount:
 GL 01-06 N100, 000.00
 GL 07-14 N200, 000.00
 GL 15-17 N300, 000.00
 Consolidated N500, 000.00
ii. Payment to the family of the deceased, cost for one full
page advert in one national newspaper for the publication of
obituary at the prevailing rates.
iii. Transportation of the corpse to officer’s home town at
reasonable cost.
38.30.3 Loose of Life: Insurance at Government Expense on

Official Assignment.(PSR 080203)
The following persons when travelling by air, land or sea at
Government expense will be eligible for free insurance cover to
be provided by the Ministry/Extra-Ministerial Office of the staff
concerned as follows:
Traveller Capital Benefits

Staff N2,000,000.00
Wife of staff N1,000,000.00
Child of staff N1,000,000.00
Non- Official N1,000,000.00
NYSC N1,000,000.00
A passenger travelling to and from any destination inside or outside

Nigeria with the authority of Government, free insurance cover for
the capital benefits, prescribed in Rule 080203, will be automatic
and will not require the completion of any formalities by the
passenger. If the passenger wishes to arrange excess of the capital
benefits provided by Government he must do so privately and at his
own expense.
Note: This is when an officer is on an official assignment, and

an accident occurred that took the life of the officer, the above
provision will be applied.
38.30.4 Death of an Employee: Insurance Cover on Contributory

Pension Scheme (Section 4(5) Pension Act
In addition to the rates specified in section 4 (1)(a) of the Pension
Act in which all employer will contribute 10% of the salary of the
employee, every employer shall maintain a Group-Life Insurance
Policy in favour of each employee for a minimum of three times the
annual total emolument of the employee and premium shall be paid
not later than the date of commencement of the cover. Where the
employer failed, refused or omitted to make payment as and when

due, the employer shall make arrangement to effect the payment of
claims arising from the death of any staff in its employment during
such period.
38.30.5 Officers Entitled To Medical Check-Up (PSR 070206 (f)

i. Officers on Salary Grade Level 16 and above shall undertake
mandatory medical check-ups, locally, once a year. If as a
result of such check-up it is recommended that a further
medical consultation and/or treatment should be undertaken
/given abroad, permission to do so may be granted by either
the President or Head of the Civil Service of the Federation
as the case may be. Where such officers happen to be abroad
on official business, they may undertake the once-a-year
medical check-up abroad, provided that they obtain prior
permission from either the President or Head of the Civil
Service of the Federation, as the case may be, prior to their
departure abroad.
ii. Officers on Grade Level 12 to Grade Level 15 are entitled to
medical check-ups, locally, once in two years. If as a result
of such check-up it is recommended that a further medical
consultation and/or treatment should be undertaken/given
abroad, permission to do so may be granted by the Head
of the Civil Service of the Federation. Where such officers
happen to be overseas on official business, they may take
their once in two years medical check-up abroad, provided
that they obtain prior permission from the Head of the Civil
Service of the Federation before the medical consultation
takes place, and provided also that the medical adjacent
practitioner to be consulted is one that is recommended by
the Nigerian Mission located in or assigned to the particular
country concerned. It should be noted that a local medical
check-up may only be authorised if the applicant chooses a
recognised health care provider.
38.30.6 End-of-the-Year Welfare Package

This is for the government to show appreciation to all public officers
for their contribution by giving them end-of-the-year presents.
Government has, therefore, decided that henceforth, no Ministry,
Extension, Ministerial Department or Agency should give any cash
bonus. Rather, they should buy and distribute foodstuffs such as
rice, groundnut oil, palm oil, etc. including rams and turkey to all
members of staff. Circular Ref. No. B.63304/xiii/T.6/266 of 19th
November, 1997.
38.30.7 Disengagement Allowance and Kilometer Allowance

(PRS 130103/130104)
Disengagement allowance shall be paid to an officer proceeding
on retirement from service at uniform rates of 5% of annual
basic emolument plus authorised kilometer allowance for retiring
officers from duty, officers reporting to their duty station, officers
undertaking responsibility using their cars and on transfer or posting
at the rates specified in their extant circular.
Note: Most of the allowance being paid to Public Servant in the

past that has not been abolished could not be paid now, but we
are talking of corruption at all time. The root course of these must
be identified and is addressed before we can eradicate the issue of
corruption in Nigeria.
Practice Questions
1. Discuss the provisions of Pension Reform Act. 2004.

2. Discuss the objectives of pension reform Act 2014.
3. Enumerate the various ways retirement benefit under Pension
Reform Act 2014 can be obtained .
4. State the conditions for pension and gratuity benefits.
5. Enumerate the entitlement of officers that dies in the course
of his/her official duty.
6. Discuss gratuity and pension payable to the president, vice
president, governors, deputy governors and judiciary Officers.
7. Discuss the categories of persons exempted from contributory
pension scheme.
8. Explain the function of pension, transitional arrangement
directorate of public service of the federation.
Chapter Thirty Nine
State and Local Government Accounting
Learning Outcomes
• discuss the main sources of state government revenues;
• highlight and discuss the state revenue and control
mechanisms;
• enumerate and discuss the financial statements and other
reports to be produced by a State Accountant-General;
• explain the importance and functions of local governments;
• discuss the financial statements and other reports to be
produced by a local government;
• discuss financial statements of local government; and
• discuss the importance of the office of the Auditor-General
for Local Governments.
39.0 State Government Accounting

39.1 Introduction
State government is the second tier in the Public Sector
Administration. The accounting system of the state is the same with
that of the federal government. The Governor of the state is the Chief
Executive of the state. He is also required to prepare his budget and
lay it before the state house of assembly as Appropriation Bill for
consideration, which will become Appropriation Law if passed and
signed by the Governor.
The Commissioner of Finance also authorises the Accountant-
General of the State, through the issuance of annual general warrant,
to release funds from the Consolidated Revenue Fund of the state
to pay for personnel cost and other services provided in the annual
1311
estimates. The Accountant-General is the chief accounting officer of

the receipts and payments of the state government.
The Auditor-General for the state is usually appointed by the
Governor with the approval of the state house of assembly in line
with section 126 of the 1999 Nigerian Constitution. However,
the level of financial independence of the State Auditor-General
provides cause for concern. The Office of the Auditor-General for
the State depends on the government for financial resources to meet
its various costs. As noted recently during a television programme,
“Journalist Handout”, can the Auditor-General truly audit the state
government when he depends on it for finance? Without financial
independence, the Auditor-General would find it difficult to audit
and issue a true and fair view on the finances of the state government.
In the new dispensation, each commissioner of each ministry and
head of extra-ministerial departments is regarded as the chief
executive while the permanent secretary is the accounting officer.
Under this scenario, each ministry is expected to be a self-accounting
unit in which accounts are processed and cheques issued. However,
in most of the states, payable orders are still in use while the Office
of the Accountant-General of the State only issues cheques. With
this practice, most of the ministries and departments are not yet self-
accounting units because they are only required to keep incomplete
records of their above-the-line payment and receipts. Though the
centralised issuance of cheques is a form of control, the reconciliation
of account will not be easy and this may have negative effect on the
final account. Unlike at the federal level where all allocations, as
approved, are transferred to the ministry’s account, all the payments
are made in the State Accountant-General’s office.
The Auditor-General for the State is required to submit his report
(which is his opinion on the financial statements submitted to him by
the Accountant-General) to the house of assembly. Public Accounts
Committee of the House will then consider his report. It is very
unfortunate that the level of compliance to this statutory provision
from the records in the office of Auditors-General for states is less
than encouraging. There is a ray of hope with external intervention.
1313 State and Local Government Accounting
For instance, to benefit from the Fiscal Sustainable Plan, which the
World Bank and Federal Ministry of Finance have initiated, a state
must prepare and submit its financial statements to the Auditor-
General for audit to qualify for some grants. This requirement has
made most of the states to key into the system to benefit from the
grant. They must, however, ensure that their financial statements
pass through quality control of all necessary agencies to ensure that
they are credible and reliable.
39.2 Sources of Revenue to State Government

39.2.1 Statutory Allocation
The major source of revenue is from Federation Account which is
statutory allocation.
Since the Supreme Court ruling of 2002 and all the subsequent
modification orders which came into effect in May 2003, the revenue
sharing formula remains as follows:
(a) Vertical distribution
Federal government 52.68%
State government 26.72%
Local government 20.60%
Total 100%
The federal government’s share is further distributed as follows:
Consolidated Revenue Fund (CRF) 48.50%
Federal Capital Territory (FCT) 1.00%
Development of Natural Resources 1.68%
Share of Derivation & Ecology 1.00%
Stabilisation 0.50%
Total 52.68%
(b) Horizontal Distribution
In addition to vertical distribution, further distribution is made between
the states and local government councils using the following: equality,
population, land mass and terrain, social development factor and internal
revenue effort. The indices for distribution of statutory allocation are
made between the states and local government councils using:
Equality 40%
Population 30%
Land mass and terrain 10%
Social development 10%
Internal revenue effort 10%
Note: It is important to note that the level of revenue generated
by each state government has an impact on what it shares from
Federation Account.

39.2.2 Derivation 13%
For states where mineral resources are sourced, the derivation of 13%
is also used in the sharing formula in line with statutory provision.
At present, the 13% derivation is applied only to oil revenue. So, in
calculating the derivation, the 13% of oil revenue will be used.
Although there are various Internally Generated Revenue(IGR)
sources available to state governments, the sources are not uniform
among them. For example, sources of revenue available to Oyo
State may not be applicable to Ogun State. IGR depends on the
resources available to the state concerned. The following sources
are, however, common to all the states:
i. Taxes
ii. Fines fee and rates
iii. Licences
iv. Earning and sales
v. Rent from government property
vi. Interest repayment and dividends
vii. Reimbursement
viii. Miscellaneous
ix. Statutory
x. Grants
39.2.3 Value Added Tax

Another statutory allocation is Value Added Tax (VAT). An account
is opened with the CBN for the warehousing of VAT on both imported
and non-imported goods. The accrued revenue is distributed monthly
in line with the allocation formula and indices provided by Revenue

Mobilisation, Allocation and Fiscal Commission (RMAFC). The
two agencies that collect VAT are Nigeria Custom Service and
Federal Inland Revenue Service. While Nigeria Custom Service
collects on imported goods at the port, Federal Inland Revenue
Service collects on purchase of goods and services rendered. Value
Added Tax (VAT) is the consumption tax on goods and services and
it is shared to the tiers of government as follows:
Federal government 15%
State government 50%
Local government 35%
Total 100%
39.3 Financial Statement of State Government

With the adoption of IPSAS by the Federal Republic of Nigeria, it
is mandatory for all state governments to apply it in the preparation
of their financial statements. In line with the approved adoption
roadmap, the use of cash basis IPSAS commenced in 2014 while the
IPSAS accrual-basis commenced in 2016. Due to the requirements,
most states are still on cash basis in the second quarter of 2019.
The states that claimed to have commenced are finding it difficult
to adhere to simple principles and best practices. For instance, the
published financial statements did not contain comparative figures
even when the states affected have been in existence for many years.
39.4 Domestication of National Chart of Account

One other important development is the domestication of the
National Chart of Accounts to ensure that all the economic codes
are in line with the national chart of accounts. This will facilitate
comparison between one state government’s financial statements
with those of other states.
39.5 State Government Revenue and Control Mechanism

Revenue is very important to any government because it is the main
means by which it can raise resources to meet its obligation to the
citizens. This is particularly important considering the nation’s
recent economic recession and the downturn in the revenue accruing
to the Federation Account. This, therefore, means that each state
must look inward to be able to meet its obligations.
It is instructive to mention that when huge revenue allocation from
Federation Account was being earned by most of the states, they
did not bother about the control mechanism. As a result, most of
the revenue collected were not paid into the government account
and the loophole in the system led to avoidable loss of revenue. For
instance, the non-use of Treasury Receipt Book 6A and 6 and the
maintenance of many revenue accounts with banks were channels
for loss of revenue. The fact that most of the tellers submitted were
discovered to be fake which means that the revenue collected were
not paid to government accounts. It was difficult to discover this due
to the numerous accounts opened with banks. In addition, all the
bank statements submitted to the Accountant-General’s office for
bank reconciliation were done in arrears for many years.
Although some states have engaged the services of consultants and
adopted the use of e-receipt in an effort to address these challenges,
there are still some loopholes that need to be blocked to avoid
revenue leakages in the system. For some agencies that cannot
use e-receipt, they can still continue the use of Treasury Receipt
Book 6A to collect the revenue. For example, the judiciary/courts
and other MDAs that have the same characteristics, one dedicated
account should be created for them for the payment of revenue.
The sub-accountant that will be in-charge of the revenue of these
agencies should have access to the bank statement to ensure that the
payment made by the revenue collectors are actually paid into the
government account before the issuance of TRB6 as evidence that
the revenue collected has been accounted for.
Except for the judiciary and other MDAs with the same characteristics,
all receipts, both TRB6 and 6A, should be retrieved from all the
ministries and proper stock taken with Auditor-General for the state.
The latter should retain custody of the retrieved receipts.
39.6 Control Mechanism

The following control measures are recommended.
i. The number of banks in use for revenue should be reduced.
ii. The sub-accountant in the local government representing
the director of treasury responsible for the state government
revenue in each of the local government should dedicate
only one account number for the collection of revenue in that
jurisdiction. He should have access to the bank statement to
validate that all revenues are actually paid into the account.
iii. The revenue account should be non-cheque bank account.
iv. The bank statement of the revenue accounts should be
reconciled monthly to ensure that all revenues collected are
paid into government account.
v. E-receipts should be introduced to curb the leakages in the
state revenue.
vi. Monitoring of revenue should be taken seriously in the state.
vii. Third party printers should not do printing of the revenue
receipts or earning receipt booklets.
viii. The sub-accountant should display in his office an up-to-
date chart listing the individual revenue collectors under his
control and the date on which each is expected to make his
return.
ix. In compliance with FR 208(111), the roadworthiness
certificate should carry the amount on the licence book as
states government and FCT Abuja have been losing a lot of
revenue from this source.
39.7 Expected Financial Statements and Other Reports to be

Produce
In line with the objective of the 2017 revised cash basis IPSAS,
the following are the expected financial statements and other
reports the Accountant-General is expected to render annually for
the use of stakeholders taking into consideration the preparation of
Consolidated Financial Statement, Disclosure of Information about
External Assistance and Third Party Payment:
(i) Main financial Statements
(ii) Performance reports
(iii) Statistical reports
(iv) Statement of accounting policies.
39.7.1 Main Financial Statements

The main financial statements consist of:
i. Statement 1 - Cash Flow Statement
ii. Statement 2 – Statement of Assets and Liabilities
iii. Statement 3 – Statement of Consolidated Revenue Fund
iv. Statement 4 - Statement of Capital Development
v. Note to the financial statement
39.7.2 Performance Report

The performance reports expected to be produced are:
a. Revenue Performance Report
b. Recurrent Expenditure Performance Report
c. Capital Expenditure Performance Report
39.7.3 Statistical Report

a. Statistical report is used to analyse the annual total
expenditure broken down into functional categories of general
public service, defence, public order and safety, economic
affairs, environmental protection, housing and community
development, health, recreation, culture and religion.
b. Statistical report is equally used to analyse the total expenditure
according to programme, like power and transportation.
c. Statistical report segmented the total capital expenditure into

the six geo-political zones.

There are important accounting policies that must be stated which
will be the basis for the preparation of the financial statements.
These are specific principles, conventions and rules adopted in the
39.8 Main Financial Statements

i. Statement No 1 – Cash Flow Statement
Cash flow statement is divided into three sections:
a. Operating Activities: Operating activities consist of
all actual movement of income and expenses for the
period under review.
b. Investment Activities: Investment activities consist of
actual investments made during the period. In most
cases, investment relates to capital expenditures,
which are sectorised in line with the sectorisation of
the capital expenditure. For instance, administrative
sector, economic sector, law and justice sector, social
service sector, regional development sector, capital
expenditure funded from aid and grants. From the
above sectorisation, the total amount invested in each
sector can be identified immediately without much
problem which is good for analysts.
c. Financing Activities: Financing activities consist
of all sources of inflow and outflow of financing the
activities of the entity for the period under review.
For instance, inflow from aid and grant, loans both
external and domestic and outflow which is repayment
of loans, bonds and external loans. There must be note
for detailed information about the external assistance
aid, grant or loan.
d. Movement of other Cash Equivalent: The net cash will
be arrived at which is the liquidity of the government
or entity.
Note: The direct method should be used for the preparation of the cash
flow statement in line with the method adopted by Nigeria government.
In addition, all cash movement for the period must be reflected in
the statement with appropriate notes for details and cross-reference.
For instance, any additional property, plants and equipment (PPE)
purchased or invested on should be reflected in the cash flow statement.
It should be noted that the comparative figure must be provided. On no
condition should cash flow be presented without comparative figures of
the immediate past year. However, in line with IPSAS 24, “Presentation
of Budget Information in the Financial Statement”, it is appropriate to
provide a column to make it a full statement.
Specimen of Statement No. 1

Cash Flow Statement
For the year ended 31st December, 2015
Annual Cash Flow from Note Actual 2015 Actual 2014

Budget Operating (N) (N)
2015 Activities
Receipts:
Statutory
Allocation:
FAAC 1 2,426,016,647,945.69 2,735,598,769,426.61
Value Added
Tax Allocation 2 104,661,035,354.09 106,743,764,228.50
Share of excess
crude oil account 3 0 170,058,565,533.75
Licence 5 5,583,595,856.38 2,426,402,460.62
Mining rents 6 809,929,098.05 1,496,623,432.86
Royalties 7 0 21,914,538.08
Fees general 8 25,273,285,949.15 21,547,334,702.78
Fines 9 2,661,432,109.28 1,327,815,103.89
Sales general 10 29,514,217,497.62 73,333,462,005.59
Earnings 11 13,358,183,054.95 3,436,755,473.44

Rent of
government
building 12 163,206,729.11 93,216,095.00
Rent on land
and others 13 1,579,488,628.46 1,239,008,173.52
Repayment – general 14 231,512,466820.29 1,233,012,611.22
Investment income
(Including operating
surplus) 15 298,916,102,027.72 221,136,206,785.86
Interest earned 16 47,097,219.74 28,614,107.36
Reimbursement 17 72,003,966,625.40 15,481,644.20
Other revenue sources
of the government 18 0 122,681,281,488.85
Total receipts 3,212,100,645,915.93 3,462,418,227,812.16
Payments:
Personnel cost
(including salaries
on CRF charges) 19 2,050,080,350,036.02 1,982,268,617,482.21
State govt.
contribution to
pension 20 78,776,312,731.02 57,015,611,526.50
Overhead charges 21 537,917,487,132.28 408,912,093,179.41
Other CRF charges
(incl. service wide
vote 22 514,300,464,669.98 359,082,608,612.47
Total payments: 3,181,074,614,569.40 2,807,278,930,800.59
Net cash flows from
operating activities 31,026,040,346.53 655,139,297,011.57
ANNUAL CASH FLOW NOTES ACTUAL 2015 ACTUAL 2014

BUDGET FROM INVESTING (N) (N)
ACTIVITIES
INFLOW:
OUTFLOW:
CAPITAL
EXPENDITURE:
ADMINISTRATIVE
SECTOR 23 69,151,530,454.94 159,719,967,285.55
CAPITAL
EXPENDITURE:
ECONOMIC
SECTOR 24 248,050,291,311.72 247,929,302,667.61
CAPITAL
EXPENDITURE:
LAW AND JUSTICE 25 15,679,523,564.27 19,786,201,860.45
CAPITAL
EXPENDITURE:
REGIONAL
DEVELOPMENT 26 14,482,772,321.68 34,203,672,014.85
CAPITAL
EXPENDITURE:
SOCIAL SERVICE
SECTOR 27 134,568,197,960.29 71,326,057,891.98
CAPITAL
EXPENDITURE:
FUNDED FROM
AID AND GRANTS 28 22,142,472,757.04 1,696,294,224.03
CAPITAL
EXPENDITURE:
EXTERNAL LOANS 29 273,014,420,000.00 342,703,050,000.00
GENERAL
RESERVE (PYA) 30 856,613,427,425.39 601,339,004,160.56
TOTAL OUTFLOW: 1,633,702,635,795.33 1,478,703,550,105.03
NET CASHFLOWS
FROM INVEST-
MENT ACTIVITIES: 1,633,702,635,795.33 1,478,708,550,105.03

CASHFLOWS
FROM FINANCING
ACTIVITIES:
INFLOW:
PROCEEDS FROM
AID AND GRANTS 31 21,269,429,407.32 2,006.589,629.20
PROCEEDS FROM
EXTERNAL LOAN 32 273,014,420,000.00 342,703,050,000.00
PROCEEDS FROM
INTERNAL LOANS: 33 1,550,862,000,000.00 570,243,511,000.00
PROCEEDS (Refund
of LG Portion of Paris
club over deduction 34 0 602,519,135,060.46
OTHER CAPITAL
RECEIPTS 35 1,248,750.00 201,500.00
TOTAL INFLOW: 1,845,147,098,157.32 1,517,472,484,189.66
OUTFLOW:
REPAYMENT OF
EXTERNAL LOANS
Including serving 36 74,679,041,429.59 84,822,837.17
REPAYMENT OF
STATE BONDS 37 831,222,902,000.00 19,170,000,000.00
REPAYMENT of
Internal loans &
other contractual
obligation 38 42,656,715,000.00 0
TOTAL OUTFLOW 948,558,658,429.59 103,992,787,837.17
NET CASHFLOW
FROM FINANCING
ACTIVITIES: 896,588,439,727.73 1,413,479,696,352.49
MOVEMENT IN
OTHER CASH
EQUIVALENT
ACCOUNTS
STATE
GOVERNMENT
INVESTMENT 39 84,602,802,659.90 666,398,715,025.60
DEPOSIT 40 2,558,412,461.29 703,573,784.13
TRUST AND
OTHER FUNDS
OF STATE GOVT 346,287,643,060.26 52,463,622,599.61
NET (INCREASE)
/DECREASE IN
OTHER CASH
EQUIVALENTS 783,616,469,691.21 21,788,488,208.38
524,490,041,752.14 635,020,006,850.24
NET CASH 181,598,113,968.93 45,104,563,591.21
CASH & ITS
EQUIVALENTS
OPENING
BALANCE 480,649,885,886.89 525,754,449,478.10
CASH & ITS
EQUIVALENTS
CLOSING BALANCE 299,051,771,917.96 480,649,885,886.89

The Accompanying Notes from Part of this Statements

The note to the account on the statutory allocation is very important; therefore,
you must know how to compile it otherwise the figure will not agree with what
actually happened in the year under review.
Documents Required
a. Monthly FAAC meeting
b. Bank statement where the amount is paid into (The allocation should be
paid to the State Consolidated Revenue Fund)
c. Debt Management Office Report
Note 1 (A)
2015 Government Share on FAAC
Month Net Receipt Deduction at Source Gross

(N) (N) (N)
January 2,731,521,700.70 3,690,777,669.00 6,576,967,265.09
February 967,578,975.90 1,985,857,450.90 2,895,432,874.00
March 958,987,243.87 1,876,981,980.00 2,231,657,862.09
April 974,876,154.90 1,674,793,970.00 2,678,961,981.00
May 976,095,047.70 758,932,875.40 1,489,974,345.80
June 1,465,986,285.85 1,856,945,345.98 3,986,563,456.90
July 875,986,342.86 1,867,234,981.09 2,095,963.328.42
August 1,085,971,564.60 1,057,974,841.00 2,975,951,573.00
September 694,942,861.00 1,068,941,952.52 1,857,941,745.08
October 586,094,375.09 986,438,236.67 1,589,085,458.39
November 1,874,851,096.55 1,986,463,612.90 3,095,576,235.00
December 945,095,458.00 1,009,574,953.67 2,086,831,867.58
Total 10,574,864,857.67 14,876,769,167.90 25,786,681,096.00
Note: The above table is a specimen of Note 1; the figures are not real.
From the above table, it can be seen that the net receipt is lower than the
contractual obligations that were deducted at source. Therefore, you cannot
rely on the bank statement alone without verifying from the FAAC files.
Otherwise, the account will not be reliable.
Other Special Statutory Allocation to States Note 1 (B)
Actual Month 13% Exchange Paris Club Total

2014 Derivation Rate Gain Refund
xxxxx January xxxxxx xxxxxx xxxxxxx xxxxxx
xxxxx February xxxxx xxxxxx xxxxx xxxxx
xxxxx March xxxxx xxxxxx xxxxx xxxxx
xxxxx April xxxxx xxxxxx xxxxxx xxxxx
xxxxx May xxxxx xxxxxx xxxxxx xxxxxx
xxxxx June xxxxxx xxxxxx xxxxx xxxxx

xxxxx July xxxxxx xxxxxx xxxxx xxxxx
xxxxx August xxxxxx xxxxxx xxxxx xxxxxx
xxxxxx September xxxxxx xxxxxx xxxxx xxxxxx
xxxxx October xxxxxx xxxxxx xxxxx xxxxxx
xxxxxx November xxxxxx xxxxxx xxxxx xxxxx
xxxxx December xxxxxx xxxxxx xxxxx xxxxxx
xxxx Total xxxxx xxxxx xxxxx xxxxx
Note 2 Note 3
Value Added Tax Allocation 2015 Share of Excess Crude Oil Account
Month Amount (N) Month Amount (N)

January xxxxx January Xxxx
February xxxxx February Xxxx
March xxxxxx March Xxxx
April xxxxxx April Xxxx
May xxxxxx May Xxxx
June xxxxxx June Xxxx
July xxxxxx July Xxxx
August xxxxx August Xxxx
September xxxxxx September Xxxx
October xxxxx October Xxxx
November xxxxx November Xxxx
December xxxxx December Xxxx
Total xxxxx Total xxxx
Note: The above tables are specimen of Notes 1-3 of the cash flow statement
Statement No. 2
Statement of Assets and Liabilities As at 31st December, 2015
Details Note 2015 2014

(N) (N)
Assets
Liquid assets:
CRF bank balance 14 xxxxx xxxxx
Cash held by MDAs 15 xxxxx xxxxx
Total liquid assets
Investment and other cash assets
State government investments 16 xxxxx xxxxx
Imprest 17 xxxxx xxxxx
Advances 18 xxxxx xxxxx
Sub-total investment & other cash asset
Intangible asset 19 xxxxx xxxxx
Sub-total Intangible assets
Total assets
Liabilities:
Public funds
Consolidated Revenue Fund 20 xxxxx xxxxx
Capital Development Fund 21 xxxxx xxxxx
Trust & Other Public Funds 22 xxxxx xxxxx
Total Public Funds

Internal loans & external loans
Internal loan 23 xxxxx xxxxx
External loans 24 XXXXX XXXXX
Other Liabilities
Motor vehicle loan civil servants 25 XXXXX XXXXX
Deposit * 26 XXXXX XXXXX
Total Liabilities
Note: Note 26, which is deposit has been asterisked since none of the
MDAs has been able to give details of the deposit at the end of the
financial year including the federal government.
According to the National Chart of Accounts, Economic Code of Deposit is

410101 with the Following sub-Heads:
Economic Code Federal Government State Government Local Government

410101 Deposit Deposit Deposit
41010101 Contract retention Contract retention Contract retention
fees fees fees
41010102 Prisons inmate
deposit N/A N/A
41010103 Caution fees Caution fees Caution fees
41010106 Bonds and sureties Bonds and sureties Bonds and sureties
Note: What happens to all the above deposits in the government which
have not been reported?
Statement No 3
Consolidated Revenue Fund For the Year Ended 31st December, 2015
Actual Previous Details Note Actual 2015 Final Budget 2015 Initial/Original Budget
year 2014
11,643,722,687,721.20 Opening balance 11,527,509,521,314.40
Revenue
Statutory Allocation
2,735,598,769,426.61 Statutory allocation: FAAC 1 2,426,016,647,945.69 2,695,010,000,000.00 2,695,010,000,000.00
106,743,764,228.50 Value added tax allocation 2 104,661,035,354.09 172,529,000,000.00 172,529,000,000.00
170,058,565,533.75 Share of excess crude oil account 3 0 - -
3,012,401,099,188.86 Total statutory allocation 2,530,677,683,299.78 2,867,539,000,000.00 2,867,539,000,000.00
Independent revenue allocation
0 Personal taxes 4 0 0 0
2,426,402,460.62 License 5 5,583,595,856.38 695,886,391.45 695,886,391.45
1,496,623,432.86 Mining rents 6 809,929,098.05 429,228,001.93 429,228,001.93
21,914,538.08 Royalties 7 0 6,285,036.83 6,285,036.83
21,547,334,702.78 Fees general 8 25,273,285,949.15 6,179,723,782.43 6,179,723,782.43
1,327,815,103.89 Fines 9 2,661,432,109.28 380,814,179.08 380,814,179.08
73,333,462,005.59 Sales general 10 29,514,217,497.62 21,031,860,573.63 21,031,860,573.63
1329
3,436,755,473.44 Earnings 11 13,358,183,054.95 985,653,206.14 985,653,206.14

93,216,095.00 Rent of government building 12 163,206,729.11 26,734,151.91 26,734,151.91
1,239,008,173.52 Rent on lands and others 13 1,579,488,628.46 355,344,564.98 355,344,564.98
1,233,012,611.22 Repayments general 14 231,512,466,820.29 353,625,052.13 353,625,052.13
221,136,206,785.89 Investment income (including
operating surplus) 15 298,916,102,027.72 351,602,198,504.00 351,602,198,504.00
28,614,107.36 Interest earned 16 47,097,219.74 8,206,457.19 8,206,457.19
15,481,644.20 Reimbursement 17 72,003,966,625.40 4,440,098.33 4,440,098.33
327,335,847,134.45 Total independent revenue 681,422,971,616.15 382,060,000,000.00 382,060,000,000.00
Statement of Consolidated Revenue Fund
For the Year Ended 31st December 2015 Financial Year
1330
year 2014
Other revenue source
122,681,281,488.85 Other revenue sources of the
government 18 0 0 0
122,681,281,488.85 Total other revenue sources 0 0 0
3,462,418,227,812.16 Total revenue 3,212,100,654,915.93 0 0
Expenditure
Operating expenses
1,982,268,617,482.21 Personal cost (including salaries
on CRF charges) 19 2,050,080,350,036.02 2,294,898,005,497.51 2,294,898,005,497.51
57,015,611,526.50 State government contribution to
pension 20 78,776,312,731.02 81,856,551,688.00 81,856,551,688.00
408,912,093,179.41 Overhead charges 21 537,917,487,132.38 582,897,857,420.48 582,897,857,420.48
359,082,608,612.47 Other CRF charges (including service
wide votes) 22 514,300,464,669.98 1,603,365,820,742.18 1,088,960,311,329.00
2,807,278,930,800.59 3,181,074,614,569.40 4,563,018,235,348.17 4,048,612,725,934.99

84,822,787,837.17 36 74,679,041,429.59 80,661,415,472.89 0
19,170,000,000.00 37 831,222,902,000.00 831,222,902,000.00 0
0 38 42,656,715,000.00 42,656,715,000.00 0
0 0 - 0

0 0 - 0
103,992,787,837.17 948,558,658,429.59 954,541,032,472.89 0.00
2,911,271,718,637.76 4,129,633,272,998.99 5,517,565,,038.09 4,048,612,725,934.99
11,092,576,178,546.80 12,445,042,139,397.50 5,517,537,656,038.09 4,048,612,725,934.99
434,933,342,767.69 Total operating expenses
11,527,509,521,314.40 Repayment of external loans 12,445,042,139,397.50
Transfer to capital development fund 138,695,627,693.46 541,174,565,449.30 541,174,565,449.30

Closing balance 12,583,737,767,090.90
The accompanying notes form part of this statement.
Statement No. 4
Statement of Capital Development Fund for the Year Ended 31st December, 2015
year 2014
3,655,180,762,473.79 Opening Balance 2,717,327,783,265.65
Prior Year Adjustment
1,411,555,256,060,46 Intangible Assets (PYA) 56 1,156,923,523,000.00 1,156,923,523,000.00 0
601,339,004,160.56 General Reserve (PYA) 30 856,613,427,425.39 856,613,427,425.39 0
2,012,894,260,221,02 Total Prior Year Adjustment 2,013,536,950,425.39 2,013,536,950,425.39 0.00
Capital Receipts
434,933,342,767.69 Transfer from Consolidated
Revenue Fund 57 0.00 541,174,565,449.30 541,174,565,449.30
2,006,586,629.20 Proceeds from Aid and Grants 31 21,269,429,407.32 0 0
342,703,050,000.00 Proceeds from External Loan 32 273,014,420,000.00 0 0
570,243,511,000.00 Proceeds from Domestic Loans:
Fgn Bonds 33 1,550,862,000,000.00 0 0
602,519,135,060.46 Proceeds from Domestic Loans:
Ntbs etc. 34 0 0 0
0 Proceeds From Loans – Development
of Nat. Resources 0 0 0
0 Proceeds of Loans from Other Funds 0 0 0
201,500.00 Other Capital Receipts 35 1,248,750.00 0 0
1,952,405,826,957.35 Total Capital Receipts 1,845,147,098,157.32 541,174,565,449.30 541,174,565,449.30
Capital Expenditure
159,719,967,285.55 Capital Expenditure: Administrative
Sector 23 69,151,530,454.94 172,499,126,077.20 172,499,126,077.20
247,929,302,667.61 Capital Expenditure: Economic Sector 24 248,050,291,311.72 549,868,334,248.52 369,946,209,089.23
19,786,201,860.45 Capital Expenditure: Law and Justice 25 15,679,523,564.27 21,014,120,137.39 20,813,927,911.91
34,203,672,014.85 Capital Expenditure: Regional
Development 26 14,482,772,321.68 33,190,133,380.53 21,740,000,000.00
71,926,057,891.98 Capital Expenditure: Social Service 27 134,568,197,960.29 63,029,190,686.63 57,057,986,485.64
1,696,294,224.03 Capital Expenditure: Funded From
Aids and Grants 28 22,142,472,757.04 22,142,472,757.04 0
342,703,050,000.00 Capital Expenditure: External Loans 29 273,014,420,000.00 273,014,420,000.00 0
1331
877,364,545,944.47 Total Capital Expenditure 777,089,208,369.94 1,134,757,797,287.31 642,057,251,563.98
0 Transfer CRF 0 0 0
2,717,327,783,265.65 Closing Balance 1,771,848,722,627.64
The accompanying notes form part of this statement.
39.9 State Government Financial Statement under IPSAS

Accrual Basis of Accounting
In line with the approved roadmap, the government gave a directive
on the adoption of IPSAS accrual-basis. The 22 provisions of
the Fiscal Sustainability Plan (FSP) which the Federal Ministry
of Finance and World Bank initiated is compelling the states to
adopt IPSAS accrual-basis in order to access the associated grant.
However, with the provision of IPSAS 33-First Time Adopter, three
years grace is given for an agency to complete the full adoption. As a
result and in compliance with the provision, some state governments
have commenced preparation of the financial statement on IPSAS
accrual-basis of accounting
39.9.1 Expected Financial Statement to Be Prepared by State

Government
i. Statement of Financial Position
ii. Statement of Financial Performance
iii. Cash Flow Statement
iv. Statement of Changes in Net Asset/Equity
v. Budget Performance Report (a comparison of budget and
actual)
vi. Related Explanatory Notes to the Accounts
To avoid a repetition of specimen of the financial statements with
the adoption of the IPSAS, since the same template is adopted by all
the three tiers of government, we will concentrate on the note to the
accounts that need to be addressed.
39.9.2 Note to the Financial Statements

Financial statement is to show the full information that happened
in the agency in the year under review. The notes provide detailed
additional information about the transactions that took place
during the year. The notes provide further explanations to users
of the financial statement which is the yardstick for measuring
the accountability of any government agency. This explains why
at the end of each statement, a clause is always written, “The
accompanying notes form an integral part of the General Purpose

Financial Statement (GPFS)”. Regrettably, most of the notes only
have the same figure like that on the face of the financial statement
without providing additional information. This practice makes the
financial statement incomplete.
The financial statement templates adopted are always presented by
each tier of government and these are accepted by the World Bank
and Federal Ministry of Finance as proper financial statements that
complied with the guidelines of the Fiscal Sustainability Plan. As
a result, they, therefore, qualify for the grant without reviewing
the financial statements. Instructively, the notes to those financial
statements have no bearing with the figures on the face of the
financial statements. For instance, for those accounts to comply
with accrual basis of accounting, the following fundamental issues
must be addressed:
i. Receivable
ii. Payables
iii. Intangible assets
iv. Inventories
v. Deposit
The above items on the face of the financial statement and the
notes have no bearing and, therefore, contravened the provision
of Financial Reporting Council of Nigeria’s “Revised Guidelines/
Regulations 2014 for Inspection and Monitoring of Reporting
Entities”. If the provision is applied, most of the government
agencies will be penalised. The highlights of the guidelines are
discussed below.
39.9.3 Guidelines/Regulations for Inspections and Monitoring

of Reporting Entities
This is to bring to the notice of all entities, users and preparers
of financial statements and the general public that the guidelines/
regulations aimed at the effective implementation of Nigeria’s
Accounting, Auditing, Actuarial and Valuation Standards and

Code of Corporate Governance, have been issued by the Financial
Reporting Council of Nigeria (FRC), an agency of the Federal
Government of Nigeria charged with the responsibility for, amongst
other things,
i. Developing and publishing accounting and financial
reporting standards to be observed in the preparation of
financial statements of reporting entities in Nigeria and for
related matters vide the FRC Act No. 6 of 2011.
ii. In accordance with Section 7 of its enabling Act, the
Council is empowered to do all things necessary for or in
connection with the performance of its functions.
iii. The Council is empowered to enforce and approve
enforcement of compliance with accounting, auditing,
corporate governance and financial reporting standards in
Nigeria.
iv. Directorate of inspections and monitoring shall impose
sanctions/penalties as prescribed by these guidelines/
regulations. The appropriate sanctions/penalties are arrived
at after due consideration of the nature and materiality of
the contravention of the applicable financial reporting
standards, code of corporate governance or requirements
of the Act.
v. There are five categories of non-compliance situations
that may be material without rendering the ‘financial
statements’ totally misleading as specified in the schedule
attached to the Act. In such situations, the Council shall
impose sanctions as follows:
(a) Type 1 non-compliance (N5m);
(b) Type 2 non-compliance (NI5m);
(c) Type 3 non-compliance (N25m);
(d) Type 4 non-compliance (N50m); and
(e) Type 5 non-compliance (N100m).
(f) Type 6: Withdrawal of financial statements leading

to restatement – Not less than N500million but
not more than N5 billion for each year requiring
such restatement. The range is based on market
capitalisation/turnover as distinguished by section
33 of the Act and in multiples of N500m.
Entities that are not within the categorisation will be penalised

based on such factors that may be so determined by the Directorate
of Inspections and Monitoring in so far as the amounts are not more
than the rates stated here above and not too distinct from the rates
altogether. These amounts are subject to review from time to time
by the Council.
39.10 Some Accounting and Disclosure Anomalies

Distinguished by Type
a. No classification of expenses, e.g. staff costs, auditor’s
remuneration, interest on loan, depreciation and directors’
remuneration.
b. Failure to show the required highlights in a statement of
cash flows and to show, by way of note, a reconciliation of
the amounts in a statement of cash flows with equivalent
items reported in the statement of comprehensive income
or the statement of financial position.
c. Non-disclosure of the make-up of “other assets” and “other
liabilities” when either of them consists of a significant
balance or item in proportion to the total.
Comment: In view of the anomalies highlighted by types,

especially ‘c’ Non-disclosure of the make-up of “other assets”
and “other liabilities” when either of them consists of a significant
balance or item in proportion to the total. What is happening in the
Government Financial Statement is not other assets, it is full asset
and liabilities as the figure in the financial statement will equally be
repeated in the note without make-up.
39.11 Observations and Recommendations

The following observations and recommendations on the under-
listed items on the financial statements will enhance the quality and
reliability of the financial statement of the government agencies:
39.11.1. Receivable
Under the accrual basis, receivable on revenue should be the first
item before any other. The revenue receivables should be identified
in the notes to the account with full details of the debtors, their names
and dates, as these will assist to determine whether the receivable is
impaired or not. There should be schedule showing the names of the
individual debtors, nature of services obtained, gross amount and
age analysis.
For advances, there should be a schedule showing the names of the
individual staff debtors, nature of advance granted, age analysis of
each class of advances and loan along with the comparative figures.
For “other debtors”, there should be schedule consisting of “other
debtors”, names of the beneficiaries, age analysis and comparative
figures.
39.11.2 Payables
Under the payables, where there are creditors and accruals, there
should be a schedule showing the names of the individual creditors,
nature of services rendered, gross amount, age analysis and
comparative figures.
For remittances, e.g., NHF, co-operative, deducted but not yet
remitted, a schedule showing the nature of remittances, beneficiaries,
amounts and reasons why the remittances were not made when they
were due.
“Other creditors”, a schedule totalling names of the creditors,
services rendered and their comparative figures.
39.11.3 Intangible Assets

Intangible asset, as it affects Public Sector, is the software purchased
for the implementation of IPSAS. Under the note, the disclosure
of the intangible asset must be explicit and specific. The intangible
asset acquired should not be described as, “Other Intangible” on
which billions of naira were spent. The amount will be reflected in
the cash flow statement as an indication of movement of cash for the
year under review. From National Chart of Accounts, the economic
code for intangible asset is 320301. What constitute intangible assets
in Public Sector are: patents, copyrights, trademarks, franchise and
software. Therefore, anything apart from these are not intangible
assets.
39.11.4 Inventories
Inventory is a very important aspect of the financial statement that
needs full disclosure. Schedule of store items in the main store and
those in each department should be analysed.
39.11.5 Deposit
The economic code of deposit is 410101. Retention fees and
bonds and sureties must be under this code otherwise, the financial
statement may be regarded as incomplete and unreliable. It is
practically impossible not to have unpaid retention fees from the
contract awarded during the year as at the end of the financial year.
The same applies to bonds and sureties from the courts for the year
under review.
39.12 Auditor-General for the State

The appointment of the Auditor-General for the states is in section
126 of the 1999 Constitution (as amended). The Auditor-General
for a State shall be appointed by the Governor of the State on the
recommendation of the State Civil Service Commission subject to
confirmation by the House of Assembly of the state. The power to
appoint persons to act in the office of the Auditor-General for a State
shall vest in the Governor. Except with the sanction of a resolution

of the House of Assembly of a state, no person shall act in the office
of the Auditor-General for a State for a period exceeding six months.
A person holding the office of Auditor-General under section 126 (1)
of the Constitution shall be removed from office by the Governor of
the State acting on an address supported by two-thirds majority of
the House of Assembly praying that he be so removed for inability to
discharge the functions of his office (whether arising from infirmity
of mind or body or any other cause) or for misconduct. An Auditor-
General shall not be removed from office before such retiring age
as may be prescribed by law, save in accordance with the provisions
of this section.
39.12.1 Effective Operation of Auditor-General for the States

For state Auditors-General to perform as expected, financial
independence should be granted to them. Currently, except for his
salary, all other running costs for the office are always contentious.
Therefore, until this fundamental issue is addressed, the quest for
effective audit of any state government account will remain a mirage.
39.13 Local Government Accounting

Local government represents the third tier of government within
the Nigerian Federation. The local council represents the basic
unit through which any federal nation administers the people at the
grassroots level. Like other tiers of government, it has three arms:
executive, legislative and judicial arms. However, its judicial arm
has not been separated from that of the state government.
Local governments receive a share of revenues that are collected
nationally – Statutory Allocation, Value Added Tax and Excess
Crude distributions. They also generate their own internal revenue
as well as receive a share of states’ internally generated revenue.
Local government can be described as government at the local
level exercised through representative councils established by law
to perform specific duties within a restricted geographical area. As
the lowest tier of government, the local government is responsible
for some of the most key grassroots expenditures including those

for health and education sectors. Therefore, their ability both to
accurately prepare and implement budgets are crucial in the overall
National Vision 202020 agenda and State Development Plans.
Statutory allocation is a transfer from FAAC and is based on the
collection of mineral (largely oil) and non-mineral revenues
(companies’ income tax, customs and excise) at the national level,
which is then shared between the three tiers of government using the
statutory sharing ratios. The 20.60% local governments’ share of the
total disbursements of statutory allocation is shared by the 774 LGs
using the statutory sharing ratios.
VAT is an ad valorem tax on most goods and services at a rate
of 5%. It is collected by the Federal Inland Revenue Service
(FIRS) and distributed between the three tiers of government on
a monthly basis – partially based on set ratios, and partially based
on the amount of VAT a particular state/LG is able to generate.
In total, LGs receive 35% of the total VAT collections nationally,
which is then shared by the 774 LGs using sharing ratios.
IGR at the LG level represents various revenue that LGs are
statutorily empowered to collect within their geographic location.
39.13.1 The Need for Local Government

There is the need for an effective local government in Nigeria for
the following reasons:
(a) To bring government nearer to the people.
(b) To bridge communication gap between the rural areas and
the urban centres and between the federal government and
rural areas.
(c) To facilitate effective and efficient government administration.
(d) To foster rapid and even development of the country.
(e) To provide utility service and infrastructure for economic
development.
(f) To encourage greater public participation in government.
(g) To promote education at the local level.
39.13.2 Functions of Local Government

(i) Making of recommendation to the state government on the
economic development needs of the local government.
(ii) Collection of rates and issuance of television licences.
(iii) Establishment and maintenance of cemeteries, burial

ground and home for the destitute.
(iv) Licensing of bicycles, trucks, canoes, wheel barrows.
(v) Establishment, maintenance and regulation of markets,
motor parks and public playgrounds/parks.
(vi) Construction and maintenance of roads, street drains, paths,
open spaces, or such public facilities as may be prescribed
from time to time by the local government council.
(vii) Naming of roads and streets and numbering of houses.
(viii) Provision and maintenance of public conveniences and
refuse disposal.
(ix) Registration of all births, deaths and marriages.
(x) The local government council may prescribe assessment
of privately owned houses or tenement for the purpose of
levying such rates.
(xi) Control and regulation of outdoor advertisement, movement
and keeping of pets.
(xii) Licensing, regulation and control of the sale of liquor.
(xiii) Local government shall participate in the:
a. provision and maintenance of primary education;
b. provision and maintenance of primary health care/
service;
c. the development of agriculture and natural resources;
and
d. provision of rural roads.
39.13.3 Organisational Structure of the Local Government

The organisational structures of local government consist of:
i. Department of Personnel Management
ii. Department of Finance, Supplies, (Treasury)
iii. Works
iv. Primary Health Care
v. Environment
vi. Agriculture
vii. Education
viii. Community Development
ix. Legal
x. Budget Planning Research and Statistics
39.13.4 Department of Primary Health Care Environment

and Legal
This shall be headed by a medical officer, qualified environment
officer, a university degree holder in the field of agriculture and a
legal practitioner respectively.
39.13.5 The Legal Department

This shall also be charged with the preparation of contractual
agreement for and on behalf of the council for projects above the
value of N2,000,000.00(two million naira).
• Copies of all contract agreement entered into by any local
government shall be transmitted through the legal department
to the Auditor-General (local government) who shall in turn
have access to project sites for the purpose of carrying out
project monitoring and evaluation.
The basic functions and areas of concern of local government are
as follows:
(a) Education
(b) Agriculture and Natural Resources
(c) Works and Housing, Land and Survey
(d) Medical and Health
These responsibilities are headed by supervisors.
39.14 Local Government Structure

The Executive arm of local government comparises:
i. The chairman
ii. Vice-chairman
iii. Supervisors
iv. Secretary to the local government
39.14.1 Responsibilities of Local Government Officers

a. Chairman of Local Government
The Chairman as Chief Executive: The chairman of
each local government shall be the chief executive and
accounting officer of the local government provided his
role as accounting officer shall exclude signing vouchers
and cheques. For the avoidance of doubt, vouchers and
signing of cheques shall be signed by the head of personnel
management and the treasurer of the local government.
The chairman, as the chief executive and accounting
officer shall perform the following functions:
i. He shall observe and comply fully with the checks
and balances spelt out in the existing regulations
governing receipts and disbursement of public funds
and other assets entrusted to his care and shall be
liable for any breach thereof.
ii. His accountability shall not cease by virtue of his
leaving office and he may be called at any time, after
leaving office, to account for his tenure as chairman.
iii. He shall be responsible to account to the public
accounts committee for all moneys voted for each
department and shall be peculiarly liable.
iv. Though he shall not be a signatory to cheques and
vouchers, he must ensure that the head of personnel
management and treasurer to the local government
signs all cheques and vouchers.
v. He shall commit in writing all instructions given by

him relating to expenditure of public fund.
vi. He shall subject himself to periodic check in order
to ensure adherence to the Finance (Control and
Management) Act.
vii. He shall render annual report to the local government
council in order to ensure accountability and
enforcement of performance ethics.
viii. He shall present his annual estimated budget to
the local government council (legislature) for
consideration and approval.
ix. He shall render monthly statement of income and
expenditure to the legislature (local government
council).
x. He shall render quarterly returns of the actual income
and expenditure to the state government for onward
transmission to the Office of Vice-President of the
Federal Republic of Nigeria with a copy to Central
Bank of Nigeria.
b. The Vice-Chairman
i. The vice-chairman, who shall be elected with the
chairman of the local government shall be assigned
responsibility for the administration of a department
of the local government. Therefore, all functions of
the supervisors are applicable to him as a supervisor.
ii. He shall act for the chairman in his absence.
iii. He may be called upon to account for his tenure as
vice-chairman.
c. Secretary to the Local Government

The secretary to the local government shall be appointed
by the chairman and shall hold his office at the pleasure of
the chairman. He shall perform the following functions:
i. Serve as the secretary of the meetings of the Executive

Committee of the local government and keep the
records thereof.
ii. Co-ordinate the activities of the departments of the
local government.
iii. Liaise, on behalf of the chairman, with the legislature
through the leader of the council (House).
iv. Liaise with the secretary to the state government and
other necessary state functionaries for state and local
relations.
v. Perform such other duties as may be assigned to him,
from time to time by the chairman.
d. Supervisor
The supervisors in the local government act as the
political head of the department as that of commissioner
and minister in the state and federal government level,
respectively. Each local government should not have
more than five supervisors and where the vice-chairman is
allocated a department, it means that the chairman would
appoint only four supervisors. Each of the supervisors
holds his appointment at the pleasure of the chairman who
appointed him or her and the tenure shall end with the
tenure of the chairman who made the appointment.
The following functions shall be performed:
i. Serving as political heads of their respective departments.
ii. Serving as members of the executive committee of the
local government.
iii. Giving directives to the professional heads of their
respective departments on general policy issues.
iv. Assisting the chairman to supervise the execution
of local government projects within their respective
departments.
v. Carrying out such other functions as the chairman

may assign from time to time.
e. Head of Personnel Management

The head of personnel management is a career officer whose
tenure of office, remuneration, functions, responsibilities
and conditions of service are as in the approved scheme of
service for local government employees. He performs the
following functions:
i. He signs all cheques and vouchers.
ii. All contractual agreements, local purchase orders,
job orders, vouchers and other documents relating to
contracts and supplies, subject to the prior approval of
the approving authority, shall be signed by him/her.
iii. He serves as the chairman of the junior staff
management committee.
iv. He is one of the facilitators of the audit alarm
committee.
f. The Treasurer
The treasurer to the local government shall perform the
functions listed below:
i. Performing the duties of chief financial adviser to the
local government.
ii. Having responsibility for the administrative control
of the financial department of the local government.
iii. Performing the duties as the chief accounts officer for
the receipts and payments of the local government.
iv. Ensuring that the accounting system as laid down
in the existing regulations are complied with by all
departments.
v. Having responsibility for budgetary control and
surveying the accounts of all the departments of the
local government.
vi. Preparing and publishing monthly and annual financial

statements of the local government.
vii. Co-ordinating the budget as the chief budget officer.
viii. Being a signatory to local government cheques and
vouchers.
ix. Serving as one of the facilitators of the audit alarm.
x. Performing other functions as may be assigned to him
by the chairman.
xi. Making sure that all instructions relating to the
expenditure of public funds are in writing.
xii. Making all accounting officers to understand that they
are responsible to the public accounts committee for
all moneys voted.
39.14.2 Functions of Treasury Department in the Local

Government
(a) All financial documents and other records prescribed
by regulation to be kept by the treasurer are properly
maintained and kept up to date.
(b) All revenues due are properly collected and paid into
the government funds.
(c) To ensure that all advances are recovered in accordance
with the condition under which they were granted.
(d) No payments are made unless properly authorised and
funds are available.
(e) Accurate account is kept of all moneys received and
disbursed.
(f) Preparation of monthly bank reconciliation statements.
(g) Safeguards, including the arrangement of duties on
sound “internal check” principle as laid down for
protection against fraud, embezzlement or irregularity.
(h) Preparation of annual estimates, annual accounts and
all other financial returns.
(i) Checking the accounts of the revenue collectors at

least once a month.
(j) Maintenance of chart by the treasurer to detect any
revenue collector who failed to render returns.
(k) Issuance of receipts to revenue collectors.
(l) Maintenance of security document register.
39.14.3 Internal Auditor of the Local Government

The main objectives of the section include:
i. To promote accuracy and reliability in accounting and
operating data.
ii. To safeguard government resources against waste,
fraud and inefficiency.
iii. To measure the extent of the operating departments
compliance with government policy.
iv. To evaluate the overall efficiency of the operating
functions.
The internal auditor of each local government is responsible to the
accounting officer. He shall submit to his accounting officer and
Auditor-General detailed audit programme. He is also one of the
facilitators of audit alarm. The general responsibilities of internal
audit in all the tiers of government as contained in the regulation are
as follows:
a. That there is compliance with the provision of the financial
regulations.
b. That financial directives issued by the chief accounting
officers of each tier of government are strictly observed.
c. That all revenues are promptly collected and brought to
account.
d. That all expenditures are properly authorised and
satisfactorily achieve the purpose for which they are
intended.
e. That adequate safeguards exist for the custody of funds,

stores and other assets of the government.
f. That all annual estimates, supplementary estimates,
development plans, accounts, financial statements and
other financial returns are submitted on the due dates in the
manner required.
g. He should display revenue collection chart to detect any
revenue collector who fails to render returns.
h. He should ensure that all officers whose duties involve the
handling of local government funds are adequately bonded.
i. Ensure that the computations and castings have been
verified and are arithmetically accurate. Ensure that all
payments have been entered in the Departmental Vote
Book (DVEA).
39.15 Legislative Arm of Local Government

39.15.1 Composition of the Local Government Legislative
House
The local government council, which is the legislative arm of the
local government, consists of the leader, the deputy leader and
councillors.
39.15.2 Appointment of Clerk of the Legislative House

There shall be clerk of the legislative house and some other staff as
may be prescribed by a regulation made by the service commission
and the method of appointment of the clerk.
39.15.3 Functions of the Clerk of the House

1. The clerk is the administrative head of the legislative arm.
2. His functions shall include:
i. He shall at the commencement of the first sitting of
the house, call the members to order, proceed to call
the roll of members in alphabetical order, pending
the election of a leader and a deputy leader
ii. The clerk is the secretary to the body of the officers

or principal officers council.
iii. At the opening of each day’s proceedings, the clerk
shall distribute to members a paper to be known as
order paper, listing the business of the day.
iv. The clerk shall keep minutes of the proceedings of
the house and of committees of the whole house and
shall circulate a copy of such minutes to be known as
votes and proceedings before the day’s sitting.
v. Responsible for the custody of the voted records,
bills and other documents laid before the house.
vi. The clerk advises the leader and members about the
rules and procedures of the house.
vii. Endorse and authenticate bills passed by the house
before forwarding same to the chairman for assent.
viii. Controls the votes of the legislative house that is, the
income and expenditure of the house, reporting from
time to time the position of the finances of the house.
ix. Custodian of all property of the house.
x. The clerk signs all resolutions and other letters
emanating from the house.
39.15.4 Functions of the Local Government Legislative House

a. Debating, approving or amending the annual budget of the
local government subject to the chairman’s approval which
may be set aside by two-thirds majority of the members of
the local government council.
b. Vetting, monitoring and implementation of projects and
programmes in the annual budgets of the local government.
c. Examining and debating the monthly statement of income
and expenditure rendered to it by the chairman.
d. Advising, consulting and liaising with the chairman of the
local government.
e. Constituting the public account committee.
f. Performing such other functions as may be assigned to it,
from time to time by edict or law of the state in which it is
situated.
39.15.5 Mode of Exercising Legislative Power

The legislative power vested in the local government council shall
be exercised by bye-laws duly passed by the local government
council. To become effective, such bye-laws must be assented to by
the chairman of the local government.
The chairman may withhold his assent in exercise of his veto. The
chairman veto may, however, be overridden by the local government
council if the bill is passed again by two-thirds majority of members
of the council. In such cases, the bye-law shall become effective
and the assent of the chairman of the local government shall not be
required in respect of such a bye-law.
39.16 The Executive Committee of the Local Government

39.16.1 Composition
i. Chairman of the local government
ii. The vice-chairman of the local government
iii. The secretary to the local government
iv. All the four supervisors
39.17 Revenue of Local Government

The main sources of revenue to the local government are as follows:
(a) Statutory Allocations
(i) Federation Account
(ii) Value Added Tax (VAT)
(iii) State Government Account
It is mandatory for the federal government to release 20.60% of
the Federation Account to the local government and 35% of the
VAT to the local government. The share of each state are shared
on the following basis: 1% of the total amount meant to the local
government in each state is paid to the Training Fund being managed
by the local government service commission. The remaining are
shared thus:
• 40% Equity
• 30% Population
• 10% Social development
• 10% Land mass and terrain
• 10% Internal revenue effort.
(b) Grant
(i) From federal government
(ii) From the state government
Grants to local government may come from federal and state
government. It is important to note that grant is different from
statutory allocation. Statutory allocation is compulsory as the
federal or state government cannot withhold it while that of grant
may be withheld.
(c) Internally Generated Revenue

This consists of the revenues generated by the local government
from its internal sources. The internally generated revenue varies
from one state to another and is influenced by the cultural, political
and economic set up of the people. Such revenues are summarised
as follows:
i. Rates, radio/television license fees.
ii. Fee/charges for use of cemeteries and burial
grounds.
iii. Bicycles, trucks, canoes, wheel barrows, etc.
iv. Fees charged for use of slaughter house.
v. Fee/charges for registration of births, deaths and
marriages.
vi. Property and tenement rates.
vii. Outdoor advertising fees/charges.
viii. Fees/registration charges for shops and kiosks,
restaurants, bakeries, etc.
ix. Liquor licensing fees.
The above sources are grouped into National Chart of Account
which each local government is expected to domesticate. Revenue
economic codes are as follows in line with the IPSAS format:
Revenue
Economic Code Description
12010105 Pool Betting Tax
12010106 Development Fund
12010107 Capital Gain
12020105 Radio /Television Station License
12020131 Liquor License
12020137 Trade Permit Licenses
12020416 Contractor Registration
12020418 Marriage/Divorce
12020443 Birth/Death Registration Fees
12020444 Burial Fees
12020445 Change of Ownership Fees
12020108 Rent on Local Government Properties
12020810 Earning from Commercial Undertakings
13010102 Aid and Grants
39.18 Autonomy of Local Government

39.18.1 Section 162(5-8) of 1999 Nigeria Constitution as
Amended
Since 1999, autonomy of the local government has been in the news
because, despite the provision of the constitution, their allocation
is always hijacked by the state government. Regrettably, when the
funds were left in the hands of the local government chairmen, most
of the local government staff were not paid. So, the matter needs
special study to really evolve the way out.
Section 162(5) states that “the amount standing to the credit of
local government councils in the Federation Account shall also
be allocated to the state for the benefit of their local government
councils on such terms and in such manner as may be prescribed by
the National Assembly.”
According to section162(6), each state shall maintain a special

account to be called “State Joint Local Government Account” into
which shall be paid all allocations to the local government councils
of the state from the Federation Account and from the government
of the state.
Also, section 162(7) provides that each state shall pay to local
government councils in its area of jurisdiction such proportion of its
total revenue on such terms and in such manner as may be prescribed
by the National Assembly.
In line with section 162(8), the amount standing to the credit of local
government councils of a state shall be distributed among the local
government councils of that state on such terms and in such manner
as may be prescribed by the House of Assembly of the state.
39.18.2 Role of Nigerian Financial Intelligence Unit

Despite the above constitutional provisions, all the agitation could
not scale through. To ensure compliance to the above constitutional
provision, Nigerian Financial Intelligence Unit (NFIU), an agency
carved out from the EFCC, was mandated to monitor the movement
of funds. The Nigerian Financial Intelligence Unit gave clear
directives to all stakeholders responsible for the movement of the
funds from the Federation Account. The major highlights of the new
guidelines, which will become effective from June 1, 2019, border
on the restoration of the financial autonomy of local governments.
With the directives, Nigerian Financial Intelligence Unit:
i. Banned banks, governors, financial institutions, public
officers and other stakeholders from tampering with the
statutory allocations of local government areas from the
Federation Account.
ii. Said that all erring individuals and companies will face
international and local sanctions. Some of the sanctions are:
• will likely blacklist erring governors and the chief
executive officers of the affected banks;
• will close down any erring bank; and
• provided watch-list of violators in 160 countries where

they cannot transact business or pay bills.
iii. Imposed a daily N500,000 cash transaction limit on all the
774 local governments.
With these guidelines, each local government is now free to spend

its funds judiciously without taking directives from governors who
have hijacked the monthly allocations of the third tier of government
under the guise of State Joint Local Government Accounts.
The complete copy of the guidelines has been released to the Governor
of the Central Bank of Nigeria, the Chairman, Economic and
Financial Crimes Commission (EFCC), the Chairman, Independent
Corrupt Practices and other Related Offences Commission (ICPC)
and Chief Executive Officers of all banks and other financial
institutions. The statement said: “The NFIU requests all financial
institutions, other relevant stakeholders, public servants and the
entire citizenry to ensure full compliance with the provisions of the
guidelines already submitted to financial institutions and relevant
enforcement agencies, including full enforcement of corresponding
sanctions against violations from 1st June, 2019.
Having realised through analysis that cash withdrawal and
transactions from the State Joint Local Government Accounts
(SJLGA) poses the biggest corruption, money laundering and
security threats at the grassroots levels and to the entire financial
system and the country as a whole, NFIU decided to uphold the full
provisions of section 162 (6) (8)of the 1999 Nigerian Constitution as
amended which designated, “State Joint Local Government Account
into which shall be paid allocations to the local government councils
of the state from the Federation Account and from the government
of the state.”
The amount standing to the credit of local government councils of
a state shall be distributed among the local government councils
of that state and not for other purposes. As far as the NFIU is
concerned, the responsibility of the account as a collection account
is fully reinstated.
In addition, the NFIU had to take such measures in response to

threats of isolating the entire Nigerian financial system by other
international financial systems due to deficiencies in our anti-
money laundering and counter-terrorism financing implementation
and measures. Therefore, it is no longer possible to allow the
entire system to suffer the deliberate and expensive infractions or
violations by public officials and/or private business interests.
The NFIU vowed to deal with individuals and companies abetting the
diversion of local government funds. The agency said such violators
will face local and international sanctions. Henceforth, all erring
individuals and companies will be allowed to face direct international
and local targeted sanctions, in order not to allow any negative
consequences to fall on the entire country. To be precise, with effect
from 1st June, 2019, any bank that allows any transaction from any
local government account without monies first reaching a particular
local government account will be sanctioned 100%, both locally and
internationally. In addition, a provision is also made to the effect that
there shall be no cash withdrawal from any local government account
for a cumulative amount exceeding N500,000:00 per day. Any other
transaction must be done through valid cheques or electronic funds
transfer. Any state government that is willing to seek any expert
economic advice in the unlikely event of these guidelines constituting
an inconvenience to the management of the state can work with the
NFIU and /or CBN.
With the above directive, there is hope that the local government
councils all over the states of the federation will be financially
autonomous.
39.19 Expenditure of Local Government

Expenditure simply means expenses payable out of revenue.
Expenditure may be classified as recurrent expenditure and capital
expenditure.
39.19.1 Recurrent Expenditure

This is in the nature of regular maintenance and operating expenses
paid out of accumulated and current revenue fund of the local
government. It consists of two major items.
(a) Staff and personnel costs
(b) Other charges
In government accounting, these classes of expenses are grouped on
sectional basis into head and sub-head.
Note: Revenue economic code is different from expenditure economic

code. For instance, the revenue economic code starts with “1”, whereas,
expenditure head which refers to a major grouping of expenditure, starts
with “2”. Thus an expenditure head is a cost centre.
In public sector accounting, each ministry/department constitutes

a head, e.g., office of Auditor-General for the Federation —
expenditure head is 26. In local government, each head has many
sub-heads. The following is the current-head in use. Each head has
its own sub-heads.
Economic code Category of Expenditure

210101 Salaries & Wages
210103 Overtime Payment
210103 Consolidated Revenue Fund Charges
210201 Allowances
21020101 Non-Regular Allowances
21020102 Contributory Pension
21030101 Gratuity
21030102 Pension
220201 Travel & Transport — General
22020101 Local Travel & Transport Training
22020102 International Travel & Transport
22020201 Electricity charges

22020202 Telephone charges
22020301 Stationaries
22020306 Printing security Documents
22020401 Maintenance of Vehicles
Note: that the expenditure will be arranged according to the

sector the expenditure falls into. In addition, you would observe
that the main code 1 is for Revenue, Main code 2 is for Recurrent
Expenditure and Main code 3 is for Capital Receipt while Main
code 4 is for Capital Expenditure.
39.19.2 Spending Limits

The implementation guideline on the application of the Civil
Service Reform to the local government service has imposed limits
of expenditure on councils and council functionaries. Councils are
categorised on the basis of the level of internally generated revenue
annually. Individual monthly spending limits are maintained for
local government functionaries as follows:
Functionaries Annual Internal Generated Revenue

Above N2m N1m - N2m Below N1m
Chairman 75,000 30,000 15,000
Vice-Chairman 20,600 12,000 7,000
Leader 18,000 9,000 5,000
Secretary 15,000 5,000 4,500
Supervisor 10,000 8,000 4,500
Clerk 8,000 4,500 3,000
Head of
Department 8,000 4,500 3,000
The individual spending limits are subject to the following

conditions:
i. All expenditures approved by an individual officer shall
be reported within a week to the next higher officer for
information.
ii. Each officer authorising expenditure shall be held
personally accountable even after leaving the office.
iii. The limit of authority to approve expenditure shall be
subject, in the usual manners to budgetary appropriation,
availability of funds and financial memoranda.
iv. The total monthly expenditure authorised by each officer
shall be formally reported in the monthly statement of
expenditure rendered to the legislative arm of each local
government.
39.19.3 Financial Statements to be Prepared by Local Government

Councils
With the adoption of IPSAS for public sector entities, local
government councils are expected to prepare their accounts in line
with the IPSAS implementation guidelines issued by the office
of Accountant-General of the Federation. In order to effectively
produce the required financial statements, the following books need
to be operated:
a. Cash Book: Cash book is a very important book of account
to the local government. It serves the dual purpose of
recording receipts and payments as well as control over
the DVRA, DVEA and deposit and advance ledgers.
b. Department Vote Revenue Account (DVRA): This is the
memorandum that records revenue generated by the local
government on departmental basis. This ledger is divided
into the various departments of the local -government. Any
revenue item generated is recorded under the department
from which the revenue originates. Entries made are
classified into head, sub-heads and items. Examples are:
tenement rates, license fees, etc. The DVRA gives total
yearly revenue for the purpose of final accounts.
c. Department Vote Expenditure Account (DVEA): The

DVEA is the memorandum account kept for recording
expenditure of the local government. Each department
of the local government has a vote for it in approved
budget of the year. Any money spent by each department
is recorded against such department from the originating
vouchers and under the appropriate heads, sub-heads and
items. At the end of the financial year, the entries recorded
therein are summoned up for final account purposes.
d. Cashier Receipt Book: The cashier of the council keeps a
register in which all daily takings are recorded according
to their heads, sub-heads and items including particulars
of official number receipt issued. This book is balanced
at the end of each day for a senior officer to check and
reconcile with the amount banked the next day by the
chief cashier. This book also provides a source record for
pre-banking audit of takings.
e. Receipts Book Register: This is also called security
register as it is used to record all security books including
the receipt book. All the receipts will be recorded in the
register quoting the delivery note or RBIN for receiving
the receipts. Note that it should be recorded serially in the
register and anyone issued out will be signed for.
f. Register of Bills Received: A register of bills received on
Form LGT 43 shall be kept by each officer maintaining
a departmental vote expenditure book and record details
of all bills or invoices as they are received, the date on
which such bills or invoices are passed for payment and
the number of the relevant payment voucher.
g. Advances Ledger: This ledger is kept for recording the
amount of advance granted to officers, e.g., touring
advance, rent/salary advance, motor vehicle. This ledger
provides a source for compiling the total advances to be
included in the assets and liabilities statement of the year
ended.
h. Deposit Account: This book records mainly deposit

and advance which the council keeps on behalf of third
parties. These include deductions made from tax payable
to the Internal Revenue Department, staff contribution to
co-operative and thrift society, and deduction at source
from contract.
i. Investment Register: This is the register used to record
all the investments made by the local government. This
should be classified as:
i. Investment in Nigeria
ii. Overseas Investment
iii. Revenue Fund Investment.
39.20 Financial Statements of Local Government

What constitutes the final accounts of the local government is an
embodiment of documents known as financial statements. The
financial statement as the name implies is a statement of financial
transactions of the local government for the year. The following
statements are mandatory for all local government to prepare
annually for submission to the relevant stakeholders:
a. Statement No 1- Cash Flow Statement
b. Statement No. 2 -Asset and Liabilities
c. Statement No.3 –Statement of Revenue and
Expenditure
d. Explanatory Notes to the Financial Statement
The following notes/schedules must accompany the financial
statements especially from statement of asset and liabilities.
i. Schedule of Actual Revenue
ii. Schedule of Advance Account Balances
iii. Schedule of Deposit Account Balances
iv. Schedule of Reserve Fund Account Balance
v. Schedule of External Loans Outstanding
The local government councils are expected to comply with the
implementation circular on adoption of IPSAS. Therefore, since
the three tiers of government are to use the same template for easy
consolidation to avoid repetition of the statement, only statement of
revenue and expenditures will be prepared as other statements are
the same templates.
Statement No.3
Owa-Alero Local Government Council Statement of Revenue & Expenditure for the Year Ended 31st December, 2016
Economic Actual 2015 Details Note Budget 2016 Actual 2016 Variance %
Code
1362
Opening Balance 250,000
Add Revenue
11010101 Statutory Allocation 1 1,000,000,000 850,000,000 0.15
11010201 Value Added Tax 2 500,000,000 95,000,000 0.41
13010101 Aid & grant 3 25,000,000 20,000,000 0.2
12010108 Local rate 400,000 200,000 0.5
License fees & fines 5 350,000 150,000 0.57
Rent of govt. property 6 7,500,000 7,000,000 0.067
Radio/television license 7 460,000 250,000 0.46
Trade permit license 8 800,000 700,000 0.125
Contractors registration 9 190,000 180,000 0.053
Marriage / Divorce 120,000 100,000 0.17
Birth/Death Certificate 900,000 700,000 0.22
Pool Betting tax 1,500,000 1,000,000 0.33
TOTAL REVENUE 1,537,220,000 975,530,000

Expenditure
Salary/Wages 11 250,000,000 185,000,000 0.26
Overtime 12 20,450,000 10,400,000 0.49
Consolidated Revenue Fund charges 13 19,500,000 11,000,000 0.44
Allowance 14 43,000,000 32,000,000 0.26
Non-Regular allowance 23,000,000 12,950,000 0.44
Contributory pension 15 19,000,000 18,500,000 0.026
Gratuity 16 43,500,000 12,500,000 0.72
Travelling/Transport 17 50,500,000 30,000,000 0.41
Intervention 18 35,000,000 27,500,000 0.21
Electricity Charges 19 40,750,000 30,500,000 0.25
Stationery 20 50,000,000 30,000,000 0.4
Vehicle Maintenance 40,250,000 32,500,000 0.19
Capital expenditure; Administrative
section 21 228,000,000 127,000,000 0.44
Capital expenditure ; Economic Section 22 138,000,000 136,000,000 0.08

Capital expenditure; Law/Justice Sector 23 25,000,000 14,500,000 0.42
Capital expenditure; Social Sector 24 545,000,000 143,000,000 0.73

Capital expenditure; Regional

Development section 25 213,950,000 115,500,000 0.46
Capital expenditure; Funded by Aids
& Grants 26 14,500,000 4,000,000 0.75
TOTAL EXPENDITURE 1,799,400,000 972,850,000
Operating Balance 2,680,000
1363

39.21 Auditor-General for the Local Government

The Auditor-General for the local government performs the
following functions:
a. To carry out on regular basis the audit of the local government
account to ensure that:
i. The financial statements show a true and fair view of the
operations of the local government during the period.
ii. That the records of the local government have been
properly kept.
iii. That the financial statements are in agreement with the
accounting records.
iv. That the financial statements are prepared in accordance
with the relevant laws and regulations.
v. That all revenue collected have been accounted for.
vi. That no expenditure was made without appropriate
authority.
b. Has power to sanction and surcharge any officer as stipulated
in the guidelines.
c. Notify the public accounts committee of audit alarms of
significant importance and serious pre-payment audit queries
for which the accounting officer of the local government is
liable or responsible.
d. In addition, any other sensitive issue which, because of its
urgency, cannot wait until the committee is convened shall be
dealt with by the Auditor-General for the local government.
39.21.1 Appointment and Removal

The Governor on recommendation of the State Civil Service
Commission appoints the Auditor-General for the local government.
The State House of Assembly must confirm the appointment. The
Governor can appoint an Acting Auditor-General for only 6 months
without the approval of the House. He can be removed by the
Governor for inability to discharge the functions of the office or for
misconduct. Such removal must be approved by 2/3 majority of the
House. If no misconduct occurs, or if he does not fail to discharge

his functions, he cannot be removed from office until retirement
age.
Worked Examples
The following balances were extracted from the Department Vote
Revenue Account (DVRA) and the Department Vote Expenditure
Account (DVEA) of Owode-Egba Local Government for the year
ended 31st December, 1990.
Economic Code Particulars/Details Amount

120101 Taxes and Rates 5,000,000.00
120102 Local Licences and Fine 4,500,000.00
120103 Commercial Undertaking 6,000,000.00
220104 Local Government Council 600,000.00
220105 Finance Department 9,000,000.00
220106 Education 8,000,000.00
220107 District Area Office 8,000,000.00
220108 Office of the Secretary 9,200,000.00
120103 Rent of Government Property 2,000,000.00
120104 Interest on Dividend 1,000,000.00
220109 Health and Social Welfare 5,000,000.00
220110 Planning and Budgeting 3,000,000.00
120105 Reimbursement 2,500,000.00
Community Development 1,500,000.00
Miscellaneous 4,000,000.00
Works Department 9,000,000.00
Traditional Offices 3,000,000.00
Statutory Allocation 36,000,000.00
Other Charges 2,500,000.00
Capital Expenditure 20,000,000.00
The following is also relevant:

The local government adopted the following codes same as that of
federal and state government.
i.
Economic Code Details

Revenue
1101 Statutory Allocation
1201 Internally Generated Revenue
Expenditure
2201 Salaries and Other Emoluments
222 Overhead
2305 Research and Development
2401 Depreciation
2501 Amortisation
2601 Impairment
2701 Bad Debt
3000 Assets
3100 Current Asset
3201 Non-Current Assets
4000 Liability
4100 Current Liability
4201 Non-Current Liability
4301 Capital Reserve
4401 Accumulated Provision
ii. The General Revenue Balance on 31st December, 1989 stood

at N56.000.00.
iii. At 31st December, 1990, liquid assets of the local government
include: Fixed Deposit N70.000; Investment in Shares
N80,000; Advance N31,500.
iv. At 31st December, 1990 the local government liabilities
include:
Deposit N58.700
Renewal Funds Deposits N50.000
v. Reserved Fund 2% of the total receipt for 1990.
Required
You are required to prepare for submission to the Auditor-General
for local government.
(a) The General Revenue and Expenditure Account for the year
ended 31st December, 1990.
(b) Statement of Actual Expenditure.
(c) Statement of Assets and Liabilities.
(d) Statement showing the balance at the bank on 31st December,
1990.
Solution
(a) Owode-Egba Local Government
General Revenue And Expenditure for the year ended 31st Dec., 1990
Revenue Expenditure
Head Details Amount Head Details Amount

Bal.B/f 56,000 2001 Local Govt. Council 600
1001 Taxes & Rates 5,000 2002 Office of Secretary 9,200
1002 Local License Fees 4,500 2003 District Ana Office 2,500
1003 Cornn. Undertaking 6,000 2004 Finance Department 9,000
1004 Rent Local Govt. Prop. 30,000 2005 Planning & Budget 700
1005 Interest on Dividend 11,000 2006 Education 8,000
1007 Reimbursement 15,000 2007 Health & Social 7,000
1008 Miscellaneous 4,900 2006 Comm. Dev. 3,400
1009 Statutory Mention 100,200 2009 Works Dept. 10,000
2010 Traditional Office 7,000
2011 Miscellaneous 2,500
2012 Other Charges 3,600
4000 Capital 60,000
General Revenue c/d 109,100
232,600 232,600
Bal. b/d 109.100
(b) Statement of Actual Revenue
Head Particulars Amount

1001 Taxes & Rates 5,000
1002 Local License Fees 4,500
1003 Comm. Undertaking 6,000
1004 Rent Local Government Properties 30,000
1005 Interest on Dividend 11,000
1007 Reimbursement 15,000
1009 Statutory Allocation 100,200
176,600
(c) Statement of Actual Expenditure
Head Particulars Amount

2001 Local Government Council 600
2002 Office of the Secretary 9,200
2003 District Area Office 2,500
2004 Finance Department 9,000
2005 Planning Budget 700
2006 Education 8,000
2007 Health & Social 7,000
2008 Community Development 3,400
2009 Works & Housing 10,000
2010 Traditional Office 7,000
2012 Other Charges 3,600
4000 Capital Expenditure 60,000
123,500
(d) Owode-Egba Local Government

Assets and Liabilities as at 31st December, 1990
Deposit
58,700 Bank 36,300
Renewal Fund Deposit
50,000 Fixed Deposit 70,000
Reserve Fund
3,532 Investment in
General Revenue
105,568 Shares 80,000
Advance 31,500
217,800 217,800
Note: 2% of Actual Revenue i.e. N176.600 x 2/100 = N3,532
(e) Statement of Bank Balance
Total Liabilities 217,800

Assets:
Deposit 70,000
Investment 80,000
Advance 31,500 (181,500)
36,300
39.22 Content of Assets and Liabilities

39.22.1 Asset side
(a) Cash/Bank: This is the balance from the cash book kept by
the local government.
(b) Investment: This is the information extracted from the
investment register maintained by the local government.
It is noted that interests received on such investment are
catered for under recurrent revenue in the estimate.
(c) Reserve Fund Investment: This is the fund or account
maintained by the local government in order to ensure that
funds meant for investment and any other purpose are not
spent when the local government is in need of cash. This can

be used when the local government has one form of general
investment to make, hence, this account forms part of the
asset of the local government as at the end of the year.
(d) Fixed Deposit: This is the amount fixed in the bank to yield
some interest.
(e) Advance: The money represents the various advances granted
to staff of the local government, e.g. touring advance, car
loan, rent and salary advance.
39.22.2 Liabilities side

(a) Deposit: This is money collected on behalf of other institutions
that has not been remitted as at the date of the account.
(b) Renewal Fund Deposits: These are funds maintained to
enable the council build up adequate provision to cover all
necessary renewal of plant and machinery and major repairs
during the lifetime of undertaking projects such as works or
electricity. The annual contribution to a renewal fund could
be an agreed percentage of total capital cost of the project.
(c) Reserve Fund: The local government as a security for future
utilisation keeps this fund. It is also called stabilisation fund
and it is a percentage of the total revenue.
(d) General Revenue Balance: This is the balance at the end of
each financial year and it may be a surplus or deficit balance
since it is the difference between revenue and expenditure.
39.22.3 Treasury Cash Book

The flow of cash in and out of the local government is recorded in
the cash book.
The cashbook has 24 columns.
Receipts Sides Expenditure Sides

1. Date 13. Date
2. From whom received 14. To whom paid
3. Allocation 15. Allocation
4. Treasury No, 16. Payment Voucher Number
5. Total 17. Total
6. Cash 18. Cash
7. Bank 19. Bank
8. Revenue 20. Expenditure
9. Expenditure Recoveries 21. Revenue Refund
10. Advances 22. Advances
11. Deposit 23. Deposit
12. Others 24. Others.
39.22.4 Analysis of the Cash Columns

1 Date: This is the date of transaction.

2. From whom: Name of the person or officer making
payment.
3. Allocation: Vote of charge in the estimate.
4. Treasury Receipt No: This is the number of the treasury

receipt issued by the cashier for
money received. The total receive.
5. Total: This is the money paid into the

treasure whether in cash, cheques,
postal order or money order.
6. Cash: Amount of money paid through the

bank.
7. Bank: Amount of money paid through the

Bank
8. Revenue: If the amount received is revenue

which is allocated to any subhead in
the estimate.
9. Expenditure Money paid to the cashier as par

Recoveries: payment formally made by him or
somebody else which, for one reason
or other, is returned to the cashier
when wholly or partly.
10. Advance: This is receipt in form of repayment

advances to the council.
11. Deposit: This is money received by the cashier

deposit which shall be paid to the
depot at a later date.
12. Other Accounts: Any money received which does not

fall within the preceding groups are
entered here.
The explanation given in respect of the receipt side 1-12 also holds
for payment side 13 - 24.
39.23 Preparation of Annual Estimates of Local Government

i. The local government executive committee shall issue a
circular calling for the preparation by local government of
estimates for the incoming financial year.
ii. Immediately on receipt of the Executive Committee’s call
circular and not later than 10th June, the treasurer shall issue
an estimate call circular to heads of department.
iii. Under the general direction of the appropriate supervisor,
the head of department shall prepare estimated proposals for
each of the services concerned.
iv. The department’s estimated proposals supported by full

explanatory notes shall be forwarded to the treasurer by
10th July.
v. Not later than 31st July, the treasurer shall consolidate the
estimated proposals of departments, including the Finance
Department and submit them through the secretary for
consideration by the Executive Committee.
vi. The Executive Committee shall consider the estimated
proposals, the report and summary prepared by the treasurer.
vii. This will be forwarded to the legislative house which will
then consider the draft estimates or amend draft as may
be appropriate at a meeting to be held not later than 15th
December.
viii. Following its approval of the annual estimates, the council
shall forward copies of the approved estimates to the
governor as indicated in the call circular.
ix. The approved estimates shall be implemented with effect
from first day of the financial year.
39.24 Virements or Re-Allocation of Voted Moneys and

Supplementary Estimates
i. The Executive Committee shall have the power to re-
allocate funds voted in the approved annual estimate from
one sub-head to other sub-heads provided that:
 no new sub-head or item of expenditure shall be
created in the estimates;
 the provision under the sub-head or items of
expenditure to which funds are to be re-allocated
shall be increased by a total amount exactly equal to
the total amount by which the sub-head from which
funds are to be provided are reduced;
 except with the prior consent of the council, a re-
allocation of funds shall not be used to:
• transfer funds from one capital project to
another capital project included in the approved
plan; and
• transfer funds to various approved office

allocations to sub-head for political and
traditional holders, etc.
ii. The Executive Committee with the prior consent of the
council shall approve approved re-allocations of voted
monies between main head in the estimates.
iii. Procedures in seeking approval to re-allocate funds:
 where it appears to the officer controlling any vote
sub-head that the votes are likely to be exhausted
before the end of the year but that there are likely
savings under other vote sub-heads for which he
is responsible, he shall refer the matter to the head
of department indicating the savings which appear
likely and requesting his authority to seek approval
for the re-allocation or (virement);
 if the head of department supports the proposals, the
head of department shall prepare Part A of form LGT
11 (in duplicate) for submission to the treasurer. The
savings from other vote sub-head shall be entered in
Part A of the form;
 on receipt of the form LGT 11, the treasurer shall give
it a number; the number shall be entered in the space
provided at the top right hand corner of the form. The
treasurer shall check to ensure that there are savings
in the vote claimed;
 the treasurer will complete Part B of form LGT 11,
sign Part C in the appropriate place and retain the
duplicate of the form. The original of the form will
be passed to the secretary who will sign Part C and
submit it to the Executive Committee;
 The Executive Committee shall consider the
application and approve or disapprove, but if the
application does not declare savings, the Executive
Committee shall direct that the application be re-
submitted in the form of a supplementary estimate.
39.25 Collection and Receipt of Revenue

i. If shortages are found in the amount actually received, the
full amount shown in the treasury receipt will be debited in
the cash book and credited to the appropriate revenue sub-
head.
ii. A payment voucher will be made for the amount of the
deficiency, debiting a personal advance account in the name
of the revenue collector and crediting the cash book.
iii. The treasurer must formally notify the amount of deficiency
to the revenue collector and to the Executive Committee.
iv. Revenue or other moneys overpaid or incorrectly received,
must be refunded to the payer as soon as possible. Refunds
of revenue should not be treated as expenditure but deducted
from the relevant revenue head and sub-head.
39.26 Loss of Fund in Local Government

i. On receipt of such loss report, the chairman shall inform:
(a) The executive committee.
(b) The treasurer, if he has not himself made the report to
the chairman.
(c) The council.
(d) The internal audit; or
(e) The Auditor-General for the local government.
ii. Where a loss has been reported to the chairman, he shall:

(a) At once, ask the person involved to refund the loss in
full or to make proposals in writing for refunding the
total amount of the loss within fourteen days of the date
of discovery of the loss (FM 84).
(b) Where the person involved is an employee, the amount
should be recovered installmentally.
39.26.1 Board of Inquiry on Losses

Immediately on receipt of any loss report submitted by the
chairman, the Executive Committee shall appoint a Board of Inquiry
to investigate the loss. The board shall report to the executive

committee on its findings in respect of:
i. The nature of the property lost.
ii. The total value of the property lost.
iii. The date on which the loss was discovered.
iv. Whether the loss was reported to the police.
v. The adequacy of the means of safeguarding the property.
vi. The reason why the system of “Internal Check” and
supervision failed to prevent the loss.
vii. The action recommended by the Board of Inquiry to
prevent a recurrence of such a loss.
viii. Where an employee of the local government is held
responsible for the loss, the amount already recovered
or recommended to be recovered from him.
ix. The recommendations of the Board of Inquiry as to the
recovery or write-off of the amount lost.
Practice Questions
1. Discuss the main sources of state government revenues.

2. Highlight and discuss the state revenue and control mechanisms
3. Enumerate and discuss the financial statements and other
reports to be produced by a State Accountant-General.
4. Discuss the financial statements and other reports to be
produced by a local government
5. Discuss financial statements of local government.
6. Discuss the importance of the Office of the Auditor-General
for local governments.
7. What are the compositions of the Executive Committee of the
local government.
8. What are the content of the Board of inquiry on losses of
funding.

Chapter Forty
Accounting for Tertiary Institutions
Learning Outcomes
i. explain the concept of tertiary institutions and fund
accounting;
ii. discuss the main sources of revenue of tertiary institutions;
iii. highlight and discuss how to account for Tertiary Education
Trust Fund (TETFUND);
iv. enumerate and discuss the organisational structure of
TETFUND and its functions;
v. discuss the functions of funds generation, planning and
budget divisions;
vi. explain the oversight functions of TETFUND over its
projects;
vii. discuss the broad principles for accessing the yearly
TETFUND allocations; and
viii. explain the guidelines on operation of TETFUND project
funds.
40.0 Introduction
In this chapter, we shall discuss the practical approach to be adopted
in accounting for all the resources in the tertiary institutions in
order for the institution to present reliable financial statements
to the public. The ongoing reforms in the public sector financial
management have brought to the fore the importance of accounting
for tertiary institutions in Nigeria. This is further reinforced by the
fact that most of the literature on accounting for tertiary institutions
1378
1379 Accounting for Tertiary Institutions
has not been able to capture the implications of the reforms on the
accounting processes of the institutions. In addition, auditing of
the institutions by external auditors have become a serious issue
because the average auditor can only audit if he understands the
environment or the full operation of the institution.
There are many sources of funding education that are not always
captured in the financial statements of institutions. This practice
may invariably render the financial statements unreliable. For
instance, TETFUND is one of the major sources of funding tertiary
institutions in Nigeria. Without understanding the operations of
TETFUND itself, auditing the funds released to various institutions
will be difficult. More worrisome is the fact that no measuring
system is in place to monitor the efficiency of institutions. This may
encourage other institutions to perform poorly in the execution of
donor-funded projects. This is practical since no chief executive of
any institution has been queried and sanctioned.
40.1 Tertiary Institutions and Fund Accounting

Tertiary institutions include those institutions that make extensive
use of fund accounting principles. Indeed, revenue funds and trust
funds dominate the accounting structure of educational institutions.
It is important to make it clear that institution’s fiscal years and
academic years rarely coincide; it is common for tuition and fees
collected near the end of a fiscal year to relate in large portion to
services to be rendered by the institution during the ensuing fiscal
year. In other words, since the school calendar is not the same as the
financial year, it is important to note this and ensure that any method
adopted is appropriately reflected in the accounting policy of the
agency. Accordingly, the portion of revenues received in advance,
from all sources available is recognised as deferred revenues in the
financial position for the institution.
Tertiary institutions in Nigeria consist of colleges of education,
polytechnics and universities. All the institutions have the same
administrative structures and the same type of principal officers.
Each of the institutions is established by an Act of the National

Assembly or of the state house of assembly. The provisions of
financial regulations are, therefore, applicable to them. All the
institutions are regarded as parastatals that operate on accrual basis
of accounting before the adoption of IPSAS. The accounts prepared
previously were not IPSAS-complaint. With the adoption of IPSAS,
it is now mandatory for all of them to prepare their account on
IPSAS accrual basis.
Domestication of National Chart of Account: The National Chart of
Account (NCOA) is one of those things that are required because the
purpose of the IPSAS is to consolidate the accounts of all agencies
to form a single financial statement of the federal government. It is
only when the national chart of account are used before the objective
can be achieved. Therefore, there is need to domesticate the National
Chart of Accounts in tertiary institutions for comparison with other
institutions. For instance, economic code for general fee is 120204
since most of the institution IGR is fees. For uniformity, all tertiary
institutions must have uniform chart of account very urgent for the
implementation of the IPSAS accrual basis of accounting.
40.2 Accounting Structure of Tertiary Institutions

In line with the framework of IPSAS Accrual basis of accounting,
the following statements and reports must be produced as part of the
financial statements:
a. Statement of Financial Position
b. Statement of Financial Performance
c. Statement of Cash Flow
d. Statement of Changes in Net Asset
e. Explanatory Note to the Accounts
40.3 Main Sources of Revenue to Tertiary Institutions

Revenues generally are from exchange transactions and non-
exchange transactions. From the available financial statements
prepared by management of these institutions and presented for
external audit, the revenues that constitute exchange transaction

and those of non-exchange transactions were not clearly identified.
For emphasis, revenues from exchange transactions are revenue in
which something will be given in return for the fees paid, while
revenues from non-exchange transactions are revenues that will not
attract any items or services to the payer/students. The main sources
of receipts/income to tertiary institutions are listed below.
a. Tuition fees
b. Investment income
c. Subventions from government
d. Students’ obligatory fees
e. Income from revenue generating units
f. Other income/sundry receipts
g. Special grants
h. Donations
i. TETFUND and other intervention funds
j. Endowment and other donations
40.3.1 Breakdown of Revenue Sources

The above sources of income/revenues can be clearly broken as
follows:
i. Tuition fees from postgraduate and foreign students
ii. Acceptance fees
iii. Student hostel fees
iv. Student identity cards fees
v. Registration fees
vi. Staff school income
vii. Distance learning Institute
viii. Other income generating units
ix. Interest on deposit
x. Caution fees
xi. Hire and sale of academic gown
xii. Income from staff bus
xiii. Other convocation fees
xiv. Contractors registration
xv. Issuance of certificate

xvi. Other income/revenue
xvii. Verification of result
xviii. Matriculation fee
xix. Medical screening
xx. Issuance of transcript
40.4 Accounting for Revenue and receivable (Student Account)

In line with IPSAS (9) and (23): Exchange transactions and Non-
exchange transaction respectively, Revenue must be recognised
with certain criteria already discussed earlier; it must be measured
and disclosed. With the IPSAS Accrual basis of accounting, it is
important to identify how to capture the receivable aspect of the
revenue because it is not possible for all the students to pay all their
school fees at the end of the school financial year. Therefore, the
schedule of receivable must be made available.
Available record shows that most of the tertiary’s institutions
financial statements have not been disclosing the amount of
receivables in the financial statements. This practice, which tends
to render the accounts unreliable, was not intentionally done to hide
any information. There is evidence to show that the practice was
caused by the existence of knowledge gap. There is need therefore
to build the capacity of personnel involved.
40.4.1 Practical Approach

a. Since the mode of student registration is electronically
done, the records must be in electronic form.
b. There should be a programme for the collection of school
fees and all other dues. Excel can also be used perfectly.
c. Student registration number should be used to arrange the
student ledger according to each department.
d. Acceptance fees should be used to recognise revenue
from the students. Columns should be created for all fees
and dues applicable to each student. The head of student
account section should ensure all receipts submitted are
posted promptly.
e. Receipt book should not be less than triplicate such that

the student is given the original, duplicate to student
account section while the third copy is retained in the
booklet.
f. Although payments can be made in the bank, some
schools make it mandatory for fees and dues to be paid
through the POS where the copy can easily be confirmed
and converted to receipt which can be used to update the
student ledger.
g. At the back of the payment slip, the student should
indicate the payment made from the demand notice sent
to individual student portal; it is the demand notice sent
that will be used to debit the student ledger pending when
payment is made.
h. Monthly report can be generated concerning the receivable
position at any particular date with individual names of
the debtors.
i. After the acceptance fee, the student has been brought
into the revenue net for the period of his/her study.
j. If part payment is allowed and the payment are made on-
line , how does the actual fees paid be determined without
the physical presentation of the pay slip.
k. In alternative, no part payment will be acceptable which
means once payment is made it will be easy to allocate to
various code/sub-head.
l. For the purpose of know your customer (KYC), it will be
advisable for the students to appear physically to present
the pay slip for proper accountability.
m. There is need for demand notice to be sent electronically
from the bursary department to all the students into
individual portal or valid email address.
Note: With the IPSAS Accrual basis of accounting,

receivable is very important because most of the tertiary
institution financial statement despite that it was on
accrual basis, the revenue aspect were always on cash
basis because no record of receivable in all the financial
statement that have been submitting to the relevant
agencies.
Specimen of Student Ledger

Code No. Code No. Code No. Code No. Code No. Code No.
23 24 25 26 27 28
S/No. Registration Name School Id Card Reg. Fee Accept Mat. Fee Medical Total
No. Fee Fee Fee Fee
N65,000 N1,000 N5,000 N5,000 N2,000 N1000 N
Specimen of Student Demand Notice

Accounting Department
Level: 100
S/No Code No Type of fees Amount (N)

1. 0024 Acceptance fees 20,000.00
2. 0025 School fees 60,000.00
3. 0026 Registration 5,000.00
4. 0027 Matriculation 10,000.00
5. 0028 ID Card fees 3,000.00
6. 0029 Medical screening 4,000.00
7. 0030 Hostel fees 45,000.00
TOTAL 147,000.00
Note: All students are expected to pay into the school account and
come with the pay slip to the bursary for official receipt.
40.5 Accounting for Caution Fees

Caution fees are a form of deposit that, at the end of the student’s
years in the school and if nothing was damage, the amount will
be refunded. It is very rare for institutions to refund such fees to
students. Best practice requires that the deposits be refunded to the
students because the moneys do not belong to the institutions.
40.6 Accounting for Income Generating Units

These are small units generating some revenues to the institution.
Only the surplus should be brought to the financial statement.
Therefore, receipt booklet should be issued and manned by a
competent officer from the bursary department. A form of income
and expenditure account will be prepared while the surplus will be
transferred to the main account. Examples of such units include
space allocation, shuttle bus/transport, etc.
40.7 Accounting for Donations and Concessionary Loan in

Tertiary Institutions (Non-Exchange Transactions)
Donations are regarded as revenues/incomes that must be disclosed
in the financial statement in line with matching concept. This is
because the donation has contributed to the success of the agency
in the period the donation was given. Donation may be in cash;
provision of infrastructures, services-in-kind; and concessionary
loans.
a. Cash Donation: This should be recognised in the financial
statement as part of inflow for the year under review.
b. Donation of Infrastructures: There are buildings donated
by companies, old students and other donors which are
not captured in the financial statement which contravene
the principle of matching concept. Accordingly, there
should be three non-current asset schedules. Property, Plant
and Equipment (PPE) must be prepared in all the tertiary
Institutions. Anything short of this, the financial statement
will not show a true and fair view. These three schedules are:
i. Part A = Funded from subvention and internally

generated revenue
ii. Part B = Funded from donations
iii. Part C = Funded from TETFUND
The explanatory note to the account should be detailed describing
each asset and its location. Issue of measurement should not be a
problem even where no paper is given, its fair value will be taken
c. Services in-kind: These are voluntary services provided to
an entity by an individual or entities. Such services may
include free technical assistance from other governments or
international organisations, voluntary work in schools and
hospitals or community services performed by convicted
offenders. The standard provides that entities may recognise
services in-kind as revenue and expenditure where the
amount can be measured is material and its inclusion
enhances the presentation of the financial statements.
On measurement, the amount spent on such service before the
donation will be used to measure the service and recognise
in the financial statement.
Disclosure: This will be disclosed under the income/revenue
to the institution. Disclosure of the nature of significant in-
kind services in all cases is encouraged.
d. Concessionary Loans: These are given and received at below
market value, the portion of the loan that is repayable, along
with any interest payments, is an exchange transaction.
However, the difference between the transaction price (loan
proceeds) and the fair value of the loan on initial recognition
is non-exchange revenue that should be recognised and
accounted for as such. For instance, the vice chancellor (VC)
needs a loan that is very important to fund some unavoidable
activities. The VC approached the managing director who
happened to be a friend of his who gave concessional loan
at the rate of 5% instead of the normal 10%. In that case,
the interest of 5% should be recognised as income to the
institution. If this is done, whenever such loan is required in
future and the VC or the managing director is not available,

the financial statement will reflect the exact cost which can
be compared to the previous transactions.
For instance, students obligatory fees were classified under non-
exchange transactions. Among the students obligatory fees are:
i. Acceptance fees (Non-exchange transaction)
ii. Student hostel fees (Exchange transaction)
iii. Students Identity Cards fees (Exchange transaction)
iv. Registration fees (Non-exchange Transactions)
To include all these under non-exchange transaction is misleading.
To avoid this, all revenues should be combined without trying to
classify them either as exchange or non- exchange transaction.
40.8 Accounting for Tertiary Education Trust Fund (TETFUND)

Tertiary Education Trust Fund is one of the funding agencies of
tertiary institutions in Nigeria. Based on the instruction that all its
funding projects must be marked for easy identification, in most of
the tertiary institutions about 50-60% of the infrastructures in some
of the tertiary institutions are funded by the agency. It is, therefore,
important to highlight its functions and its roles in infrastructural
development in the tertiary institutions in Nigeria most importantly
the guideline for accessing international funds.
Tertiary Education Trust Fund (TETFUND) was set up in 1993 to
fund infrastructural development in education sector and to improve
the quality of education in Nigeria. The Education Trust Fund was
established by an Act of Parliament as “Education Tax Fund Act No 7
of 1993”. The Act was amended by Act No 40 of 1998. The Tertiary
Education Trust Fund (Establishment, etc.) Act 2011, therefore,
repealed the Education Tax Act Cap E4 Laws of the Federation of
Nigeria 2004 and Education Fund Act No 17, 2003. The TETFUND
is, therefore, charged with the responsibility of imposing, managing
and disbursing the tax to public tertiary institutions in Nigeria only.
The Act imposed a 2% Education tax on the assessable profit of
all registered companies in Nigeria and empowered the Federal
Inland Revenue Service FIRS to access and collect the Tax. The
Education Trust Fund then, receives the tax from FIRS and disburses
to Primary, Secondary, Tertiary and other educational institution
across the Federation. The recent amendment therefore changed the
Name from Education Trust Fund to Tertiary Education Trust Fund
to affirm that it is only for Tertiary Institutions. The Fund monitors
the projects executed with the monies allocated to the beneficiaries.
The board of trustees shall administer the tax imposed by the Act
and disburse the amount in the fund to federal and state tertiary
educational institutions specifically for the provision or maintenance
of:
• Essential physical infrastructure for teaching and learning
• Instructional material and equipment
• Research and publication
• Academic staff training and development
• Any other need which in the opinion of the board of trustees
is critical and essential for the improvement of quality
and maintenance of standards in the higher educational
Institutions.
The board of trustees shall administer, manage and disburse the tax
imposed by the Act on the basis of funding of all public tertiary
education institutions and equality among the states of the federation
in the case of regular intervention. The distribution of funds shall
be in the ratio of 2: 1: 1 as between Universities, Polytechnics and
Colleges of Education. The board of trustees shall have power to
give due consideration to the peculiarities of each geo-political zone
in the disbursement and management of the tax imposed by the Act
between the various levels of tertiary institutions. The decisions of
the board of trustees are carried out by the Secretariat.
The board of trustees observed from the report from the financial
consultants, external auditors and the Auditor-General for the
Federation that funds disbursed to the beneficiary Institutions
revealed the following:
a. Poor record keeping
b. Non-maintenance of separate cash book
c. Misappropriation
d. Fixed Assets Register not kept
e. Non-adherence to accounting Policies and Procedures e.g.
Financial Regulation and Procurement Act
f. Procurement of items not taken on stores charge (No SRV/
GRN).
In view of the above, the board is of the opinion that a uniform
accounting practice should be established for the institutions in
line with the Federal Government Financial Regulation guiding the
conduct of government finances and accounting procedures.
40.8.1 Organisational Structure of TETFUND and Its Functions

TETFUND is structured into two segments for implementation of
its functions and general organisation: The board of trustees and the
secretariat.
The Board of Trustees
According to section 4(1) of the Act ‘The board shall consist of:
a. A chairman who shall be a person with good knowledge in
finance and administrative matter.
b. Each person representing a geo-political zone in the country
c. A representative each of the following federal ministries
who shall not be below the rank of a director:
i. Federal Ministry of Education; and
ii. Federal Ministry of Finance.
d. A representative each from the universities, polytechnics
and colleges of education.
e. The Executive Secretary who shall be the secretary to the
Board of Trustees.
The membership of the board of trustees shall reflect the six geo-
political zones of the federation. The members of board of trustees
shall:
i. be person with considerable experience from both the public
and private sectors to represent the business, financial and
education sectors;
ii. be appointed by the president on the recommendation of the

minister;
iii. other than the ex-officio members, each hold office for a
term of 4 years in the first instance and may be eligible for
reappointment for a further term of 4 years and no more;
and
iv. be paid some remuneration and allowance as the president
may, from time to time determine.
The board of trustees shall administer the tax imposed by this Act
and disburse the amount in the fund to federal and state tertiary
educational institutions.
40.8.2 Function of the Board of Trustees

The board of trustees shall:
a. Monitor and ensure collection of tax by the Federal Inland
Revenue Service and ensure transfer to the fund account.
b. Disburse the tax to the appropriate tertiary institutions.
c. Receive request and approve qualifying projects after due
consideration.
d. Ensure disbursement to various levels and categories of
education.
e. Update the federal government on its activities and progress
through annual audit report.
f. Review progress and suggest improvement within the
provisions of the Acts.
g. Invest funds in appropriate and safe securities.
h. Monitor and evaluate execution of projects.
i. Do such other things that are necessary or incidental to the
objective of the fund under this Act or as may be assigned
by the federal government.
40.8.3 Appointment of the Executive Secretary and Other Staff

There shall be for the fund an executive secretary who shall be
appointed by the president on the recommendation of the minister
and to be the chief executive and accounting officer of the fund. He
heads the second segment “secretariat” of the fund. The secretariat
of the fund comprises office of the executive secretary and seven
departments. Each department is headed by a director and another
director in the office of the executive secretary. In each department,
there are divisions and units for effective operations. The portfolios
of the directors are as follows:
a. Director – Executive Secretary Office
b. Director – Finance and Investment
c. Director – Corporate Planning and Development
d. Director – Monitoring and Impact Assessment
e. Director – Project Management
f. Director – Education Support Services
g. Director – Human Resource Management
h. Director – Information and Communication Technology
40.8.4 The Goals of the TETFUND

i. To continuously improve education tax revenue by ensuring
that the tax is collected and made available for TETFUND
intervention programmes.
ii. To deliver appropriate and adequate intervention
programmes with due regard to the sensitivities of
beneficiaries and stakeholders.
iii. To promote cutting-edge technologies ideas and
organisational skills in education and ensure that projects
are forward looking as well as responding to present needs.
iv. To ensure successful completion of intervention projects.
v. To form a viable and enduring partnership between the
TETFUND and its stakeholders.
vi. To manage education tax in a way that is most beneficial to
the people.
vii. To recruit, retain, train and retrain a highly motivated
workforce.
viii. To plan, undertake research and create reliable data bank

for improvement of education in Nigeria.
ix. To ensure accountability and transparency in all its
undertakings.
40.8.5 Office of the Executive Secretary

There are four units in the office of the executive secretary:
a. Internal audit
b. Legal and board secretary unit
c. Public relation unit
d. Servicom unit.
a. Internal Audit Unit

The objectives of the internal audit unit include:
i. Provision of reasonable assurance regarding the integrity
and reliability of financial and operating information.
ii. Ensuring compliance with applicable laws and regulations
iii. Ensuring that assets are safeguarded and as appropriate
verify the existence of such assets.
iv. Improving the efficiency and effectiveness of operations.
b. Legal and Board Secretarial Unit

The unit is also under the Executive Secretary. It is
responsible for legal and board secretarial matters in the
TETFUND. One of the major functions is advising the
management and the board of trustees on all legal matters.
c. Public Relation Unit

This unit is responsible for providing publicity for the
fund and its activities. It also articulates for positive public
relation for the fund as well as performs other related duties.
40.9 Departmental Structures and Functions

40.9.1 Finance and Investment Department
The objectives of this department are to provide:
i. an effective and efficient financial management accounting
system;
ii. quality cost management and control;
iii. accurate and timely periodic financial statement for decision
making by management and board of trustees; and
iv. an efficient and effective enhance returns, ensure safety and
assure liquidity.
40.9.2 Education Support Service Department

The functions of the department include:
a. Generation of qualifying academic-based intervention
programme/project.
b. Implementation frameworks, Instruments processing tools
and prototypes.
c. Playing advisory roles via office professional advice on
implementation policies and policy analysis, reviews and
marketing to executive management/BOT proposals of
Intervention ideas/concepts: operational policies generated
academic research-based projects co-ordination and
management in liaison with beneficiary institution.
40.9.3 Human Resource Management Department

The department is responsible for the following:
(a) Assist the Executive Secretary in the day to day administration
of the fund.
(b) Advice the management and board on the vision and
strategic framework for the management of the funds’
human resource and the supporting policies.
(c) Determine the appropriate organisational structure of the
fund, recruit and place staff.
(d) Provide welfare and/ or execute welfare scheme as may be

approved from time to time, execute an approval system,
train and develop staff, provide exit strategy for retiring
staff.
(e) Optimally manage facilities, provide insurance coverage for
man and materials, procure goods and services and ensure
their utilisation.
40.9.4 Corporate Planning and Development

The mandates of the department of corporate planning and
development are to:
(a) proactively monitor the assessment and collection of
education tax by FIRS, and ensure transfer of same to the
education tax pool account with CBN; and
(b) develop strategic plan and transformative intervention
programmes that are responsive to the changing educational
needs of the Nigerian public.
(c) The department is made up of two divisions and also
supervises the fund’s library. The divisions are:
• Funds Generation Division, and
• Planning and Budget Division
40.9.5 Funds Generation Division

The functions of this division include:
a. Undertaking duly visits to the offices of Federal Inland
Revenue Service for monitoring of education tax collections.
b. Attending Federal Inland Revenue Service meetings to
reconcile education tax returns.
c. Analysing monthly returns obtained from Federal Inland
Revenue Service to ascertain degree of compliance with set
targets and reconciling monthly CBN statement of account.
d. Quarterly joint TETFUND/FIRS technical meeting to
discuss education tax monitoring matters.
e. Organising and hosting annual joint TETFUND/FIRS
interactive forum.
f. Establishing and updating education taxpayers database.

g. Planning and participating in conjunction with FIRS in
identifying defaulting organisations and the execution of
TETFUND arrears drive.
h. Planning and execution of annual Taxpayers’ Forum in
collaboration with FIRS for the purpose of Taxpayer’s
education on the activities of TETFUND.
40.9.6 Planning and Budget Division

The functions of this division include:
i. Data collection, collation, storage, analysis for the purpose
of determining beneficiaries needs in the education sector.
ii. Preparation of TETFUND annual intervention budget.
iii. Tracking the performance of the budget through relevant
departments to ensure that intervention activities remained
focus.
iv. Develop and monitor the implementation of TETFUND
plan document.
v. Organise capacity building workshops for our beneficiaries
to support the delivery of transformative intervention
programmes.
vi. Liaison with relevant regulatory agencies to receive
Accreditation report on institutions and appraise it for ETF
intervention purposes.
vii. Facilitate the conduct of cutting-edge research on activities
that will promote national development and build the
capacity of Nigerian researchers.
viii. To supervise and co-ordinate the operations of the TETFUND
library.
ix. To provide the secretariat for the BOT Strategic Planning
Committee and National Research Fund Committee.
40.9.7 Monitoring and Impact Assessment Department

The functions of the Monitoring and Assessment Department are as
follow:
(a) Receive a copy of project implementation plan from the
relevant department(s).
(b) Receive project file from Project Management Department
after the second tranche payment.
(c) Receive invitation for inspection of completion by
beneficiaries.
(d) Carry out monitoring for that release.
(e) Recommend release of final tranche.
(f) Project documentation.
(g) Develop monitoring evaluation and impact assessment
guidelines and templates.
(h) Recommend appropriate cause of action after project
monitoring.
(i) Provide reports to management and board on monitoring
evaluation and impact assessment activities.
(j) Maintain photo/data bank on all projects of the fund.
(k) Carry out any other assignment as may be directed.
40.9.8 Information and Communication Technology

The department performs the following functions:
i. Provision of timely accurate and high quality information
to and decision making
ii. Maintain a strong linkage between the fund business
strategies and IT strategies.
iii. Implement information technology policy of the fund.
iv. Conduct ICT needs assessment study for the fund and its
beneficiaries vetting of ICT projects and conducting impact
assessment to ascertain compliance with industry standards.
v. Provide advice on aspects of ICT investment in hardware
and software to the fund and its beneficiaries.
vi. Keep up to date with advances in information technology
to ensure that management are fully aware of relevant
products and developments.
vii. Monitor the SLAs (service level agreements) of ICT service

providers to ensure compliance with stipulated standards.
viii. Co-ordinate the activities of the departmental management
information system desks for quality assurance.
ix. Support and empower the fund staff through:
• effective and innovative use of current and future
technologies; and
• training of TETFUND staff on ICT with a view to
developing their capacities.
x. Maintain the fund’s ICT infrastructures including servers
laptops/desktops and data communications networks.
xi. Updating and maintenance of TETFUND website.
xii. Conduct project management and quality assurance
activities for TETFUND Internet ICT projects.
40.10 Guidelines for Accessing TETFUND Intervention Funds

To access the TETFUND and be enlisted as a beneficiary of the
intervention fund, there is a methodology for processing requests.
To be enlisted, an institution must first receive the approval of the
Board of Trustees of TETFUND to qualify as a beneficiary of the
intervention funds. The following are the conditions to be fulfilled
to qualify for enlistment by prospective institutions:
i. the prospective beneficiary must be a public tertiary
institution, that is, federal or state university, polytechnic
and college of education (COE);
ii. the institution must be recognised by the relevant regulatory
body – NUC, NBTE or NCCE as the case may be and
evidence of this should be available both with the institution
and the regulatory body for sighting;
iii. the institution must have been established by law via an Act
of Parliament or Edict of the State House of Assembly and
signed into law by the president or state governor, as the
case may be;
iv. academic activities, that is, student admission, teaching and
learning, must have commenced at the institution;
v. the prospective institution shall formally apply to the fund

to be enlisted as a beneficiary of the fund;
vi. TETFUND shall visit to verify that academic activities
have commenced and thereafter recommend to the Board
of Trustees for enlistment as a beneficiary; and
vii. following the approval by the Board of Trustees, the
institution shall be enlisted and formally notified.
40.10.1 Release of Funds

In the beginning of each financial year, tertiary institutions are
requested to forward their intended programmes/projects to the
TETFUND. The following are the areas in which funds will be
released to the institutions.
i. Normal (Regular) Interventions

Beneficiaries of the fund are required to apply the money for the
following:
a. Provision of essential physical infrastructure for teaching
and learning.
b. Provision of instructional materials and equipment.
c. Research, book development and publication (journals,
etc.)
d. Academic staff training and development.
e. Publications of journals.
f. Publication of scholarly manuscripts into books.
g. Conference attendance.
h. Entrepreneurship centre.
The normal intervention is yearly for all beneficiaries of TETFUND.

ii. Special Intervention
The special intervention is usually at the discretion of the Board of
Trustees, but allocations are zonal-based and are done equitably by
decision of the Board of Trustees as enshrined in the enabling Act.
iii. Special High Impact Intervention

The Special High Impact Intervention, however, seeks to massively
inject funds into selected tertiary institutions to achieve a major
turnaround through programme upgrade and improvement in the
teaching and learning environment. Beneficiaries are selected by
the Board of Trustees based on the age of the institution per geo-
political zone amongst other criteria. The conventional universities
were first beneficiaries of the Special High Impact Intervention
programme, which started in 2009.
For any other need, which in the opinion of the Board of Trustees is
critical and essential for the improvement of quality and maintenance
of standards in the educational institutions, the TETFUND will vet
the entire request and recommend for the Board of Trustees of the
fund for the approval. The approval shall depend on the following
conditions:
a. All proposals for accessing the funds shall be purely of
academic relevance addressing deficiencies in the core
academic areas in line with the accreditation requirements
of the individual regulatory agency.
b. It is important to consult widely within the academic
community before project proposals are submitted to
the fund for reconciliation. Emphasis should be placed
on essential physical infrastructure, leaning resources,
library development, academic staff training, research and
scholarly publications.
c. Proposals for research and academic staff training and
development should comply with the guidelines.
d. The institution’s librarian in view of its special nature shall
solely handle the Library development professionally.
Correspondence to the fund in this regard should be signed/
endorsed by the librarian.
e. Projects should be prioritised within the approved allocation
to your institution.
f. Concurrent utilisation of allocations is not allowed. All
ongoing intervention projects should be concluded before
accessing subsequent allocation. However, the merger of

unaccessed allocations can be granted.
g. Observance of the due process at all stages is mandatory in
order to access the allocated funds. In this regard, all proposals
must be submitted to the TETFUND for reconciliation and
Approval-in-Principle (AIP) before advertisement, vendor
pre-qualification and tendering. Evidence of compliance
with the requirements of the Public Procurement Act 2007
is mandatory for release of funds. Project proposals which
ignore or short-circuit this procedure shall not be considered
for reconciliation of release of funds.
h. Beneficiaries are strongly advised to invite officials of
the fund to observe the opening of bids two weeks to the
scheduled date.
i. The fund shall no longer entertain projects implemented in
endless phases. All the projects should be conceived and
implemented in a single phase based on annual or merged
allocations.
j. In line with the Public Procurement Act 2007 material
(advance) payments to contracts shall not exceed 15% and
a reputable bank must guarantee such. It is also mandatory
to obtain performance bond from contractors executing
TETFUND projects and this must be valid for the entire
duration of the contract; and
k. Project inspection after the release of the first tranche shall
precede release of the second and final tranches, subject to
satisfactory retirement of the preceding funds advanced.
40.11 Access to the Yearly TETFUND Allocations – The

Broad Principles
Allocation to beneficiaries of TETFUND is made yearly and this
constitutes the normal intervention allocation. To access the funds
of the allocation, the following must be fulfilled:
40.11.1 Infrastructure/Equipment/Furnishing-based
Interventions
a. The beneficiary must have fully completed the previous
year’s intervention projects with release of the final tranche.
b. For beneficiaries in arrears of unaccessed dedicated
allocations, the Board of Trustees allows for a merger of up
to 4 years of the unaccessed allocations; subject, however,
to the satisfactory completion and verification of the
previous year’s intervention projects. However, concurrent
utilisation of yearly allocations is not allowed, that is, the
fund does not approve of intervention projects of different
years running together.
c. Submission of proposed projects to the fund to the sum of
the allocated amount must be in line with the beneficiary
institution’s core mandate and should be relevant to
teaching, learning and research; including the learning and
teaching environment.
d. The proposed projects must be justified and total cost
attached to each item. Details shall be attached in the
appendices to the submission.
e. The proposed project submission will be vetted and
Approval-in-Principle (AIP) granted if satisfactory.
f. Due process of vendor engagement must be undertaken
in line with the Public Procurement Act (PPA) 2007 and
on conclusion; all relevant details of the proceedings are
presented to the fund for vetting in this regard.
g. Release of funds in tranches follows the satisfactory
conclusion of the due processes.
40.11.2 Academic-based Interventions

a. Submission should be made to the fund not later than two
(2) months to the time of commencement of the programme.
b. The allocation of a particular year should be accessed with
a maximum number of three (3) different submissions to
mop-up the funds allocated the beneficiary institution.
c. All submissions should be made in both hard and soft copies.

The soft copies should be Excel format and submitted in a
new flash drive.
40.11.3 Guidelines and Requirements for Accessing Funds for

Physical Infrastructure and Provision of Equipment
To access allocated funds for the infrastructure/equipment-based
intervention, two (2) major stages are involved:
a. Obtaining Approval-in-Principle (AIP) for projects, and
b. Evidence of Due Process of vendor engagement in line with
the Public Procurement Act 2007, leading to access of fund.
40.11.4 Requirements for Approval in Principle

For infrastructural (construction-related) projects:
a. Soil test result, especially for difficult consistently wet
terrain; for areas with weak soil structure and for high rise
structures.
b. Detailed architectural working drawings, with seal of
architect and signed, including evidence of practice license.
c. Detailed engineering design drawings (structural, electrical
and mechanical), sealed and signed by the Design engineer.
Design should integrate result of soil test in engineering
design.
d. Detailed Bills of Quantities (BOQ), devoid of Prime Cost
(PC) items and provisional sums, especially of works
measurable from the drawings.
e. Where consultants are engaged, submission to TETFUND
must include copies of letters of commissioning of the
consultants and their acceptance. The details of consultancy
fees in line with the federal government approved scale of
fees for professionals in the construction industry must be
included.
f. The project must be fully functional – built, finished,
furnished and equipped/installed in the case of equipment.
g. For rehabilitation projects, the following shall be required

for vetting:
i. Photographs showing the current state of the facility
to be rehabilitated/renovated
ii. Schedule of dilapidation
iii. For projects that involve conversion, submission of
the as-built drawings
iv. Submission of the drawing showing the new
proposed layout
v. Bill of Quantities
For Procurement-related Projects:

a. Inventory of items to be procured should be submitted,
which should contain quantity of items to be purchased, unit
rate and total cost. Unit rates should consider importation
cost (where applicable, and taking the official exchange
rate into consideration), cost of clearance at port, relevant
statutory charges, transportation to site, installation cost,
training cost (where applicable), profit margin.
b. Genuine proforma invoice, with cost submission quoted
in the Nigerian currency – the naira and not in foreign
currency. All conversions must have been done, taking into
consideration the factors highlighted in (a) above.
c. Submission of manufacturer’s catalogue/brochure of
technical specifications, showing sample photographs of
the equipment, unit cost, and other technical specifications
of the equipment.
d. Sample photographs of the items to be purchased.
Dimensioned drawings of sketches of furniture are also
acceptable.
e. Inclusion of VAT where applicable. Withholding Tax
(WHT) inclusion is not acceptable.
f. Installation requirements with cost (where applicable).
g. Non-inclusion of consumables.
40.11.5 Specific Technical Requirements

i. All presentations are to be done in A3 format.
ii. The sheet should have title panel showing the details of
the project, including scale, date, drawing title, consultant
(where applicable), sheet in serial number.
Architecture
a. Site location in institution’s master plan
b. Site topographical layout plan.
c. Site plan showing the proposed development with access
road(s), landscaping and existing municipal services –
water and power lines.
d. Working Drawing of all floor plans with visible dimensions
and finishes specifications.
e. Detailed section drawings taken through relevant, seemingly
difficult areas of plan, well annotated and showing relevant
finishes specifications.
f. Roof plan.
g. Elevations as harmonised with the floor plan(s) and sections.
h. Schedule of doors and windows.
i. Check for inclusion of expansion joints especially for
buildings longer than 30 metres.
j. Finishes specifications.
k. Architect’s seal on drawings with signature
l. Copy of practice licence.
Civil/Structural Engineering
i. Foundation plan and sections incorporating the soil test-
recommended depth of foundation.
ii. Structural design of columns and their bases, with
reinforcement details.
iii. Structural design of beams and lintels.
iv. Staircase reinforcement details (where applicable).
v. Structural design of floor slab.
vi. Detailed structural design/specification of steel roof
structure (where applicable).
vii. Bending schedule (where applicable)

viii. Calculation sheets, duly endorsed by a registered structural
engineer with affixed seal.
ix. Culvert design for external works.
x. Drainage design showing peaks and slope directions with
gradient.
xi. Professional Seal on drawings.
Electrical Services Engineering Design

i. Lighting points design
ii. Power/socket outlet design
iii. Fire Detection/fire alarm layout
iv. Load analysis
v. General schematic distribution diagram
vi. General external lighting designs of the site; and
vii. Professional seal on drawings
Mechanical Services Engineering Design

i. Site plan showing soil waste drainage system
ii. General water supply layout
iii. Roof drainage layout
iv. Water tank details (where applicable)
v. Air-conditioning system layout (where applicable)
vi. Fire extinguisher layout (where applicable)
vii. Fire detection and fire alarm layout (where applicable)
viii. Septic tank/soak away pit design; and
ix. Professional seal on drawings
Quantity Surveying/Bills of Quantities (BOQ)

i. Use of Standard Method of Measurement (SMM), presented
in Excel format. Hand-written entries are not acceptable.
ii. Ensure clarity of description of works in the bills and bills
should harmonise with specifications and quantities in the
design drawings.
iii. Preliminaries should be broken down in details.

iv. Rates of works must be realistic and consistent all through.
v. Rates should be reflective of the market prices in the geo-
political zone where institution is situated.
vi. Elements whose quantities are numeric in nature should be
confirmed from the drawing to ascertain the accuracy of its
measurement.
vii. Inclusion of state taxes in the bills is not allowed. Only
VAT, preliminaries and contingencies are allowed
viii. All PC sums should be measured and priced; likewise
provisional sums where applicable.
ix. Professional seal on the Bills of Quantities.
40.12 Post AIP Stage and Requirements for Disbursement

of Funds
Funds disbursement is done after the AIP has been granted and
the due process requirements have satisfactorily taken place. For
construction-related projects, disbursements are in three (3) tranches
of 50%, 35% and 15%; while for procurement-related projects,
disbursements are in two tranches of 85% and 15%. The due process
leads to accessing the first tranche of funds must be carried out in
line with the provisions of the Public Procurement Act 2007.
40.12.1 Due Process Requirements for Accessing the First (1st)

Tranche of Funds
The due process requirements for accessing the first tranche of funds
are as follows:
a) Advertisement
This is the first thing to do after obtaining AIP. The requirements are
as follows:
i. Advert must be in at least two (2) national newspapers and
the Federal Tenders Journal.
ii. Advert must state criteria/conditions upon which interested
bidders would be assessed for pre-qualification. The
conditions shall be in line with the provisions of the Public

Procurement Act 2007.
iii. Evidence of observance (copy of advertisement) must be
submitted to the fund.
b) Pre-Qualification
The technical and financial capabilities of Expression of
Interest (E.O.I) are evaluated at the pre-qualification stage. The
pre-qualification stage is very important, as it is the stage where
technical and financial competences of bidders are measured.
Beneficiaries (i.e., the procuring entity) should be wary of
persons/companies in receivership, who are insolvent or are
bankrupt. Evidence of the pre-qualification exercise must be
submitted to the fund alongside other documents.
c) Tender Action
i. Successfully pre-qualified bidders should be formally
communicated and issued tender documents for pricing.
ii. Invitation to tender should state closing date and time and
copies of this should be submitted to the fund.
iii. TETFUND should be invited to witness opening of tenders,
with such invitation reaching the fund not later than two (2)
weeks to the date of the event.
iv. Record of attendance of all those present at the opening of
tenders should be taken in the handwriting of all attendees.
Each person should sign the attendance register, indicate the
organisation they represent, with contact phone numbers
and email address.
v. Copy of the attendance record should be submitted to the
fund in raw form.
d) Bid Evaluation
i. All opened and validated bids shall be evaluated and
analysed professionally to decide on the most responsive
and best evaluated bid (not least tender).
ii. The tenders board of the procuring entity shall make

recommendations on the winning bids.
iii. In instances where thresholds exceed the approval limit of
the procuring entity, a higher approval should be sought –
that is, Ministerial Tenders Board (MTB) or the Federal
Executive Council (FEC), depending on the cost of the
project.
iv. Copy of minutes of tenders board meeting and where
applicable, the MTB should be forwarded to the fund,
including, where applicable, the “Certificate of No
Objection”/Federal Executive Council (FEC) approval of
award.
e) Letter of Commitment
All beneficiaries are expected to include a letter of commitment
in their due process submission to the fund. The Letter
of Commitment is an undertaking from the beneficiary to
immediately commence the project execution on receipt of the
first tranche of funds. This is to discourage the practice of keeping
money in fixed facility over a period before commencing the
project. TETFUND strongly objects to the practice of money
fixing by the beneficiary institutions.
40.12.2 Requirements for Accessing the Second (2nd) and Final

Tranches
The release of the second tranche is subject to the following:
i. Beneficiaries must apply to the fund and show physical
proof through photographs that the funds released in the
first tranche have been fully utilised.
ii. Verification visit by officers of the fund during project
monitoring.
iii. Submission of two (2) copies of financial renditions, with a
copy addressed to the Internal Audit Unit (IAU) of the fund
through the executive secretary.
iv. Issuance by the IAU of a clearance certificate to process the

funds.
40.12.3 Requirements for Issuance of Audit Clearance (to be

Submitted by Beneficiaries)
i. Payment vouchers (PVs)
ii. Financial returns
iii. Expenditure on projects
iv. Bank statement of account showing the lodgement of the
first tranche and the payments from it
v. Bank reconciliation statement
vi. Progress report on TETFUND form
vii. Store receipt vouchers (where applicable in the case of
procurement projects)
viii. Copies of valuation/payment certificates as issued by the
consultants (where applicable).
40.12.4 Requirements for Release of the Final Tranche

To qualify for release of the final tranche, all the above listed
documentations shall be required. However, the projects must have
been fully completed, duly inscribed with the TETFUND insignia
and year of intervention and verified by officers of the Fund.
40.13 Interventions Involving Projects with Construction

and Procurement Components
In order to ease the problem of non-release of funds at the final
tranche stage due to problems associated with deferential
completion periods on a given intervention where construction and
procurements are involved, such intervention shall be split into two
(2) – construction on one hand and procurement on the other, so
that they run as parallel interventions within the same intervention.
In effect, the submission on such intervention will no longer be
as a single submission, but as two (2) and not more than two (2)
batches, which would be reconciled and processed as such. This
is to eliminate the long-standing problem of contractors who have
been able to fully complete their segment of the intervention but

cannot access the final tranche because the construction component
within the same intervention is still ongoing.
40.14 Guidelines and Requirements for accessing Funds for

Library Development, Institution Based Research,
Academic Manuscript/Books Publication and Academic
Research Journal
40.14.1 Library Development

Requirements for the Issuance of Approval-In-Principle (AIP)
i. Covering letter.
ii. Executive summary of the proposal.
iii. List of proposed books stating the author, publishers, year
of publication, quantity, unit cost and amount.
iv. List of equipment stating manufacturer, specifications, unit
cost and total cost.
v. Genuine proforma invoice from reputable sources including
sample photographs of such equipment.
vi. For furniture-related procurements, catalogues/photographs
of the type of wood to be used.
vii. For E-library, detailed specification/description of the items
should be provided with cost.
Requirements for the Release of the First Tranche

i. Copy of Letter of AIP.
ii. Evidence of advertisement for pre-qualification in the
national dailies and the Federal Tenders Journal, in line
with the provisions of the Public Procurement Act 2007.
iii. Evidence of invitation of TETFUND to the tender opening
event.
iv. Copy of the raw attendance at the opening of tenders.
v. Evidence of tender analysis and recommendation.
vi. Minutes of tenders board meeting.
vii. Letter of commitment to commence the projects immediately
after the release.
40.14.2 The Research Funds

One of the strategies of TETFUND is promotion of research in
tertiary institutions in nigerian universities, polytechnics and colleges
of education. TETFUND does this through two types of research
funds – fund for Institution-Based Research (IBR) and the National
Research Fund (NRF). IBR was established with the objective of
resuscitating research activities in the nation’s tertiary institutions;
the culture of research over the years has been dwindling in most
of the higher institutions in the country. The outcome of financial
support would be the revival of quality research among not only
lecturers in tertiary institutions but also students of such institutions.
How to Access and Utilise the Institution-Based Research

IBR Fund and Disbursement
i. TETFUND gives allocation for IBR annually. This
allocation, however, is domiciled in TETFUND account
and only released for execution of the project after the
proposal has been approved.
ii. A maximum of N2,000,000.00 is approved per project.
iii. The approved fund shall be disbursed in tranches — 85%
(before commencement;15% after submission of final
report).
Thematic Areas for IBR

There is no restriction in the thematic areas under IBR — arts,
humanities, science and technology, education etc.
Eligibility Criteria for the IBR

i. All lecturers in all tertiary institutions in Nigeria are eligible
to access fund for IBR.
ii. The research must be conducted in the submitting institution.
Submission of Research Proposals

Submission of research proposals will be done at two levels:
At the Level of the Institutions

Research proposals shall be submitted to the ICR where they are
screened and approved — approved proposals shall be duly signed
by the chairman of the committee as having satisfied the committee
based on the scoring criteria such as:
• Having followed the prescribed format
• Quality of content of proposal which could be assessed
based on the following:
i. Executive Summary
ii. Title
iii. Introduction
iv. Objectives
v. Literature review
vi. Methodology that can be replicated including
methods of data analysis
vii. Detailed budget not exceeded N2,000,000.00.
Approved proposals shall be given back to the researcher(s). Where

there are corrections, such proposals shall be vetted by the ICR for
compliance and thereafter signed by the chairman of the committee.
Approved proposals shall then be submitted in five copies to
TETFUND.
Checklist of Documents for Submission of Approved Proposals to

TETFUND by Researcher(s)
All researchers must ensure that all required documents are attached
as non-inclusion could delay the process or lead to rejection. The
following is a checklist:
• Covering letter to TETFUND by the principal researcher
through the head of department, the chairman (ICR) and
the head of institution or his representative requesting for
funding for the approved proposals.
• Minutes of meeting of the institution’s committee on research

(ICR) in which proposal was approved.
• Evidence of approval of proposed research project by
the ICR – an approval page which clearly states that the
research proposal has been screened and considered worthy
of funding by TETFUND and is hereby approved (this page
must be signed by the chairman of the committee before the
proposal can be considered by TETFUND for funding).
• Five copies of the approved research proposal in the prescribed
format (including the budget and work plan indicating the
expected date of commencement and completion).
• Detailed profile CV of the researcher(s).
• All documents must be neatly bound and paginated for ease
of reference and filing and to avoid loss of documents.
Submission to TETFUND
Here, the proposals will be further screened to ensure that the format
has been followed, the required documentations; the content and
quality of the proposal are provided. This will be done by an ad-hoc
committee in TETFUND.
Approval at the institution level does not necessarily translate to
approval at the TETFUND level; final approval is dependent on
the outcome of the screening by the ad-hoc committee, which is
dependent on the following:
i. Provision of the full complement of required documents as
indicated under the checklist above.
ii. Use of prescribed format.
iii. Proposal not exceeding the funding limits by researchers –
two million naira (N2,000,000) maximum for each project.
iv. Cost of approved proposals not exceeding the maximum
allocation to the institution (where the institution’s
submissions exceeds their allocation, the checklist becomes
a critical factor in which proposal is funded or not).
Submission of Reports
Two types of reports will be submitted:
i. Progress Report: This will be submitted as follows:
• For a project whose duration is 3 months, a report must be
submitted midway into the period (i.e., six weeks from the
commencement of the report).
• For a period that will last 6 months, a progress report must
be submitted midway into the period (i.e., 3 months after
the commencement of the project).
• For a project that will last for one year, two progress
reports would be submitted – first one at 4 months
after commencement; the second at 8 months after
commencement.
• These reports with a covering letters from the researcher(s)
should be submitted to TETFUND through his/her head
of department, the Chairman of ICR and the head of
institution.
ii. Final Report

• At the completion of the research, a final report using the
attached template (annex 3) will be used to write the final
report.
• For the final report to be accepted by TETFUND, it must
be submitted by the principal researcher to the institution’s
research committee. This final report must contain the
certification page which will indicate that the project has
been completed by the researcher(s) to the satisfaction of
the following:
• Head of department
• ICR (Chairman)
These officials will now append their signatures on this page. The
researcher will also sign the final report. The submission of the final
reports shall be accompanied by a covering letter duly signed by
the researcher, the head of department, the chairman of ICR and the
head of institution. Five copies of the final report bound should be
submitted to TETFUND.
40.14.3 Detailed Requirements for Institution-Based Research

Disbursement of funds shall be in two tranches of 85% and 15%.
Requirements to access the funds include the following:
a. Covering letter (Request for approval of proposal)
b. Executive Summary (research outline, synopsis/abstract
and Statement of the problem/challenge
c. Institution-Based Research (IBR) lead researcher profile
form
d. Completed annexure 1 form
e. Detailed profile of researchers
f. Minutes of meeting of institution’s committee on research
g. Evidence of approval of proposed research project by the
committee
h. Institution-Based Research project shall not exceed
N2million; however, National-Based Research is exempted
from this limit
i. Time Table (including commencement and expected date
of termination of research work)
j. Cost estimates for development of abstract (field work,
report writing, conferences, publications in relevant journals
k. Cost estimate of other research materials
40.14.4 Academic Manuscript/Book (AMB) Development

Intervention
a. Covering letter (request for approval of proposal).
b. Executive Summary (synopsis and titles of proposed
publications/books).
c. Minutes of meeting of the institution’s committee of
authors/publication.
d. Completed TETFUND academic manuscript/book

development author’s form
e. Curriculum vitae (C.V.) of the author(s)
f. Evidence of ISBN
g. Evidence of peer review
h. Table of content and foreword of manuscript
i. Detailed cost breakdown
j. Detailed implementation plan
k. To qualify for the final release of 15%, the institution
shall forward to the fund three (3) copies of the
published book
40.14.5 Requirements for Accessing Academic Research Journal

(ARJ)
a. Bound copies of the last three (3) editions of the journal
(where it exists) or an artist’s impression of the cover page
(if just being established)
b. Composition of the editorial board
c. Editorial policy, frequency (annual, quarterly, etc.); copyright
and other details (usually contained under “Notes to
Contributors”)
d. Evidence of registration of the Title with the National
Library of Nigeria as an international serial (i.e. ISSN)
e. Minutes of meeting of the editorial committee
f. Submission of a comprehensive proposal of the publication
g. Detailed cost breakdown to publish the journal
h. TETFUND should be acknowledged in the journal as
sponsor
i. Three (3) copies of each TETFUND-funded edition should
be submitted to the fund for records
40.15 Guidelines and requirements for Accessing Funds for

Academic Staff Training and Development (AST & D)
Programme and Conference Attendance
40.15.1 Eligibility for the Programme
To be eligible for the Academic Staff Training and Development
programme, beneficiaries must have met the following conditions:
a. be nominated by the beneficiary’s institution through the
institution’s AST&D Committee or staff development
committee as the case may be;
b. completed TETFUND AST&D nomination form duly signed
by the head of department, dean of faculty and the vice
chancellor or rector or provost of the beneficiary institution;
c. submitted current admission letter (with cost implication,
if the programme is tenable in foreign universities/
institutions);
d. submitted his/her Curriculum Vitae;
e. submitted a duly completed, signed and stamped bond form
with the beneficiary institution where he/she is an employee
in the teaching profession of the institution; and
f. submitted his/her bank details, i.e., official salary pay point.
40.15.2 Mode of Sponsorship

The mode of sponsorship and current worth of the scholarship (in
Naira) for the respective programmes as approved by the board of
trustees are as follows:
a. PhD Science (local) programme – N1,500,000.00 for 3 years
at the rate of N500,000.00 per year;
b. PhD Arts (Local) Programme – N1, 050,000.00 for 3 years at
the rate of N350,000.00 per year;
c. Masters Science (local) programme – N700,000.00 for 2 years
at the rate of N350,000.00 per year;
d. Masters Arts (local) programme – N500,000.00 for 2 years at
the rate of N250,000.00 and;
e. All foreign programmes enjoy full sponsorship as follows:

i. Cover for tuition fees, bench fees, living expenses,
health insurance and passages;
ii. Variation of costs on annual tuition fees ONLY, but
subject to confirmation from the foreign university
where the AST & D scholars are studying; and
iii. Foreign programmes in the ratio 70% for science,
engineering and technology-based courses including
bench work and 30% for Arts/Social Science-based
courses that are critical to the development of any
segment of the Nigerian economy.
f. Foreign Masters is for a maximum period of 18 months (11/2
years).
g. Foreign PhDs is for a maximum of 31/2 years; and
h. Bench work period, ranges from 3 months to a maximum of 1
year.
40.15.3 Mode of Disbursement of Funds to the Scholars

a. approved funds for beneficiaries are released en-bloc to the
beneficiary institution’s TETFUND-dedicated accounts. The
beneficiary institution is advised to open a domiciliary account
(for foreign programmes) and lodge these monies. This is to
cushion the effect of exchange rate fluctuations. The released
monies are to be disbursed on annual basis to the scholars on
receipt of the scholar’s progress reports;
b. copy of the scholar’s progress report must be forwarded to the
fund; and
c. first disbursement to the approved scholar by the beneficiary
institution should not be more than three (3) weeks of receipt/
release of funds from TETFUND.
40.15.4 Documentation Requirements

The following documentation is required for accessing the AST &
D funds:
a. list of beneficiaries completed in the TETFUND Institution

Personnel Nomination Form, i.e. TETFUND/NOM-SDT/
FORM AS;
b. outline of the areas of training;
c. name of institution/venue where training is tenable;
d. date(s)/Period and Duration of the training;
e. detailed cost estimates for the training for the respective
candidates including cost implication per candidate per year,
especially for foreign programmes;
f. letter(s) of admission of the respective nominated candidates/
staff (i.e. current and/or validated admission);
g. candidate’s course status, i.e. extent of completion (i.e., for
returning students) certified by the registrar of the Institution
where programme/course is being run;
h. evidence of course completion, that is, thesis and certificate,
must be forwarded to the fund; and
i. evidence of acceptance for bench work – i.e. short research-
based training towards the completion of an on-going (local)
PhD programme. Bench work establishes and consolidates
institutional linkages between world class foreign universities
and Nigeria.
40.15.5 Requirements for Accessing Funds for Conference

Attendance
a. documentary evidence of the conference(s) to attend; including
conference fees;
b. conference date/duration;
c. completed TETFUND Institution Personnel Data Forms for
academic and non-academic staff, i.e. TETF/IPD-CA/FORM
AS and TETF/IPD-CA/FORM NAS;
d. department/unit of staff/conference attendee indicating
academic and non-academic categories;
e. state respective budget/cost implication for each potential
beneficiary;
f. submission should reach the fund two (2) months to the
commencement of the programme; and
g. back-to-office report with copy of certificate of attendance

must be submitted to the Fund.
40.15.6 Requirements for Accessing Funds for Teaching

Practice, Entrepreneurship Study Centres
(i) Teaching Practice Supervision
Only academic staff supervising students on teaching
Practice are eligible for sponsorship. The requirements for
accessing the Teaching Practice Intervention Funds are as
follows:
a. schedule indicating dates/periods and duration of teaching
practice supervision for the intervention year;
b. names, rank and department of academic staff to be involved
in the supervision;
c. names of schools/venue where the supervision is taking place;
d. detailed cost implication per supervision during the period of
supervision;
e. completed TETFUND Personnel Nomination forms;
f. detailed cost implication for the establishment or improvement
of the mini teaching laboratory; and
g. executive dummary of the submission.
(ii) Entrepreneurship Study Centre (ESC)

To access funds for the establishment of Entrepreneurship
Study Centres, the requirements are highlighted above.
(iii) Internal Audit Clearance Certificate

The Internal Audit Unit (IAU) duties in the processing of
beneficiaries’ payments after the first tranche actually start
from request by the beneficiaries for the second and final
tranches. However, the following are basic requirements of
the IAU for the processing of the second and third tranche
disbursements for beneficiaries:
a. dedicated bank statement solely for TETFUND showing

evidence of all lodgements and all payments therefrom,
essentially for projects being retired, i.e. normal intervention,
library intervention, high impact or special projects as the case
may be;
b. e-payment schedules in line with the Federal Government
policy;
c. payment vouchers with supporting documents such as
necessary approvals by the authorities of the benefitting
institutions, advance payment guarantees, contract agreements,
receipts from payees, etc;
d. evidence of deduction and remittance of taxes to the relevant
tax authority;
e. copies of store receipt vouchers and store issue vouchers and
invoices for items procured;
f. returns on expenditure form (Form No. TETF/DF/IAU/
FR/02);
g. financial returns form (Form No. TETF/DF/IAU/FR/01);
h. general overall progress of work achieved by the beneficiary
on the initial release, which shall be determined by comparing
the amount disbursed to payments made to the beneficiaries’
contractors; and
i. where funds have been utilised for items outside the approved
projects or any of the above documents is not made available,
audit clearance for further disbursements will not be issued.
40.16 Monitoring of Projects

The fund is required by law to monitor and evaluate execution
of projects for which intervention funds have been provided to
beneficiaries. The following are some of the strategies put in place
for monitoring the utilisation of TETFUND funds:
a. Project/Programme Monitoring: This is the regular routine
and/or Ad-hoc monitoring and evaluation by staff, the Board
of Trustees and other stakeholders such as Committees of
Education of both the Senate and House of Representatives,
NGOs, National Planning Commission, etc, and
b. Financial Monitoring: This involves special financial auditing

either by audit consultants appointed by the TETFUND, Staff
of the TETFUND; any interested stakeholders, as well as the
fund’s retained external auditors. They would usually examine
the TETFUND-dedicated accounts opened and operated by
beneficiaries of TETFUND intervention funds.
40.17 Required Qualifications of Beneficiary Desk Officers

Beneficiaries are required to appoint desk officers with relevant
competences and experience in the various aspects of interventions
of the Fund. Amongst other functions, the desk officers are
also required to work in harmony with the institution’s bursary
department for the submission of accurate and complete rendition
of financial transactions on TETFUND interventions. The following
would serve as a guide.
40.17.1 Infrastructure/Equipment-Based Interventions Desk

Officer
Desk Officers having the following competences are recommended:
• Registered architect, civil/structural/building engineer or
quantity surveyor with relevant professional certification.
• Not less than 10years post-graduation and working
experience.
• Versatility in site/project administration.
• Project management qualification and experience is an
added advantage.
40.17.2 Academic/Content-Based Interventions Desk Officer

The institution’s director of academic planning is recommended for
appointment for all academic-based interventions, viz, Academic
Staff Training and Development, research and journal publications,
conference attendance, book and manuscript development.
40.17.3 Library Intervention Desk officer

The institution’s librarian shall act as Desk Officer for all matters
involving Library Intervention.
Timelines for the Delivery of TETFUND-Related Interventions
40.18 For Infrastructure-Based Interventions

40.18.1 Activity and Time Allowed
i. Submission of documents to TETFUND after receipt of
letter of allocation for Infrastructure-based projects, not more
than 10 weeks (including due process to engage consultants
and preparation of detailed designs). For others involving
procurements and academic-based interventions, not more
than 6 weeks.
ii. Processing and Issuance of Approval-in-Principle (AIP) 2
weeks from date of receipt in the processing Department of
the Fund.
iii. Conclusion of due processes and submission of due process
report, vendor engagement (excludes those requiring higher
approvals, that is, those outside the institution’s threshold),
Not later than 9 weeks from date of receipt of AIP.
iv. Vetting and processing of and crediting of the first tranche
into beneficiary’s account, 2 weeks from date of receipt of
Application for first tranche.
v. Commencement of project implementation on site, 2 weeks
from date of receipt of funds by beneficiary.
vi. Monitoring of project after the first release, 6 weeks from date
of release of funds to beneficiary.
vii. Monitoring visit for the release of the second Tranche, 2
weeks from date of receipt of beneficiary’s request (time
includes obtaining approval to travel and payment of travel
allowances).
viii. Issuance of audit clearance to relevant processing department,
3 working days from date of receipt of financial returns.
ix. Submission of field inspection report three working days from

date of arrival back in office.
x. Processing of second and final tranche payment to crediting
of beneficiary’s account, 1 week from date of submission of
Field report.
xi. Monitoring visit for the final tranche to payment of final
tranche, The periods stated in items 7 to 10 shall apply.
40.18.2 For Academic/Content-Based and Library Interventions

All academic-based interventions MUST be submitted in not more
than THREE (3) instalments.
40.18.3 Activity and Time Allowed

a. Submission of documents to TETFUND after receipt of
allocation letter: not later than 6 weeks.
b. Vetting and processing of submission for AIP (for library only):
2 weeks from date of receipt in the processing Department.
c. Vetting and processing of academic-based intervention
proposals for approval: 2 weeks from date of receipt in the
processing department.
d. Processing of letters of release of funds by the initiating
department: 1 week from date of receipt from the ES’ office.
e. Processing of funds and crediting of account of beneficiary
for academic-based interventions:1week from date of receipt
in finance department of TETFUND Audit Unit – 2 working
days; finance department – 3 working days.
f. Observance of due process of library-based interventions and
submission of documents to the fund for release of funds: 9
weeks from date of receipt of AIP.
g. Vetting of library intervention Due Process Report 1week
from date of receipt in processing department.
h. Processing of funds for library intervention by the finance
department to crediting of beneficiary’s account: 1week audit
unit – 2 working days; finance department – 3 working days
i. Monitoring visit for release of the final tranche on library

intervention to payment of beneficiary.
The periods stated in 14.1(7) to (10) shall apply.
40.18.4 Impact Assessment

The TETFUND shall from time to time conduct impact assessment
on beneficiaries’ completed projects. The aim is to assess the level
of impact such projects have had after completion, taking into
cognisance the conditions existing before the projects came into
place. By reason of this therefore, beneficiaries are to diligently
articulate and have a well-documented “Condition Report” before
the intervention. The documentation should be accompanied with
relevant statistical data that would enable impact measurement after
the intervention. Not only will this assist in determining impact
when such facilities are in use, a basis and guide would also have
been created through lessons learned for future interventions that
should necessarily be more impactful.
40.18.5 Guidelines on Operation of TETFUND Project Funds

The following points must be noted in the operation of TETFUND
project funds.
i. There should be finance desk officer who is expected to co-
ordinate the activities of other desk officers.
ii. Each beneficiary institution is expected to open a bank
account solely for TETFUND projects to be separated from
other accounts of the institution. (e.g. University of Ilorin/
TETFUND Project Accounts).
iii. Equally, the details of the bank account should be forwarded
to the TETFUND office, such as the name of the bank account
number, sort code. With the current e-payment system, any
of the tranche released are transferred to the beneficiary
institution account and the desk officer is expected to obtain
details of the purpose of the amount transferred to the account.
iv. Email address of each desk officer must be forwarded to the
TETFUND office for any important information to be passed
and especially to forward the details of the purpose(s) of the

fund released. The desk officer is expected to check his/her
mail every two days for any information that might be sent
from TETFUND office.
v. The finance desk officer should obtain credit advice from the
bank in respect of the allocation credit to the account for the
purpose of raising receipt voucher for posting into the cash
book.
vi. Allocations of fund to beneficiary institutions are communicated
directly in writing and published on TETFUND website for
the information of beneficiary institution and the public at
large.
vii. Under no circumstances should any transfer meant for
beneficiary institutions are paid into individual name bank
account without TETFUND project account inclusive.
viii. In case the credit advices are sent by post to the accounting
officer, he shall forward same to the account department/
bursary. The advice is immediately entered into the credit
Advice Received Register.
ix. The finance desk officer is expected to promptly entered the
credit advice into the cash book with receipt voucher of which
the credit advice shall be the supporting document.
40.19 Type of Book/Document to be Kept

a. Cash Book
b. Control/Vote Book
c. Payment Voucher Register
d. Procurement Planning Committee Minutes
e. Tender Board Minutes
f. Bank Mandates File
g. Bank Statement File
h. Bank Reconciliation Statement File
i. Payment Voucher File
j. Credit Advice File
k. Contract/Project Register
l. Register of Receipts
m. Register of cancelled receipts
40.20 Non-current Asset Accounting/Register

The objective of this section is to ensure that non-current assets
acquired by beneficiary institutions with TETFUND Intervention
funds are physically available and easily identifiable within
the premises of the beneficiary institutions. It is mandatory for
every beneficiary institution to maintain TETFUND Non-current
Asset Register to record all the non-current asset purchased with
TETFUND intervention funds for every year of such intervention.
The records of the non-current Assets in the beneficiary institution’s
TETFUND Fixed Assets Register shall agree with the non-current
assets physically on ground both in number and description.
40.20.1 Physical Numbering and Identification

Non-current assets purchased with TETFUND Intervention Funds
are not only to be marked with the TETFUND insignia, but also,
they are to be specially numbered as follows for easy identification:-
i. All building constructed or purchased with the TETFUND
funds are to be marked e.g. TETFUND/BD/01/2009
“meaning”.
(a) TETFUND – Tertiary Education Trust Fund
(b) BD – Building
(c) 01/09 – Fixed Asset Register Number of the land
and building constructed or purchased with the 2009
TETFUND intervention fund.
ii. All Motor Vehicles (MV) purchased with TETFUND are to be
marked e.g., TETFUND/MV/01/09.
iii. All Laboratory Equipment (LE) purchased with the TETFUND
are to be marked e.g., TETFUND/LE/01/2009.
iv. All Computer Equipment (CE) purchased with TETFUND
fund are to be marked e.g., TETFUND/CE/01/2009.
v. All Furniture and Fitting (FF) purchased with the TETFUND
are to be marked e.g., TETFUND/FF/01/2009.
vi. All Library Books and Equipment (LBE) purchased with
the TETFUND funds are to be marked e.g., TETFUND/
LBE/01/2009.
vii. All Technical and Vocational Equipment (TVE) purchased with

TETFUND funds are to be marked e.g., TETFUND TVE/01/2009.
40.21 TETFUND Non-current Asset Register

The TETFUND Non-current Asset Register shall be grouped into seven; each
group with separate pages with index for easy identification if it is manual, but
if it electronic, the programme will bring out whatever command is given.
(a) Building – To record all buildings constructed or purchased with

TETFUND Intervention Fund.
Format of Non-Current Asset Register
S/ Asset No Date Asset Cost Supplier Rate Location

No Acquired Description N of
Dep.

i. Tetfund/BD/
01/2009 2009 Lecture Hall I 12,000,000.00 AB Ojo 2% Main
& Son Camps
ii. Tetfund BD/
02/2010 2010 Mechanical 18,000,000.00 Abiola 2% Main
Workshop Ltd Camps
(b) Motor Vehicles – To record all motor vehicles purchased with Tetfund
Intervention Fund.
Format of Non-current Asset Register
S/
No Asset No Date Asset Cost Supplier Rate Location
Acquired Description N of
Dep.
1. Tetfund/MV 3/7/2009 Camry 2005 5,000,000.00 Bruco Ltd 25% VC

/01/2009 FG815/A53 Motor

2. Tetfund MV 30/6/2010 Toyota Corolla 4,000,000.00 Bike Motor 25% Pool
/02/2010 2006 FG
070/AB3

(c) Laboratory Equipment – To record all laboratory equipment

purchased with Tetfund Intervention Fund.
Format of Non-current Asset Register
S/
No Asset No Date Asset Cost Supplier Rate Location
Acquired Description N of
Dep.
(d) Computer Equipment - To record all computer equipment purchased

with Tetfund Intervention Fund.
(e) Furniture and Fittings – To record all furniture and fitting purchased
with TETFUND Intervention Fund if the furniture’s had been
numbered.
(f) Library Books and Equipment – To record all library books and
equipment purchased with TETFUND Intervention Funds.
(g) Technical Vocational Equipment –To record all technical and
vocational equipment purchased with Tetfund Intervention Funds.
Non-current Asset Schedule

A separate fixed Asset Schedule should be prepared to be consolidated with
other asset of the institution in the final account of the institution.
Non-Current Asset Schedule Format 1
Funded by Tetfund
Asset Rate % Initial Addition Disposal Total Depreciation Depreciation Accumulation Aggregate Carrying Value
1430
Cost/ During Cost/ Brought for the Year Depreciation Depreciation
Valuation the Year Variation Forward On Disposed
Building
Motor
Vehicle
Laboratory
Equipment
Computer
Equipment
Furniture
and Fittings
Library
Books and
Equipment
Technical
Vocational
Equipment
Non-Current Asset Schedule Format 2
Funded by Tetfund
Accounting for Tertiary Institutions
Building Motor Laboratory Computer Furniture Library Technical Total

Vehicle Equipment Equipment Fittings Books Equipment
Equipment
N N N N N N N N
Rate of % % % % % % %
Depreciation
Cost
At 1st January
Transfer
At 31st December
Deposal
Reclassification to investment properties
At 31st December
Depreciation And Impairment Losses
At 1st January
Reversal
Change for the year
At 31st December
Charge for the year
Deposal
At 31st December
Carrying Value
At 31st December
1431
At 31st December
At 1st January
Non-Current Asset Schedule Format Funded by Subvention & IGR
1432
Land Building Building Furniture Plan Work-in- Office & Teaching Library Motor Art Total
& Fittings Machinery Progress Computer Research Book Vehicle Collections
Equipment Equipment
N N N N N N N N N N N N
Rate of Depreciation % % % % % % % % % % %
Cost
At 1st January
Transfer
At 31st December
Deposal
Reclassification to
investment properties
At 31st December
Depreciation and
Impairment Losses
At 1st January
Reversal
Change for the year
At 31st December
Charge for the year
Deposal
At 31st December
Carrying Value
At 31st December
At 31st December
At 1st January
Practice Questions
1. Explain the concept of tertiary institutions and fund accounting.

2. Discuss the main sources of revenue of tertiary institutions.
3. Highlight and discuss how to account for Tertiary Education
Trust Fund (TETFUND).
4. Enumerate and discuss the organisational structure of
TETFUND and its functions.
5. Discuss the functions of funds generation, planning and
budget divisions.
6. Explain the oversight functions of TETFUND over its projects
7. Discuss the broad principles for accessing the yearly
TETFUND allocations.
8. Explain the guidelines on operation of TETFUND Project
Funds.

Chapter Forty One
Nigerian Foreign Service Operation
Learning Outcomes
i. discuss the concept of foreign service;
ii. enumerate the principal officials of foreign service;
iii. highlight and discuss the various foreign service allowances;
iv. distinguish between Embassy, Missions and Consulates;
v. enumerate and discuss the roles of the finance attaché;
vi. explain the conduct of the foreign officers;
vii. discuss the provisions of regulations 16,17 and 19 as they
relate to officers of foreign service;
viii. list the books of account to be kept by a typical foreign
mission; and
ix. discuss the major areas of expenditure of the mission.
41.0 Introduction
Foreign service is part of public service of the federation. Therefore,
it is imperative for all public servants to understand the operations
and the importance of foreign relations to a country. The point must
be made that no country can be an island unto itself. It must interact
and relate to other nations.
As important as the foreign service is, there is no avenue within
the public service where tutorial or training on foreign operations
is given. The only exception is a foreign affairs officer who is
mandated to attend the Foreign Service Academy where full training
on foreign operation is delivered.
1434
1435 Nigerian Foreign Service Operation
Other public servants who are attachés to the foreign service are not
trained or given any tutorial. For instance, finance, administrative,
military, secretaries, immigration and other attachés are not formally
trained. Even the offices of the Auditor-General for the Federation
and Accountant-General of the Federation that carry out oversight
function never had any such training. This lack of training has
implications for the effectiveness of the oversight often conducted.
Here lies the relevance of the information contained in this chapter,
as they would hopefully enhance the productivity of the public
servants in foreign service operations.
The foreign service was established as a separate service of the
Nigerian Government with the purpose of providing staff for the
Ministry of Foreign Affairs and in Nigerian diplomatic, consular
and other posts abroad. The conditions of service of officers
required to serve outside Nigeria differ in some respects from those
of the remainder of the Public Service. As a result, separate Foreign
Service Regulations have, therefore, been authorised. It is important
to state that Rules of the Public Service of Nigeria apply to members
of the foreign service in respect of matters not specifically covered
by foreign service regulations. However, the Foreign Service
Regulations will supersede the Public Service rules where the two
are in conflict (Reg. No. 2).
The foreign service regulations will be discussed to equip those
who are saddled with the function of oversight. This is because,
understanding of the environment is very relevant and key to success.
41.1 Definition of Terms

The following are some of the important terms in foreign service
that need to be understood:
i. Embassy and High Commission: These refer to the
buildings in which those missions are based. An embassy/
high commission can also refer to the workplace of foreign
service staff posted outside the country. It is a permanent
diplomatic mission where a group of people from one nation
represent their country in the host state. The basic function of

an embassy/high commission is to manage the relationship
between a host country and a foreign country. It is to also
manage disputes among the sending and receiving states and
to report to the home state. So reporting is the most important
task of embassy/high commission. The primary purpose of an
embassy/high commission is to assist its citizens who travel to
or live in the host country. For instance, U.S. Foreign Service
Officers also interview citizens of the host country who wish
to travel to the United States for business, education, tourism
or other purposes. Some embassies have consular sections,
which exercise the functions of a consulate. The difference
between an embassy and a consulate is that an embassy is
headed by an Ambassador and a Consulate is headed by a
Consul General.
Note: that each country only has one embassy/high
commission in a foreign country, located in the capital city.
ii. Chancery: This is the building of the mission “Chancery

Building.” Understanding of these terms that are not familiar
will enhance the operation of the officers that are on oversight
function and the attachés that were not familiar with the terms.
41.2 Task of an Embassy/High Commission

An embassy is the diplomatic representation of a country’s
government in another country.
i. It transmits messages of its home government to the
government of the host country and vice versa.
ii. It informs its home government about important political,
social, economic, military and other events happening in the
host country.
iii. It prepares international treaties and official state visits.
iv. It promotes its own home culture, economy and science in the
host country.
v. The military attaché is responsible for contact between the
two armed forces and for arms business.
vi. An embassy helps to preserve and protect the relationship

between the host country and the country represented by that
particular embassy office.
vii. The embassy can be a point of contact or base of
communication, between two countries.
41.3 Task of a Consulate

A consulate is an extension of the embassy/high commission often
located in major cities, other than capital, of the host country for
specific task to strengthen social, economic and cultural ties. It is
the representation of the public administration of a country in a
foreign town. A consulate is responsible for its own citizens, living
in or travelling to the host country. The most important duties of a
consulate are to:
i. establish and renew passport and other official documents;
ii. report birth, death, marriage, divorce and adoption that
occurred in the host country to the competent authorities at
home;
iii. inform its own citizens living abroad about the society’s
security situation;
iv. handle the military formalities and control for its own citizens
liable to military service;
v. help its own citizens in distress or other emergency situation;
vi. look after its own citizen in detention or arrest and to watch
over the rule of law and fair trials; and
vii. establish entry visas to foreign citizen about immigration —
residence-and work permits.
41.4 Head of Mission

The head of mission is the most senior officer or the officer acting in
place of the senior officer at a diplomatic post abroad. For avoidance
of doubt, an officer at the head of a consular post in a country where
there is a substantive head of mission is not, by this definition, head
of mission. Therefore, directors/deputy directors posted to missions
may be designated deputy heads of mission. However, where it
becomes expedient to post two such senior officers to a Mission, the

Deputy Director would be designated a Minister.
41.5 Support Staff

The embassy support staff is typically made up of
• economic officers who handle economic disputes and
negotiate such things as patents, taxes and tariffs;
• consular officers who deal with travel-related issues like
issuing visas; and
• political officers who follow the political climate in the
host country and issue reports to travellers and their home
government.
Embassy workers can help resolve conflicts, ease and observe
political tensions in the host country, or reach resolutions on issues
as varied as trade tariffs between the host country and the country of
origin. Embassy workers can also assist travellers visiting the host
country who are in distress.
41.6 Head of the Embassy

The ambassador is in charge of the support staff and usually gains
the position through political nomination. Ambassadors typically
have training in foreign relations before assuming the position.
41.7 Composition of Foreign Service

Foreign Service is grouped into two branches: A and B
41.7.1 Branch A
These are personnel appointed for diplomatic and representational
duties. These are the foreign affairs staff that have attended the
Foreign Affairs Academy. The same Federal Public Service
Commission does appointment of the foreign staff.
41.7.2 Branch B
Appointed for non-diplomatic duties. These are staff attaché to
support the professional foreign affairs officer. Officers from
home ministries posted to Nigerian Diplomatic Missions abroad,
shall be designated Attaches in charge of the responsibilities of
their ministries. For instance, finance, administrative, military and
secretaries’ attaché.
41.8 Training of Foreign Affair Staff

The Ministry of Foreign Affairs is statutorily required to maintain
a Foreign Service Academy, which shall be responsible for the
training of Foreign Service Officers at all levels as well as officers
serving in other branches of the ministry. All newly appointed
Foreign Service Officers shall attend one (1) year formal training in
diplomatic practice at the Foreign Service Academy.
41.9 Appointment of Principal Representatives

The power to appoint ambassadors, high commissioners and heads
of mission, who shall be principal representatives of Nigeria abroad
on a substantive or temporary basis is vested in the president on the
advice of the Ministry of Foreign Affairs.
a. In the appointment of principal representatives of Nigeria
abroad, priority consideration shall be given to career
diplomats rather than non-career diplomats.
b. The appointment of non-career ambassadors whose number
may not exceed twenty-five per cent (25%) of the total number
of ambassadors shall be at the pleasure of the president and
shall cease when the president ceases to hold office.
c. An officer sent to a post as Charge d’Affaires shall be entitled
to an acting allowance as head of mission.
d. An officer designated “deputy head of mission” shall take
charge when the head of mission is outside the country of his
accreditation.
e. No acting allowance shall be payable where an officer is

temporarily in charge of a mission under the control of a non-
resident ambassador who is concurrently accredited to the
country but is normally resident elsewhere.
f. In cases where an ambassador is recalled or withdrawn for
whatever reason from his post, the most senior foreign service
officer shall take charge of the mission. Such an officer
shall be entitled to acting allowance of one grade above his
substantive level (Reg. No.4).
41.10 Difference between Ambassador and High Commissioner

There are Non-commonwealth countries and Commonwealth
Countries. Embassies are diplomatic mission sent to non-
commonwealth countries and an ambassador is the head of mission.
High commissions are diplomatic missions sent to Commonwealth
countries and High Commissioner is the head of mission.
Note: Commonwealth countries are members of The
Commonwealth of Nations, which is an inter-governmental
organisation of 52- member-states that were former
colonies of the British Empires. For example:
• Ambassador: The United States diplomatic
mission in India is called Embassy. This is
because India was part of the British Empire
and USA is not a Commonwealth country.
• High Commissioner: British diplomatic
mission in India is called High Commission
because India was part of the British empire
and as such, it is a Commonwealth country.
41.10.1 Difference between Embassy and Consulate

An embassy is a larger representation, but a consulate is only a
smaller section of the embassy. Consulates, in a sense, can be called
junior embassies. Embassies are permanent diplomatic mission
generally located in the host country’s capital.
41.11 Conduct of the Foreign Officers

On no condition should a foreign officer be insolvent or financially
embarrassed in accordance with the provision of the Public Service
Rule 030414. The fact must be reported to the Permanent Secretary.
Therefore, all officers are expected to leave within their incomes.
41.11.1 Marriage to Foreigner

Any officer of the Foreign Service who proposes to marry a foreigner
shall first seek the prior permission of the Permanent Secretary
before proceeding with the marriage (Reg. No.6).
41.11.2 Benefit to Married Spouses
Married female officer shall enjoy the same facilities in respect

of their spouses and children as their male counterparts provided
there would be no duplication of benefits to married spouses. For
example:
i. diplomatic passport for spouses of Branch A officers to facilitate
the issuance of visa and allow effective representational functions
abroad;
ii. official passports for spouses of Branch B officers;
iii. opportunity for spouses to accompany their partners on
posting at government expense;
iv. resettlement and clothing allowance and medical attention for
spouses;
v. female officers shall enjoy children’s benefits when they are
divorced and have custody of the children or when widowed;
vi. a child of an officer must be registered with the ministry
within three months of birth, and in case of newly appointed
officers within three months of entry into service. In the case
of an adopted child, the registration shall only be taken on the
presentation of all the legal papers, including court order.
41.12 Foreign Service Allowance (Reg. No. 9)

Foreign service allowance is an area which requires special attention
by the head of mission and the Ministry of Foreign Affairs because
the bulk of financial allocation to the mission goes on allowances.
41.12.1 Appropriate Foreign Service Allowance

A foreign service officer serving abroad is eligible to receive
appropriate foreign service allowance. This allowance is paid to
enable an officer generally to maintain himself and his family, in
conditions and at a standard in which he will most usefully and
conveniently be able to carry out his duties as a representative of
the Federal Republic of Nigeria in another country. The rate of the
allowance payable to each officer varies according to the officer’s
rank and the overseas’ post in which he is serving.
The following factors, inter alia, are taken into account in assessing
the annual rate of foreign service allowance to be paid to each
officer:
i. local cost of living;
ii. expenditure which an officer serving abroad necessarily
incurs over and above that incurred by an officer of same rank
serving in Nigeria;
iii. expenditure which, while optional for a private individual, is
obligatory for an officer by virtue of his official status;
iv. the state of the Nigerian economy.
41.12.2 Hospitality Allowance

The foreign service allowance is also designed to assist an officer
going abroad in providing hospitality. In addition to the normal
foreign service allowance, government has approved the payment
of accountable hospitality allowance to officers at post (i.e. foreign
affairs officers below the rank of ambassador). Accountable hospitality
allowance is payable retrospectively, normally on monthly basis on
claims which must be supported with guest list and other documents
(i.e. receipts or bills) which the head of mission may require. It is
emphasised that the accountable hospitality allowance provided for

each officer is the maximum amount of hospitality assistance he can
expect from public funds. The prior approval of head of mission
or any other very senior officer designated for this purpose in the
particular mission must be obtained before such expenditures are
incurred.
41.12.3 Children’s Foreign Service Allowance

Children’s foreign service allowance has been integrated into the
Consolidated Foreign Service Allowance.
41.12.4 Other Conditions

i. An officer will draw Foreign Service Allowance (FSA) from
the day on which he assumes duty at an overseas post. He
will cease to draw Foreign Service Allowance on the day he
leaves his overseas post.
ii. An officer on home leave paid for by government will receive
25 per cent of the overseas allowance in consideration of his
continuing expenses.
iii. At all times, there shall be the protection of the Foreign
Service Allowance against erosion caused by currency
fluctuations, to minimise inflationary impact on purchasing
power of officers. There shall also be an in-built mechanism
for a periodic review of the Foreign Service Allowance as
may be recommended by the Minister, Foreign Affairs and
approved by the President.
iv. Foreign Service Allowance shall be based on salary grade
level.
v. All married officers will receive Foreign Service Allowance
at rates as provided in the Consolidated Foreign Service
Allowance. However, the payment of such allowance shall be
limited to actual period spent at post by spouses on monthly
pro-rata basis.
vi. Passage privilege is to be extended to wives/husbands to visit
their spouses at post at government expense once a year.
41.12.5 Clothing Allowance (Reg. No 10)

Clothing allowance has been integrated into the Consolidated Staff
Foreign Service Allowance. On first appointment as Ambassador
or High Commissioner, an officer shall be eligible for this special
clothing allowance of $3,000.00. Where clothing allowance falls
due while an officer is at Headquarters, he will be entitled to 50% of
the approved rate in naira.
41.12.6 Resettlement Allowance (Reg. No. 11)
This is an allowance paid to an officer on transfer to mission outside
the country. Resettlement allowance is payable in the following
circumstances and at the following rates:
a. On transfer from one post abroad to another or from Nigeria
to a post abroad:
• Married officers - 4 per cent of Consolidated Salary.
• Single officers - 3 per cent of Consolidated Salary.
b. On transfer from a post abroad to Nigeria provided that the
officer has served abroad for at least two years or has returned
earlier to Nigeria by the orders of the Government:
• Married officers - 6 per cent of Consolidated Salary.
• Single officer - 4 per cent of Consolidated Salary.
c. A married officer who is separated from his spouse or whose
spouse and family did not accompany him abroad shall draw
the allowance at a single rate, provided that an officer may
receive the difference when he/she is joined by his spouse or
family at post.
d. When an officer, during an interval between two postings
abroad, takes up temporary duty in Nigeria or spends his
vacation leave in Nigeria knowing that he is shortly to proceed
to another post, he is not eligible to receive two grants of
resettlement allowance. He will receive only the grant for
which he/she is eligible on arrival at the new post.
e. When an officer is promoted at the same time as he is
transferred, the grant of resettlement allowance shall be
calculated on his salary after promotion.
41.12.7 House Allowance (Reg. No.13)

A member of the Foreign Service abroad, shall be provided with
accommodation rented or owned by the Nigerian Government.
When accommodation either rented or owned by the Nigerian
Government is available and suitable, an officer shall be required
to occupy it. Where an officer is unable to move into a suitable
accommodation immediately on arrival at post, he may draw for a
period not normally exceeding 28 days estacode allowance at the
appropriate rates.
41.12.7.1 The conditions for payment of housing allowance are:

i. When, due to circumstances beyond his/her control, an officer
cannot be provided with official quarters after 28 days at post,
he will cease to draw the allowance and government will
settle the cost of reasonable hotel accommodation, less food,
alcoholic drinks and incidental expenses.
ii. When an officer returns to headquarters from posting abroad,
government will meet the normal hotel expenses of him,
spouse and up to four children for a maximum of one month,
less alcoholic, beverages, telephone and incidentals.
iii. Cash payment in lieu of hotel accommodation at headquarters
may be made to officers returning from overseas posting, who
elect for such payment at approved rates.
41.12.8 Change of Accommodation

An officer occupying accommodation, rented or owned by Nigerian
Government is responsible for the proper care of its contents. He
shall be personally charged with the cost of making good any damage
to the furniture, fittings or decorations which is not attributed to fair
wear and tear. Heads of mission are required to cause such quarters
to be inspected whenever they are vacated and to issue a certificate
to the effect that the quarters and furnishings are in a reasonable
state of repair.
41.12.9 Officers Not Allowed to Accommodate Guest More

Than Necessary
An officer is not permitted, except for a short period and in special
circumstances with the permission of his head of mission, to
provide accommodation at his post abroad to persons other than his
spouse, children and servants. This rule is to protect the officers
from relatives travelling abroad to be accommodated by the officer.
41.12.10 Circumstances for Changing Accommodation

If an officer, not on his own initiative but due to compelling
circumstances, has to change accommodation, the government shall
bear the reasonable cost of moving his effects to his new address
and if the head of mission is satisfied that payment of rent at both
places at the same time is unavoidable, he may authorise payment
of rent on both the old and new accommodation for a period of not
more than one week
41.13 Electricity/Utility Bill (Gas) to Be Jointly Paid by

Government and Officer (Reg.No.13)
i. Bills in respect of electricity and gas shall be settled from
public funds except that officers on GL 07-13 will be required
to contribute 50 per cent, while officers on GL 14 and above
will be required to contribute 65 per cent.
ii. Officers serving in designated hardship post shall be required
to contribute 20 percent towards the settlement of utility bills
incurred by them.
iii. Utilities in respect of heads of mission and deputy heads of
mission shall be settled from public funds.
41.14 Travelling Allowance/Overseas Tours (Reg. No.14)

Whenever an officer makes an official journey within the country in
which he is serving, he will be eligible for:
i. Free passage by air, rail or road to the place visited.
ii. Free transport in the place visited in accordance with the local
regulations applicable to officers of the same status.
iii. Reimbursement of actual expenditure on transport necessarily

hired in connection with the business of the visit.
iv. Estacode allowance at rates laid down in the appropriate
government regulations.
41.15 Officers Accompanying Delegates

Officers accompanying official delegates abroad or on official visits
to countries outside those in which they are serving are eligible for
passages, transport and estacode allowance in accordance with the
appropriate government regulations.
41.16 Entitlement of Officer on Posting or Returning

An officer proceeding or returning from an overseas posting or on
transfer between one overseas post and another is eligible for sea
or air passages as laid down in the Public Service Rules or extant
circulars for self, wife and four children between Nigeria and
the overseas post or one post and another. In addition, a head of
diplomatic mission is allowed free passages for two servants; while
foreign affairs officers of the rank of chief foreign affairs officers,
GL.14 and above are allowed free passages for one servant each at
public expense.
41.17 Officer Travelling by Air but Baggage by Sea

Officers travelling by air, with his heavy baggage forwarded by sea,
will be entitled as follows:
i. officers on salary grade level 12 and below – maximum of 20,
foot container;
ii. officers on GL.13 and above shall be entitled to a maximum of
40-foot container plus shipment of personal car at government
expense;
41.18 Medical Attention and Appointment of Medical

Practitioner (Reg No 16)
i. A member of the foreign service shall be entitled to receive
the same medical treatment when serving at a post abroad.
The spouse, children and Nigerian domestic servants who

have accompanied him/her abroad at public expense will
receive the same benefits.
ii. At each post abroad, a medical practitioner and a dentist will
be appointed by the head of mission after due consultation
with the home-based staff and members of staff must consult
them when necessary.
iii. Each head of mission will explore the possibility of making
single comprehensive payment for all medical attention to staff
and where the cost of medical attention is exceptionally high,
some form of group insurance scheme may be advantageous.
41.19 Domestic Servants Abroad (Reg. No.17)

i. Passage privileges are granted to enable all senior officers
in the foreign service to take children’s nurses or domestic
servants from Nigeria to posts abroad (FSR. 14 (3 b, c). On
security grounds, there may be objection to the employment of
certain types of aliens as domestic servants in the households
of officers serving abroad.
ii. An officer should, therefore, consult the head of his mission
before employing any alien.
Note: It would be regarded as serious misconduct for an
officer to abuse the passage privilege granted him for a
servant by utilizing it for the journey abroad for a person
who was not in fact to be full-time domestic servant in his
household.
41.20 Entitlement of Head of Mission

a. The Head of Mission shall be entitled to the following
domestic staff:
i. one cook and two stewards;
ii. two security guards;
iii. two drivers; and
iv. two grounds-men as and where appropriate to be
determined by the permanent secretary.
b. Some members of the domestic staff of the head of mission

listed above will be employed from the two domestic servants
who accompanied the head of mission and whose passages
were paid by the government.
41.21 Entitlement of Deputy Head of Mission

A deputy head of mission shall be entitled to the following:
i. One cook and One steward;
ii. One driver;
iii. One groundsman.
In the same vein as head of mission, the domestic servants who
accompanied a deputy head of mission at government expense
could be employed as members of his domestic staff listed above.
41.22 Foreign Service Language

All members of Branch “A” of the Foreign Service are expected and
encouraged whenever possible to learn the language of the country
in which they are serving and members of Branch “B” are also
encouraged to do so. Officers who attain proficiency in language
at lower standard or higher standard shall qualify for a one-off
payment of 5 per cent or 10 percent of Consolidated Foreign Service
Allowance respectively.
41.23 Applicable Leaves (Reg. No. 19)

41.23.1 Annual Leave Must Be Taken within the Calendar
Year
Annual leave for members of the foreign service in Nigeria will be
at the rates laid down in the Public Service Rules or extant circulars.
All officers are expected to take their vacation leave within the
calendar year in which such leave is due. Unless approval is given
for the deferment of such leave, it will be forfeited. Any leave
approved for deferment shall be spent before the officer’s retirement
otherwise it will be forfeited.
41.23.2 Deferred Leave to Cash Not Allowed

Authorised deferred leave may be commuted to cash only where
an officer has been made to retire prematurely and cannot spend all
his deferred leave before his retirement. No serving officer shall be
allowed to commute to cash at the time of retirement any deferred
leave. Annual leave for members of the foreign service in Nigeria
will be by the permission of the permanent secretary while annual
leave spent elsewhere will be by the permission of the head of the
mission.
41.23.3 Casual Leave

An-officer serving in an overseas post may, subject to the exigencies
of the service, be permitted within any calendar year to spend up to
half of his annual leave entitlement for that year overseas. In that
case, no travel time will be allowed in addition to any leave granted.
Such leave shall be deducted from his annual leave entitlement.
At the discretion of the head of mission, officers may be granted
occasional permission to absent themselves from duty for not more
than 7 days in a leave year without loss of salary. An application to
spend his local leave outside the officer’s post shall be authorised by
the head of mission.
41.24 Free Return Passage on Private Travel

In accordance with the provisions of the Public Service Rules, leave
on the grounds of urgent private affairs will, on the authority of the
permanent secretary, be granted to officers to return home for a brief
period. Where such leave has been necessitated by the serious illness
or death of a close relative, he will be granted free return passage
to Nigeria at public expense. For the purposes of this regulation, a
close relation means an officer’s parents, spouse, children or parents
of spouse
41.25 Calculation of Leave Allowance

(a) An officer serving abroad shall be entitled to 2 per cent of his
annual foreign service Allowance as leave transport grant.
(b) A head of mission must obtain the consent of the permanent

secretary before proceeding on overseas leave.
(c) Where an officer elects to proceed on home leave paid for by
government, the officer shall be entitled to only 25 per cent
of his foreign service allowance for the duration of his leave
period.
(d) Where an officer elects, on the other hand, to proceed on
home leave at his own expense, the officer shall be entitled
to full foreign service allowance for the duration of the leave
period.
41.26 Locally Engaged Staff (Reg. No.20)

(i) Staff engaged locally at a post abroad is not members of the
foreign service and their conditions are regulated by their
contracts of employment. They are not entitled to any of the
privileges or allowances payable under these regulations.
(ii) Where social security scheme is available in the host country,
missions should participate in them for the benefit of locally
engaged staff.
(iii) Where such schemes are not available, a lump sum calculated
in accordance with the provisions of the Nigerian Pensions
Act should be paid. On no account should the mission involve
itself in the payment of pension.
41.27 Transport Allowance (Reg. No. 21)

(i) The foreign service allowance of an officer serving abroad
includes an element of transport expenses equivalent to the
rate of transport allowance, which the officer would normally
have received if he were serving in Nigeria. The officer would
not, therefore, be entitled to transport allowance as long as he
receives his/her foreign service allowance.
(ii) The cost of transporting an officer’s car from one station to
another during transfer or leave, preparatory to transfer to
another post will be at government expense.
(iii) Official transport will be provided for heads of mission and

for their deputies. In large missions and where available,
transport will also be provided to ministers. Such transport
is to be used for official, ceremonial and representational
purposes.
41.28 Death of Foreign Officer or Family Member (Reg. N0. 22)

(a) The government shall bear the full cost of the repatriation of
the remains of a deceased officer, his spouse or his dependants
to the designated Nigerian home of the deceased. For the
purpose of this rule, a dependent means any member of the
officer’s family including domestic personnel whose passage
to the post was paid by the government.
(b) The government will also bear the cost of a return fare of the
spouse to enable the spouse accompany the body to Nigeria.
Otherwise, government will assist with the local burial up to
an amount not exceeding the cost of the transporting the body
to Nigeria. The government will however not be responsible
in this case for any funeral expense in Nigeria.
41.29 Spouses at Post

(i) A spouse of an officer in the Nigerian Foreign Service is
prohibited from taking up gainful employment while at post
with the officer.
(ii) Spouses of foreign service officers on leave of absence on
grounds of Public Policy who fall within the field of selection
for an interview/promotion examination shall be allowed to
sit for the interview/promotion examination while at post
and, if successful, will be promoted to put him/her at par with
his/her colleagues.
(iii) Where such a spouse has improved himself by acquiring
additional qualification, which will enhance his usefulness
to the service, he shall be considered for advancement in
accordance with prevailing regulations.
41.30 Children’s Education Supplement and How Payment

Should Be Made
(a) Children of officers at post shall enjoy free primary Education
at government expense.
(b) The contribution of an officer to secondary education in
respect of each child shall be 15% of the cost (boarding and
tuition inclusive).
(c) An officer, serving in a country in which there are no suitable
facilities for education through the medium of English
Language shall, with the approval of the ministry, send
his children to an English speaking boarding institution at
government expense in countries approved within the region
where the Mission is located.
(d) The head of mission shall, in the first instance, pay the fees
directly on production of the bills, and thereafter deduct it
from the officer’s foreign service allowance.
41.31 Approved Missions

The approved countries for each mission are as follows:
S/N Region Countries

i. West Africa Nigeria, Ghana, Gambia, Benin
ii. East, Central and Cameroon, Kenya, South Africa,
Southern Africa Botswana and Zimbabwe
iii. North Africa Officers serving in this region should
send their children to International schools
in their host countries.
iv. Europe Ireland, United Kingdom
v. Asia India, Philippines, Malaysia
vi. Latin America & USA, Trinidad and Tobago, Jamaica,
Caribbean Canada
vii. Middle East Turkey, Egypt
41.32 Retirement from Service (Reg. No. 28)

The compulsory retirement age for all grades in the Foreign Service
shall be 60 years or 35 years of pensionable service whichever
is earlier. No officer shall be allowed to remain in the foreign
service after attaining the retirement age of 60 years or 35 years of
pensionable service whichever is earlier.
41.33 Finance Attaché

Finance attaché is one of the Group “B” public foreign officers
posted to a mission to handle all matters relating to finance of the
mission. He/she is posted by the office of the Accountant–General
of the Federation to the mission and after completion of his/
her tenures, he/she is expected to report back to the office of the
Accountant-General of the Federation. The officers to be posted
are required to be knowledgeable and must understand what the
economic, accounting and double entry accounting principles are
all about. Given the feedback received and the Auditor-General’s
reports, those deployed to this foreign assignment need to be
seriously trained.
41.33.1 Duties and Functions of Finance Attaché on Revenue

a. documentation of all revenue sources accruing to the mission;
b. preparation of revenue budget of the mission;
c. ensure that approved rates are assigned to revenue sources and
write them out to the revenue collector and paste on the board;
d. collation of revenue budget of the mission;
e. preparation of medium term revenue framework;
f. liaison with Budget Office of the Federation on revenue
budget and Ministry of Foreign Affairs concerning revenue
budget of mission;
g. preparation of monthly revenue analysis report and submit
same to Deputy Director Budget of Ministry of Foreign Affairs
on or before 10th of the following month;
h. issuance of debit notes for revenue due where applicable;
i. Regular update of revenue receivables register where

applicable;
j. Maintenance and updating of individual ledger for each
receivables (debtors);
k. collection of revenue due to the mission;
l. maintenance of a Revenue Cash Book;
m. ensure effective monitoring of revenue sources of the mission;
n. advice the head of mission on issues that affect revenue
mobilisation and receivable of the mission.
41.33.2 Major Areas of Expenditure of the Mission

a. Salary of foreign service officers are paid at the home country,
only foreign service allowance is being paid according to the
rate of the allowance payable to each.
b. Accountable hospitality allowance.
c. Resettlement allowance.
d. Rent of accommodation.
e. Transport for travelling.
f. Electrical and gas bill (payment with government).
g. Medical bills.
h. Domestic staff.
i. Locally engaged staff.
j. Children’s education supplement.
41.33.3 Duties and Functions of Finance Attaché on Expenditure

The Finance attaché of the mission shall perform the following
duties:
a. ensuring proper preparation of monthly staff payroll;
b. ensuring the existence of variation control on personnel
emoluments;
c. processing approval for salaries, overhead and capital
expenditures;
d. ensuring the identification and recording of accounts payables
and record same;
e. organising the expenditure functions in a manner that

facilitates the keeping of complete and adequate financial/
statistical records;
f. ensuring proper disbursement of funds;
g. ensuring posting of payments in the relevant cash books on a
daily basis;
h. ensuring effective cash management;
i. ensuring proper accounting for third party deductions;
j. ensuring that all staff under his control are exposed to regular
training programmes to equip them with relevant skills (on-
the-job) for the efficient performance of their duties;
k. ensuring proper maintenance of mandate/AIE File/register;
l. ensuring weekly reconciliation of the mandate registers, cash
books and vote books and submit same to the director of
finance and accounts;
m. ensuring the reconciliation of the mandate registers, cash
books and vote books with the electronic payment platform
printout (where applicable) and the report submitted to the
director of finance and accounts on a weekly basis;
n. ensuring that all payments are duly authorized and supported
with relevant documents; and
o. performing any other duty assigned to him from time to time
by the director of finance and accounts.
41.33.4 Accounting Documents to Be Kept in the Mission

Missions must maintain the following accounting documents:
a. Revenue cash book
b. Revenue collection register
c. Overhead cash book
d. Capital cash book
e. Revenue receivable register
f. Salary and wages cash book
g. Accounts payable register
h. Vote book
i. Security book register
j. Property plant and equipment
k. Inventory issue note register

l. Bank reconciliation statement
m. Bank statement files
n. Advances ledgers
o. AIE files
p. Treasury book 6
q. Treasury book 6A (revenue collector receipt)
r. Master inventory board
41.34 Sources of Revenue Accruable to Foreign Missions

The following are major sources of revenue in Nigerian Mission
with the National Chart of Account:
S/N Economic Code Type of Revenue

i. 12020406 Visa fees
ii. 12020405 Passport fees
iii. 12020407 Emergency travel certificate
iv. 12020408 Authentication of document
v. 12020426 Oath/court summon fee
vi. 12020427 Identity card
vii. 12020611 Auction sales
41.34.1 Practical Approach to How Revenue collected Are

Kept in Mission
a. Revenue Collection Register Specimen
Date Receipt No. Name of Service Amount

Payee

(i) A revenue collection register will be opened for each

source of revenue boldly written at the back of the register.
(ii) A separate revenue treasury receipt Book 6A is expected
to be given to the revenue collector for easy posting into
the revenue collection register.
(iii) The total collection for the week is expected to be paid to
the finance attaché in which a treasury receipt book 6 will
be issued and pasted on the revenue collection register as
evidence of payment to finance attaché.
(iv) The economic code of the revenue collected should be
reflected in the receipt issued.
b. Revenue Cash Book

The revenue cash book is a book of original entry where receipt and
payment are recorded. That is why the revenue collector book is
called “revenue collection register.”
(i) Finance attaché is expected to lodge the revenue into
J.P. Morgan or Citibank and on no condition should the
revenue be withdrawn.
(ii) There should be a separate revenue cash book where all
revenues from all sources from various revenue collection
registers are recorded.
(iii) Monthly collection of bank statement and preparation of
Bank reconciliation statement.
41.35 Mission Expenditure

(i) Payment voucher must be raised for all payment.
(ii) Vote book must be kept; all allocation via AIE must be
posted.
(iii) The rules guiding the allowances and the benefits of any
officer must be adhered to. For instance, payment of utility,
children supplement, domestic staff and receipt must be
attached to all vouchers.
(iv) Engagement of local staff must be authorised.
(v) PV register must be kept.
(vi) All payment must be posted into the cash book.

(vii) Prepare monthly bank reconciliation statement.
(viii) Record of property plant and equipment must be kept.
There should be schedule of PPE of the mission.
(ix) Master inventory board should be maintained.
(x) Offices/house inventory board should be maintained.
41.36 Accounting for Property, Plant and Equipment in

Missions
In line with the adoption of IPSAS Accrual Basis, proper record of
property plant and equipment (PPE) in the mission is very important.
The finance attaché is expected to prepare PPE schedules ready to
be consolidated with Federal Government Financial Statement. In
addition to the schedule to be prepared, master inventory board is
also expected to be maintained to identify all non-current assets of
the mission.
41.36.1 Master Inventory Board

This contains all the individual inventory board of the offices and the
government quarters, indicating the offices and quarter at the top of
the inventory board in a page file with index for easy identification.
Master inventory board can be computerised in the system with a
programme to bring out the particular inventory required at any
particular time. The era of paper work is becoming outdated. The
inventory board can be printed out for comparison during the audit
of the Mission or when another officer is leaving the office or the
quarter and another officer entering the office/quarter for record
purpose.
Figure 41.1: Sample of Inventory Board
OFFICE INVENTORY BOARD

ROOM NO. STORE 15
TO BE HUNG UP IN EACH OFFICE
OFFICE OF THE AUDITOR-GENERAL FOR THE FEDERATION
1460
ARTICLES
INITIAL
INITIAL
INITIAL
INITIAL
INITIAL
DATE CHECKED
DATE CHECKED
NO. OR QUANTITY
DATE CHECKED
DATE CHECKED
NO. OR QUANTITY
NO. OR QUANTITY
NO. OR QUANTITY
NO. OR QUANTITY
DATE CHECKED
EXECUTIVE TABLE
SEMI EXECUTIVE TABLE
CENTRE TABLE
SIDE STOOL
CONFERENCE TABLE
EXECUTIVE CHAIR
SEMI EXECUTIVE CHAIR
CLERK CHAIR
SINGLE SETTEE
DOUBLE SETTEE
TRIPLE SETTEE
SINGLE CABINET
DOUBLE CABINET
WINDOW BLIND
COMPUTER SYSTEM
COMPUTER TABLE
PRINTER
SCANNER
PHOTOCOPIER
REFRIGERATOR
AIR-CONDITIONER
41.37 Inadequate Funding of Missions

Based on the Auditor-General’s report for the past years, it was
observed that there has been inadequate funding of the missions. As
a result, the missions had to resort to spending part of the revenues
collected by them contrary to the extant regulation No.5 “Conduct
of the Foreign Officers”. This regulation stresses the fact that on
no condition should a foreign officer be insolvent or financially
embarrassed in accordance with the provision of the Public Service
Rule 030414; the fact must be reported to the Permanent Secretary.
Therefore, all officers are expected to live according to their income.
Unfortunately, to avoid officers being financially embarrassed,
revenue is always spent pending when allocation will be received.
With cash basis of accounting being used, correct actual payable is
very difficult to ascertain. In view of the above, subsidiary ledger on
account payable is required to capture all loans taken from revenue
and other payables.
Figure 41.2: Sample of Subsidiary Ledger
Name of MDA: ………….................……………………………

Subsidiary ledger (for all Account Payable)
Name:…………………….................……………………………
Contact details: ………….................……………….……………
TIN number ……………….................………………...…………
Other details: …………….................…………………..………..
NCOA (Economic and Food code):…………………………….
Date Description/ Authority Debit Credit Balance

Details Document
No. N N N

Figure 41.3 Cash Book (To Be Used For Revenue, Recurrent Expenditure, Capital Expenditure
and Other Bank Accounts)
1462
Date Received Description/ NCOA code Authority Amount Date Paid Description/ NCOA code Authority Amount
from details of (economic document received to details of (economic document paid
N receipts code) Ref. no. N payment code) Ref no. (Pv) N
N (Rv)

Note: At period end (e.g. month end) raise a journal entry for receipt and payment side of the cash book each
41.38 Importance of the Regulations to the Office of the

Auditor-General for the Federation and Accountant-
General of the Federation
There is need to emphasise that in as much as the two agencies
are mandated to carry out oversight function on the missions,
understanding of the regulations that guide their operation must be
understood. Otherwise, the oversight will not be effective. They are
to ensure that all the regulations guiding the foreign operation are
adhered to. Those rules must be understood before embarking on
the journey.
For instance, the two agencies are to ensure that the funds allocated
are accounted for and the revenue collected is paid into the
appropriate account. The major part of the oversight of these two
agencies is to examine their payment vouchers to ensure that it
complies with the regulation. It will be a mirage for the officials of
the two agencies who do not understand the regulation properly, to
carry out an effective oversight function.
In addition, officers of other agencies who are to be posted to
foreign service need to be equipped with the regulations guiding the
operations of foreign service.
Practice Questions
1. Discuss the concept of foreign service.

2. Enumerate the principal officials of foreign service.
3. Highlight and discuss the various foreign service sllowances.
4. Distinguish between embassy, missions and consulates.
5. Enumerate and discuss the roles of the finance attaché.
6. Explain the conduct of the foreign officers.
7. Discuss the provisions of regulations 16,17 and 19 as they
relate to officers of foreign service.
8. List the books of account to be kept by a typical foreign
mission.
9. Discuss the major areas of expenditure of the mission.
QUESTIONS AND ANSWERS
Q1.0
i. What do you understand by patronage or “spoil system” and
merit-based system as it affect employment of public service?
ii. What was the consequence of the patronage system in British
Empire, United States, The Soviets Union and China?
iii. How did they overcome the consequence caused by the
Patronage system?
This question is in order and commendable because the wording of

the question is better than questions 1 and 2 above.
Solution to Question 1
i. Patronage or spoil system is the method adopted in the
recruitment of public servants in the government by slot
to the influential people in the government e.g. ministers,
commissioners and parliamentarians in which slots are given;
they either give to their children or sell to the highest bidder.
Every employment made must be sponsored by an influential
person. Merit-based system is method adopted in recruitment
which is based on competitive examination which is by merit.
Examination are conducted by an independent institution
in which employment will be based on performance at the
examination.
ii. The consequence of patronage system was poor performance
of the public service generally because it slowed down the
pace of development of the nation.
1464
1465 Questions and Answers
iii. The consequence was overcome by various reforms carried

out by various countries due to the damage done by the
patronage system and changed to merit-based system in the
recruitment of public servant.
Q2.0
This is part of the keynote address delivered by the newly elected
president of your country during the Civil Service Day lecture
organised by the Head of Service:
It was noted that many less-developed countries had to face the
serious problem of poorly developed Civil Service structures.
Indeed, after the World War II, Only few of the colonial powers had
trained indigenous administrators sufficiently. The lack of qualified
personnel sometimes led not only to a reduction in efficiency but
also a decline in administrative morality.
Nepotism, tribalism, and corruption as well as inefficiency in the
Civil Service were difficulties often added to the other trials of
independence. Based on the terms of service, most of the old hands
retired from the service without good hands.
In many countries, the incapacity of the Civil Service and political
failings of the elected leaders were major factors that led to military
rule. Military regimes have frequently been the last resort of a
country where the civil power had failed to cope with the problems
of independence.
As a directorate cadre officer in the service, what are your suggestions
on the key issues raised and the way forward to correct all the lapses
expressed in the President address?
The key points in the extract of the address is as follows:
i. Poorly developed civil service.
ii. Lack of trained officers.
iii. Presence of nepotism, tribalism and corruption.
iv. Incapacity of civilian government mostly causes the

intervention of military rule.
The above points are the issues raised in the president address and
the following suggestions will be recommended as the way forward.
i. Reforms of the service must be carried out; among the reform
will be the establishment of special school to train senior
officers, issues of motivation of the staff will be viewed
seriously.
ii. Training will be one of the priority areas to be looked into.
iii. Method of recruitment will be “merit-based system”,
patronage system will be abolished.
iv. Federal character will be used in the recruitment exercise.
Q3.0
Public Sector Entity xyz
Trial Balance for the year ended 31st December, 2015
S/N Description Debit Credit

N N
Property, Plant and Equipment;
-Motor Vehicle 250,000
-Building 2,000,000
Furniture 200,000
Equipment 1,000,000
-Plant and Machinery 300,000
Investment Property 400,000
Intangible Assets;
-Research and Development 56,000
Accounting software 260,000
Receivables;
Long term loan Grand 350,000
Unpaid Service rendered 50,000
Fine 40,000
Penalty 60,000
Fees 50,000
Prepayment; Insurance 62,000
Inventories:
- Office Consumable 4,000
- Unissued PPE Furniture 35,000
Cash and Its Equivalents 160,000
Investment;Treasury Bill 60,000
Acc.Prov. for Depreciation
PPE
-Motor Vehicle 50,000
Building 120,000
Furniture 74,000
Equipment 360,000
Plant and Equipment 140,000
Acc. For Dep.-Investment
Property 50,000
Acc. for Impairment-Long
term receivable 35,000
Research and Development 20,000
Payable from Exchange
transaction 225,500
Unremitted deduction 57,000
Employee benefits
Obligations (Current) 368,000
Deffer Income- Aid and Grant 700,000
Accrued Expenses:
Audit and Professional fee 50,000
Utility Bill 30,000
Capital Grant 1,500,000
Long Term Borrowing;
- Domestic 200,000
- Foreign 1,000,000
Reserves 1,247,500
Accumulated Net
Surplus/ (Deficit) 890,000
TOTAL 6,227,000 6,227,000
ii The following information extracted from cash book

Receipts; (N)
Subvention 2,000,000
Scrapped P and M 15,000
Allocation Capital 2,600,000
Aid and Grant 400,000
Fees 1,500,000
Fine 1,250,000
Penalty 1,300,000
9,065,000
Payment; (N)
Motor vehicle 450,000
Building 700,000
Plant and Machinery 750,000
Equipment 500,000
Outstanding Liabilities: -Payable
from Exchange transaction 125,000
Loan Payment:
- Domestic 50,000
- Foreign and Interest 510,000
Salaries and Wages 2,950,000
Transport and Travelling 100,000
Hotel Accommodation 50,000
Office Consumables 70,000
Rent Expenses 50,000
General Repairs and Maintenance 65,000
Audit fees 750,000

Utilities 50,000
Other overhead 60,000
Donation to Political Party 100,000
Finance charge - Insurance 162,000
Miscellaneous Expenses 450,000
TOTAL 7,932,000
The following information are relevant:

1. Out of the payment for the building, as total sum of N500,000
was used to construct mini shopping mall for rental. The
Project was completed and commissioned during the year.
IPSAS 16
2. The payment for salaries and wages include settlement of B/F
outstanding employees benefit and unremitted deductions
while employee salaries and wages bill for the month of
December, 2016 amounting to N500,000 was not yet paid.
3. Contract for the supply of Motor vehicle was awarded to ABC
Motors Ltd. The Managing Director is a former Director-
General of the entity. IPSAS 20
4. The following information was extracted from the unit in charge
of accounting for PPE (IPSAS 17) 5 sets of HP computers
were received from Development Partners to assist the agency
to fight sub-standard products in the country. The HP series
P1120 2016 model. Base on this information, a call was made
to three of their computer suppliers to find out the current
price of the HP P1120. Two of the suppliers said N100,00 each
while one said N100,500. Base on the information which is
the fair value of the computer, the computer were valued for
N500,000 IPSAS 23
5. The entity during the year received an asset valuation report
from an estate valuer who was engaged to carry out the
valuation of its building (PPE and investment property). The
new values of the Building (PPE and investment Property)
were put at N3m and N1.5m respectively. The report was
approved by the Board. IPSAS 17
6. An item of equipment with the carry value of N100,000 was

swapped with another equipment with a fair value of N300,000
from a sister entity. The swapped equipment was acquired by
the entity five years ago at a cost of N400,000 IPSAS 17.
7. An item of plant and machinery with carry value of N110,000
was scrapped during the year for 15,000 due to non-availability
of spare part. The plant and machinery was bought 3 years
ago at a cost of N200,000 IPSAS 17.
8. Some of the accounting policies adopted by the agency include
the following rates:
%
• Motor vehicle 20
• Building 2
• Furniture 10
• Equipment 15
• Plant and Machinery 15
• Investment Property 5
All PPE (Including PPE acquired during the year were all issued).
9. During the year, one of the contractors took the entity to court
for breach of contract. The case was still in court as at the end
of the year and from all indications, judgment will eventually
be in his favour. The legal adviser estimated the judgment debt
to be N750,000. IPSAS 19
10. Value of office consumable base on stock sheet as at 31st
December, 2016 was N10,000 IPSAS 12.
11. All intangible assets are amortised at the rate of 20% per
annum IPSAS 31
12. The brought forward prepayment was in respect of Insurance
on the vehicles for the year 2016 and N35,000 is being owed
for 2016.
13. The brought forward, the differed income (Aid & Grants), was
utilised during the year.
14. The following expenses were incurred but not settled as at end
of the year.
(N)
• Audit and accountancy fees 150,000
• Utility 28,000
• Repairs and maintenance 20,000
15. An extract from the Foreign loan amortisation indicates that
a total sum of N510,000 comprising of principal and interest
N10,000) was due for repayment during the year.
16. Outstanding fines, penalties and fees as at 31st December,
2015 were all received during the year.
Required
Prepare, in vertical form, the Statement of Financial Performance
and Statement of Financial Position of Standard Organisation of
Wazobia for the year ended 31st December, 2016.
(Show All Workings)

PUBLIC SECTOR ENTITY XYZ
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31ST DECEMBER, 2016
2015 NOTES 2016 FINAL INITIAL/ SUP. VARIANCE

N0’000 BUDGET ORIGINAL BUDGET ON FINAL
20X BUDGET 2016 BUDGET
2016 N
REVENUE
XX SUBVENTION 1 2,000,000 2,000,000
XX NON-TAX
REVENUE 2 3,900,000 3,900,000
XX AID AND
GRANTS 3 1,600,000 1,600,000
XX TOTAL
REVENUE 7,500,000 7,500,000

EXPENDITURE
XX SALARIES &
WAGES 4 3,025,000 3,025,000
XX OVERHEAD
COST 5 3,977,000 3,977,000
XX DEPRECIATION
CHARGES – PPE 6 740,000 740,000
XX IMPAIRED
CHARGES 7 185,000 185,000
XX AMORTISATION
CHARGES 8 63,200 63,200
XX FINANCIAL
CHARGES 9 25,000 25,000
XX TOTAL
EXPENDITURE 8,015,200 8,015,200

XX SURPLUS/
(DEFICIT)
FROM
OPERATING
ACTIVITIES
FOR THE
PERIOD -515,200 X

XX LOSS ON
SWAPPED
ASSETS 10 -80,000 (x)
XX TOTAL NON-
OPERATING
REVENUE
(EXPENSES) -80,000 XX
-595,200
XX SURPLUS/
(DEFICIT)
FROM
ACTIVITIES X
XX EXTRA
ORDINARY
ITEM (x)
XX NET
SURPLUS/
(DEFICIT)
FOR THE
PERIOD XX


STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER, 2016
Notes 2016 2015

N N N N
ASSETS
CURRENT ASSETS
CASH & CASH
EQUIVALENTS 11 140,000 160,000
INVENTORIES 12 2,000 39,000
RECEIVABLES 13 50,000 200,000
PREPAYMENT 14 0 62,000
192,000 461,000
NON-CURRENT
ASSETS
LOAN GRANTED 15 315,000 315,000
INVESTMENT 16 60,000 60,000
PROPERTY, PLANT
& EQUIPMENT 17 6,031,000 3,396,000
INVESTMENT
PROPERTY 18 1,900,000 350,000
INTANGIBLE 19 232,800 296,000
ASSETS
8,538,800 4,417,000
TOTAL ASSETS 8,730,800 4,878,000

LIABILITIES
CURRENT
LIABILITIES
DEPOSITS 20 0 0
ACCRUED
EXPENSES 21 708,000 448,000
UNREMITTED
DEDUCTION 22 0 57,000
DEFERRED INCOME 23 0 700,000
PROVISIONS 24 750,000 0
CURRENT PORTION
OF BORROWINGS 25 300,000
PAYABLE-EXCHANGE
TRANSACTION 26 100,500 225,500
1,858,500 1,430,500

NON-CURRENT
LIABILITIES
BORROWINGS 27 350,000 1,200,000
350,000 1,200,000
TOTAL
LIABILITIES 2,208,500 2,630,500

NET ASSETS 6,522,300 2,247,500

NET ASSETS/
EQUITY
CAPITAL GRANTS 28 4,100,000 1,500,000
RESERVES 29 2,422,300 747,500
6,522,300 2,247,500
TOTAL NET ASSETS
/ EQUITY 6,522,300 2,247,500

STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31ST DECEMBER, 2016
Details 2016
N N
CASH FLOW FROM
OPERATING ACTIVITIES
INFLOW
SUBVENTION RECEIVED a 2,000,000
NON-TAX REVENUE b 4,050,000
AID & GRANTS c 400,000
TOTAL INFLOW FROM
OPERATING ACTIVITIES 6,450,000
OUTFLOW
SALARIES & WAGES d -2,950,000
OVERHEADS e 3,170,000
FINANCE COST f -15,000

TOTAL OUTFLOW FROM
OPERATING ACTIVITIES (6,135,000)
NET CASH FLOW FROM
OPERATING ACTIVITIES 315,000

CASH FLOW FROM

INVESTING ACTIVITIES
PURCHASE/CONSTRUCTION
OF ASSETS — PPE g -1,900,000
PURCHASE OF INVESTMENT
PROPERTY (500,000)
PROCEEDS FROM SCRAPPED
PPE 15,000
NET CASH FLOW INVESTING
ACTIVITIES (2,385,000)

CASH FLOW FROM
FINANCING ACTIVITIES
REPAYMENT OF LOAN —
DOMESTIC -50,000
REPAYMENT OF LOAN —
FOREIGN LOAN -500,000
CAPITAL GRANT 2,600,000
NET CASH FLOW FROM
FINANCING ACTIVITIES 2,050,000
NET CASH FLOW FROM ALL
ACTIVITIES (20,000)
CASH & ITS EQUIVALENT AS
AT 1/1 160,000
AT 31/12 i 140,000

NOTE:
AT 31/12XX
BANK BALANCES 140,000
140,000
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APPENDICES
1485 Appendix
1487 Appendix
1489 Appendix
1491 Appendix
1493 Appendix
1495 Appendix
1497 Appendix
1499 Appendix
1501 Appendix
INDEX
Academic Advances, 975, 978-979, 1186-1190

- Manuscript/Book (AMB) - Ledger, 1359
Development intervention, 1410, African Development Bank, 945, 950
1415-1416 AFROSAI-E (African organisation of English-
- Research Journal, 1410 speaking Supreme Audit Institution),
- requirements for, 1416 1198, 1222-1223
Acceptance of Bids, 886 Agency theory, 1197
Access to yearly TETFUND allocations, Allocated Stores, 827-828
1400-1406 Allocation of Fixed/Variable Overhead Cost,
Accountant-General of the Federation 832
- Treasury and Federation Account, Allocation to other funds, 930-931
1206 Ambassador and High Commission,
Accounting - difference between, 1440
- and Disclosure anomalies Amendment to existing Executive Order,
distinguished by type, 1335 1107-1108
- Books and Maintenance of Record, Amortisation, 814, 822
956-957 - Ledger, 961
- Books and Records, 957-960 Annual estimates of Local Government,
- Codes, 837 - preparation of, 1373-1374
- Documentation, 796, 806-807, 821 Annual Stocktaking, 847-850
- Documents/Records used in the Annuity for life, 1262, 1283
stores, 837-842 Applicable
- entries, 851, 854 - Accounting Codes, 806, 821
- for - Leaves, 1449-1450
- Caution Fees, 1385 Appointment of
- Deposits, 1184-1185 - Comptroller-General of the U.S.,
- Donations and Concessionary 1209-1210
Loan in Tertiary Institutions, - the Executive Secretary of
1385-1387 (TETFUND), 1391
- Income Generating Units, 1385 - Auditor-General of the Federation,
- Property, Plant and Equipment 1196, 1200-1201
in Missions, 1459-1460 Appropriation
- Revenue and receivable - Bill, 1311
(Student Account), 1382 1384 - Law, 1311
- Tertiary Education Trust Fund Approved Missions, 1453
(TETFUND), 1387-1392 Asset under Construction, 790-791
- Policy, 803 Assets, 786
- Procedures, 796-801, 809, 822-826, - divided into Current and Non-Current
948-949 Assets, 1054-1055
- Structure of Tertiary Institutions, Audit,
1380 - Act, 1196
- Treatment, 810, 824 - Inspection Report, 1219
- of losses, 1083-1089 - of Personnel Salaries and Wages,
Accrual Basis of Accounting, 785, 829, 971 1233-1234
Accrued benefits to Public Servants, 1305- - of Security Documents, 1235-1236
1309 - Procedure, 1231
Adjustment Voucher, 1164, 1177-1179 - programme on Project, 1216-1218
Adoption and Implementation of IPSAS, - Report Writing Rules, 1250
926, 1133
1505 Index
Auditing - Trustees
- and Reporting, 1213-1214 - function of, 1390
- in other countries, 1208-1212 Bought-in Inventories, 850
Auditor-General Breakdown of Revenue Sources, 1381-1382
- for the Local Government, 1364-1370 Budget Monitoring and Price Intelligence
- for the State, 1337-1338 Unit (BMPIU), 861
- for the Federation Budget Office of the Federation (BOF),
- mandates of, 1201-1202 962
- responsibilities of, 1202-1203, Buhari, President 1094-1095,1099
- scope of work, 1204-1205 Build, Own, Operate and Transfer (BOOT)
- Statutory Functions as per Financial strategy, 860
Regulations, 1203-1204 Bureau of Public Enterprises (BPE), 949,
Authority for the Issuance of Imprest, 1109
1194 - prior review by, 901
Authority to Incur Expenditure (AIE), Bureau of Public Procurement, 862
945-946,949 Bush, George H.W. 1099
- Register, 961
Autonomy of Local Government, 1352-1355 Cadwalader, Gen. 1101
Award of Contract, 879 Calculation of Leave Allowance, 1450-1451
- that requires pre-qualification, 891- Capital Expenditure, 785-786
892 - from Development Fund, 1045
Carrying Amount/Value, 787
Bank Advices, 979-980 Cash
Bank Reconciliation, 971, 1133 - Advance, 869-870
- Audit, 1234 - and Accrual Basis of Accounting,
- how to carry out, 1008 1022
- importance of, 1008-1015 - basis of accounting standard, 1022
- Statement, 1002 - Book, 1358
Basic Concept of Accounting and Project - Audit, 1238-1239
Finance, 922-923 - Posting, 975-981
Beneficiaries/Eligibility, 1268 - Flow Statement, 1031-1034,1064,
Benefit of Fiscal Reporting, 952 1319-1331
Bid - method of preparation, 1064-
- Evaluation, 1407-1408 1068
- Report, 885-886 - of Comparison of Budget and
- Opening, 883-884 Actual Amount, 1069
Bi-Monthly Meeting of OAGF, 963 - Order Form, 980, 1177
Board of - Remittance/Transfer to Station
- Inquiry, 1090-1092 outside Nigeria, 1192
- on Losses, 1376-1377 Cashier Receipt Book, 1359
- Survey Central Bank of Nigeria (CBN) 945-
- and Inquiry, 1075-1083, 1090- 946, 948-949-950, 962, 984, 1143-
1092 1144, 1146, 1150, 1174, 1229, 1289-1290
- of Unservicable Items, 1071, 1076- - Fiscal Liquidity Assessment
1077 Committee, 950
- on Cash/ Bank Balances and Stamps, - /OAGF Consultative Forum, 951
1071, 1075-1076 Central Pay Office (CPO), 985
Certificate of Cash and Bank Balance,
998-999
Chancery, 1436 Consultants Qualification Selection (CQS),

Cheque received/credit advice register, 900
1007 Consumable Stores, 828
Cheque Summary Register, 979-980 Content of Assets and Liabilities, 1370-1373
Children’s education supplement and how Contract
payment should be made, 1453 - Agreement, 919
Children’s Foreign Allowance, 1443 - Audit, 1237
Choice of the Appropriate Selection Method, - Award, 845, 869-870
901 - processes, 891
Civil Society Organisations (CSOS), - packaging, 869
863 - Performance Guarantee, 887-888
Classification by Functions of Government - Register and Contract File, 922
(COFOG), 1153 - Vouchers, 979
Clinton, President 1107-1108 Contribution
Clothing Allowance, 1444 - and Funding, 1269
Collection and receipt of revenue, 1376 - by employee and employer
Competitive Method, 871 - rate of, 1279
Complex Terms of Reference Contributions of the Federal Government and
- preparation of, 898 Federal Capital Territory Administration,
Compliance Audit Manual, 1198 1286-1287
Componentisation of Asset, 788 Contributory Pension Scheme, 1260, 1276-
Components of a Good Audit, 1224 1278, 1304
Components of Value-for-money, 1214 - categories of persons exempted from,
Composition of Financial Statement IPSAS, 1263,1277
1054 - establishment of, 1276
Composition of Foreign Service, 1438-1439 - operation of, 1279-1281
Compulsory retirement, 1270 Control Mechanism, 1317
Computation of Cash and Bank Balance, Conversion Voucher, 837
975 Cooperative Societies, 1148
Computation of Retirement Benefits Formula, Copyrights, 813
1291-1292 Core value of GAO, 1210-1211
Computer software, 813 Corporate Planning and Development, 1394
Concept of Public Debt, 1037-1039 Correspondence Allowance, 1189-1190
Concerns about Electronic Payment, 991 Cost Differential Factor, 832
Conditions for Granting Advances, 1186- Cost Estimates and Budget
1190 - preparation of 897
Conditions for Pension and Gratuity benefits, Cost excluded from the cost of inventories,
1267-1268 833
Condonation of break in service, 1298 Cost Model, 819
Conduct of Foreign Officers, 1441 Cost of PPE, 789
Conflict of Interest, 894-895 Cost, 787
Consolidated
- Account Department (CAD), 1022 Damaged Inventory (Loss of Stock), 852
- Financial Statement, 1023, 1025 Data required to effect e-payment, 986
- Foreign Service Allowance, 1443 Death
- Revenue Fund (CRF), 925, 930, 945, - in the course of duty, 1272-1274
948, 1040, 1287, 1290, 1311 Death
Consulate - of
- task of, 1437 - a Serving Pensionable Officer, 1306
1507 Index
- an employee, 1284 Domestic Servants abroad, 1448

- insurance cover on Contributory Domestication of National Chart of Account
Pension Scheme, 1307-1308 1315
- an Officer/Spouse Overseas, 1306 Domestication of NCOA, 1380
- Foreign Officer or Family member, Due Process requirements for accessing
1452 tranche of funds, 1406-1409
Debt Management Office (DMO), 945, 947, Duties of Desk Officer, 1001-1002
949, 962, 1289 Duty Tour Allowance
Definition of some - (estacode) for Officer on Oversea
- key terms, 786-789, 872, 1266-1267, Tour, 1188-1190
1435-1436 - within Nigeria, 1188
- terms relating to Intangible Assets,
813-815 E-Collection, 1133
Democracy Day, 1099 Ecological Fund, 930-931
Department Economic
- of Petroleum Resources (DPR), 933, - Code (Revenue in Arrears), 973
961 - Financial Crimes Commission
- Vote (EFCC), 1037, 1184, 1246, 1353-
- Expenditure Account (DVEA), 1354
1359 - Reforms and Governance Project
- Revenue Account (DVRA), (ERGP), 1132,1138
1358 Eligibility of the Tender, 881
Deposit, 1183-1184, 1337 Embassy
- Account, 1360 - and Consulate
- Ledger, 1184 - difference between, 1440
- Money Banks (DMB), 1143 - and High Commission, 1435-1436
- Register, 1184 task of, 1436-1437
Depreciable Amount, 787, 814 Emergency Procurement, 912
Depreciation/Amortisation charges, 785 End-of-the-Year Welfare Package, 1309
Derivation 13%, 1314 Engagement of Consultant, 893-894
Development of Natural Resources, 930-931 Entitlement of
Diagnostic/Baseline Study, 858-859 - Deputy Head of Mission, 1449
Direct Contracting, 869 - Head of Mission, 1448-1449
Direct Procurement/Emergency 910-912 - Officer on posting or returning, 1447
Disclosure, 793-795, 803-806, 836-837 Entity internally created inventories, 831-
- requirement 820-821 832
Disclosures in Financial Statements, 1070 Entity – specific Value, 788
Disengagement Allowance and Kilometer Entrepreneurship Study Centre (ESC), 1420
Allowance, 1307-1309 E-payment, 971-1021
Disposal - benefits of, 986-987
- Methods, 917-918 - characteristics of, 985-986
- of Intangible Asset, 825 - Instruments, 989
- of Public Property, 916-918 - System, 926, 981-983, 1133
Distributing goods at no charge or for a Estimated value of Motor vehicles, plants
National Charge Subsidy 833 and equipment for disposal, 1079-1082
Documentation, 1299 Evaluation of Bids and Qualification Criteria,
- of receipts into the store, 844-845 884-885
Documents required for Bank Reconciliation,
1007
Evaluation of Proposals - Sub-Treasury Directorate, 966-967

- criteria for, 907-908 Federation Account, 925, 942, 1316, 1350
Examination of the Bid, 884 - establishment and operation of, 929-
Excess Crude distributions, 1338 930
Executive - Allocation Committee (FAAC), 925,
- Order, 1094-1131 933-937, 949, 1023, 1339
- and Presidential Proclamation - establishment of, 931-932
- historical background
- and Independent Revenues
of, 1100-1103 - challenges in revenue to, 963-
- emerging issues, 1097-1098 966
- issued by President Buhari, - Directorate, 929-944
1115-1116 - inflows into, 933
- uses of, 1108-1111 Finality of Shortlists, 906
- vs. Presidential Memoranda Finance Attache, 1454-1457
and its uses, 1111-1115 - on Revenue
- Summary Report, 1219-1220 - duties and functions of, 1454-
Exemption from Taxes, 1285 1455
Expected Financial Statements, 1318-1319 Financial
Expendable Stores, 828 - Accountability in Nigeria System
Expenditure - failure of, 1256-1257
- Audit, 1232 - Audit Manual, 1198
- Division, 945-949 - Proposal,
- of Local Government, 1355-1360 -specific information on, 909-
Expression of Interest and Short-listing of 910
Consultants - Regulation provisions on disposal of
- analysis of, 905 Assets, 916-917
External Consultant on Project/Contract, - Reporting
892-895 - Council of Nigeria (FRC), 1334-
1335
Fair Value, 787 - requirements, 991
Features of payment vouchers, 1164 - under Cash Basis of Accounting
Federal Standard, 1024-1030
- Capital Territory (FCT), 930-931 - under IPSAS Accrual-Basis of
- Executive Council, 873 Accounting, 1053-1070
- Government, - under IPSAS Cash Basis of
- and Federal Capital Territory Accounting, 1022-1052
Pension Transitional Arrangements - Statement
Directorate - Audit, 1224-1227
- functions of, 1295-1296 - Process
- Retirement Benefits Bonds, 1289- - overview of, 1225-1226
1291 - of State Government, 1315
- Share, 948 - Statements
- Inland Revenue Service (FIRS), - of Local Government, 1360-
933, 961, 1148, 1158, 1388 1363
- Pay Offices, 925, 933, 967-970, - to be prepared by Local
1029, 1190 Government Councils, 1358-
- Revenue Reconciliation Committee 1360
(FRRC), 961, 963 First-in-First-out (FIFO) method, 835-836,
846, 851
1509 Index
Fiscal - Statistics (GFS), 1151

- Account Division, 949-951 - Integrated Financial Management
- Liquidity Committee, 963 Information System (GIFMIS), 926, 945,
- Report, 951-952 949, 1132-1138, 1147, 1173
- Responsibility Act 2007, 949 Grant, 1351
- Sustainability Plan, 1155-1162, 1313 Gratuity and pension payable to
Fixed - Governor and Deputy Governor,
- Budget Selection (FBS), 900 1275
- Overhead Absorption Rate (FOAR), - Judicial Officer, 1275-1276
832 - President and Vice President, 1274-
- Overhead Cost, 831-832 1275
Force Account (Direct Labour), 869 Group Life Insurance Policy, 1281
Foreign Service, 1434-1463 Group Register, 1169,1173
- Academy, 1434 Guidelines
- Allowance (FSA), 1442-1446 - and requirements for accessing funds
- Language, 1449 for Academic Staff Training and
- Regulations, 1435 Development (AST&D), 1417-1421
Free return passage on private travel, - and requirements for accessing funds
1450 for Library Development etc, 1410-
Full retirement benefits under contributory, 1416
1282-1284 - for accessing TETFUND intervention
Functions of Procurement Unit/Section, funds, 1397-1400
915-916 - of disposing of Motor Vehicles, plants
Fund Directorate, 945-952 and equipments, 1071
Funds Generation Division, 1394-1395 - on Audit Queries and Sanctions,
Furniture Inventory Board, 837, 840 1241-1244
- Status and Organisation of Internal
General Audit, 1247-1248
- Circulars, 1095 - on Operation of TETFUND Project
- Functions of the Treasury Office, Funds, 1425-1426
927-929 - Regulations for Inspections and
- Payment Guidelines, 918-922 Monitoring of Reporting Entities,
- Purpose Financial Statements (GPFS), 1333-1335
820, 836, 1022, 1025-1027, 1029,
1035,1151-1152,1333 Head of Embassy, 1438
George Washington’s Proclamation of Head of Mission, 1437-1438
Neutrality, 1793 1099 Heritage Asset, 791
Government Highlights of Executive Orders issued by
- Accountability Office (GAO), UK President Buhari, 1126-1131
1208-1212 Hire of Government Officials, 894
- and Nigeria Auditor-General Office Honour Certificate, 1175
- difference between, 1211- Hospitality Allowance, 1442-1443
1212 House Allowance, 1445-1446
- Agencies as Consultant, 894
- Auditing, 1205-1207 Impairment Loss, 785, 814
- Financial - of a Cash-generating Asset, 787
- Reforms, 1132 - of Intangible Assets,
- objectives of, 1133 - indicators of, 815-816
Impairment, 787 Internally

Import Duty Collection Committee (IDC), - created inventory, 852-853
962 - Generated Goodwill, 818
Imprest, 1192-1195 - Generated Revenue, 1351
- Audit, 1236-1237 International
Inadequate funding of Missions, 1461-1462 - Monetary Fund (IMF), 945, 950, 1151
Incapacity Pension, 1271-1272 - Organisation of Supreme Audit
Income Generating, 785 Institutions (INTOSA), 1198-1199
Indemnity Certificate/Letter, 1175-1176 - Public Sector Accounting Standards
Independent Corrupt Practices and other (IPSAS), 785-811, 828-830, 843, 847,
Related Offences Commission (ICPC), 971-1070, 1199, 1315, 1318, 1358,
1037, 1184, 1246 1354 1380, 1382, 1459
Information and Communications - Accrual Accounting Basis, 971-1021
Technology (ICT), 1396-1397, 1147 Internationally Competitive Bidding(ICB),
Information asymmetry and need for Audit, 869
1197-1198 Inventories, 827-854, 1337
Infrastructure Concession and Regulatory - examples of, 830
Commission (ICRC), 1109 - bought-in, 831
Inspection Section, 1071- 1072 - - cost of, 831
Institution-Based Research (IBR), 1411 Investigation, 1071, 1074
- requirements for, 1415 Investment Property, 785-811
Intangible Assets, 813-826, 1337 Investment Register, 1360
- identification of, 815 Invitation to Bid, 879-880
- measurement of, 818-821 Invoice, 842
- recognition criteria for, 816-817 Irrevocable Standing Payment Order (ISPO),
Integrated 948
- Financial Management System
(IFMIS), 1140 Jonathan, President 1099
- Payroll and Personnel Information Journal Entries, 1179-1180
System (IPPIS), 926, 1132-1133,
1147- 1151, 1168, 1171-1173, 1190,
Key features in posting Cash Book, 974
1280
- Transaction Account (ITA), 1149-
1150 Last Pay Certificate, 1175
Interest on Delay Payment, 888, 919 Least-Cost Selection (LCS), 900
Internal Audit Ledger accounts, 972
- and Statutory Audit in Government Ledgers and Registers, 957-959
Parastatals Legal and Institutional Framework, 861-864
- scope of, 1254-1255
- Clearance Certificate, 1420-1421 Letter of
- Efficiency - Award and Signing of the Contract,
- hindrance to, 1251-1252 886-887
- Report, 1249-1251 - Commitment, 1408
- Principal functions of, 1246 - invitation, 907
– legal backing of, 1248 Liabilities, 1055-1056
- Sustaining effectiveness of, 1252- Life Cycle of PPE from time of Acquisition,
1253 791-792
Internal check procedure for imprest account, Limited International Bidding (LIB), 869
1182, 1194-1195
1511 Index
Limits of reimbursable imprest, 1195 Ministry of,

Lincoln, Abraham 1101-1102 - Finance Incorporated (MOFI), 952
Lincoln’s Emancipation, 1863, 1099 - Mines and Steel Development, 933
Loan Section, 959-960 Missing employees, 1284
Loans Ledger, 960 Missing Officers, 1299
Local Government Mission Expenditure, 1458-1459
- Accounting, 1338-1341 Mobilisation Fees, 887,918
- Executive Committee, 1350 Modernisation of the Internal Audit
- functions of, 1340 Functions, 926,1133
- legislative arm, 1348-1350 Monetary
- need for, 1339 - and Fiscal Policy Coordinating
- organisational structure of, 1340, Committee (MFPCC), 962
1342-1348 - Policy Co-ordinating Committee of
- revenue of, 1350-1352 DMO, 950
Local Purchase Order (LPO)/Job Order, 837, Monetary Threshold, 873
842-844 Monitoring
Locally engaged staff, 1451 - and Impact Assessment, 1396
Loss of - of Projects,1421-1422
- Fund in Local Government, 1376- Monthly
1377 - Bank Schedule mandates, 1007
- Life - Reconciliation of Mandates, 950
- insurance at Government expense
on official assignment, 1307
National
Losses, 1071-1074
- Bureau of Statistics, 950
- Chart of Accounts (NCOA), 895-
Macroeconomic benefits, 987-989 796, 833, 848, 926, 1025-1027, 1029,
Maintenance of Cash book, 975 1132-1133, 1184, 1315,1351, 1380,
Management of Inventories, 846 1457
Master Inventory Board, 1459 - structure of, 1152-1154
Measurement, 803-806, 834-835 - Competitive Bidding (NCB), 869
Medium of sending instructions, 990 - Council on Public Procurement
Methods of Electronic Payment, 982-984 - establishment of, 865-868
Methods of Procurement, 869 - Economic Empowerment Strategy
Microeconomic benefits, 989 (NEEDS), 926
Minimum - Health Insurance Scheme, 1148
- and maximum pension, 1274 - Housing Fund, 1148
- entry age into the Public Service, - Insurance Commission, 1283
1265 - Pension Commission (PENCOM),
Ministerial Tender Board, 873 1261, 1280-1281
Ministerial/Departmental Board of Survey - Planning Commission, 950
on Unservicable Items - Research Fund (NRF), 1411
- constitution of, 1077-1078 - Shopping, 912-914
Ministries/Departments and Agency (MDAs), - Standard Bidding Documents
864, 877, 929, 945, 947, 974, 990,1003- 1006, (NSBDs), 863
1022, 1027-1028, 1053, 1071, 1117-1118, - Strategy for Public Service Reform
1138-1139, 1142- 1143, 1146, 1149, 1154, (NSPSR), 926
1168, 1202, 1206-1207, 1229, 1316-1317 Nature of the Cash Book, 972-974
Negotiable Method, 872
Net Realisable Value (NRV), 835 - Contract Sum, 918

Neutrality Act of 1794, 1101 - Supplies Contract, 920-921
New Deal programmes, 1102-1103 - Procedure after award of Contract or
Nigeria Engagement of Consultant, 914-915
- Customs Service, 933 - Vouchers,
- Extractive Industries Transparency - Audit, 1164,1235
Initiative (NEITI), 962 - definition of, 1164
Nigerian - pensions, 1165
- Financial Intelligence Unit (NFIU) - Register, 1169, 1172-1173
- role of, 1353-1355 Payroll, summary vouchers, 1165
- Foreign Service, 1452 Pension
- National Petroleum Corporation - Asset Custodian (PAC), 1280-1281,
(NNPC), 933 -961,1143 1286, 1312
- Ports Authority (NPA), 1143 - Fund Administrator (PFA), 1148,
Nominal 1261, 1279-1281, 1284, 1286-1287
- Retirement benefits, 1270 - Fund Custodian, 1280
- Retirement Savings Account, 1280 - Reform Act, 1260-1261
Non-Contributory - 2004, 1276-1277, 1287
- and Contributory Pension Scheme - thrust of, 1261-1262
- comparing the benefit of, 1297- - 2014, 1276, 1281-1283
1298 - objectives of, 1263
- Pension Scheme, 1261 - Scheme, 1260
- historical background of, 1265- - Transitional Arrangements Directorate
1276 - establishment of, 1294-1295
Non-current assets, 785 Performance
Non-Expendable Stores, 828 - Audit and Budget Monitoring and
Non-Generating Assets, 785 Evaluation,
Non-government organisations (NGOs), 898 - differences between, 1221
Non-Personal Advance, 1186 - Bank Bond, 919
Notice of Withdrawal/Retirement, 1298-1299 - Report, 1030, 1318
- /Value-for-Money Audit, 1214-1221
Objectives of Government Financial Personal
Reforms, 926 - Advance, 1186
Office of the Accountant-General of the - Emolument Form, 1168-1170
Federation (OAGF), 925-970, 985, 1133, - Emolument Record Card, 1168,
1148, 1312 1171, 1189
- Directorates in, 927 - Income Tax, 1176
Officer Interdicted, 1177 Personnel Cost, 1311
Officers entitled to Medical Check-Up, 1308 Petroleum Profit Tax (PPT), 930, 937
Other charges payment voucher, 1165 Planning of Disposals, 916
Port operations, 1119-1120
Parastatals Tender Board, 873
Post retirement death benefit, 1274
Patents, 813
Posting of Treasury Cash Book, 978-979
Payables, 1336
Preparation of
PAYE collection, 1158
- a payment voucher, 1164
Payment
- procedure for, 1167-1168
- for Works/ Projects, 921-922
- Cash Flow Projection (CFP), 950
- of
- Daily Summary of CRF, 950
- Consultancy and other services, 921
1513 Index
- Fiscal Account, 949-950 - Reforms, 891

- Monthly Cash Flow Projections, 949 - in Nigeria, 856
- salary vouchers/pay roll, 1164, Programmed
1174-1175 - fund withdrawals, 1283
Preparing Bank Reconciliation Statement, - monthly or quarterly withdrawals,
1006-1007 1262
Pre-qualification of contractors, 891 Project Register and Project File, 922
Pre-Retirement death benefits, 1272 Property, Plant and Equipment (PPE), 785-
Presidential 811,1385
- Executive Order on Preservation - and its applicable standard, 789
of Suspicious Assets on Corruption, Public
1121-1125 - Account Committee (PAC), 965,
- Memoranda, 1094-1131 1197, 1202, 1213
- pardon, 1099 - Debt, 1022
- Power and Constitutional - Management, 951
Democracy, 1103-1105 - Expenditure, 1159
- Proclamation, 1094-1131 - Financial Management (PFM), 926,
- types of, 1098-1099 1159
- Revenue Monitoring and - reforms, 1132, 1157
Reconciliation Committee (PRM & - in Nigeria
RC), 962-963 - reforms of, 1132-1162
- System of Government - Procurement, 856, 1095
- instruments under, 1094-1131 - Act 2007, 856, 871, 877, 910
Pre-Tender Meeting, 883 - proposed amendment to, 889-
Prevention and Loss of Fund by Auditor- 890
General, 1212 - physical and practical impact
Principal Journal Voucher (PJV), 1180 of, 865
Private Sector, 1282 - reality on, 923-924
Procedures for Remittances, 1191 - Bill, 861
Proceeds of Items for disposal, 1078-1079 - Processes, 877
Processing - Sector
- Death Benefits, 1301-1302 - Administration, 1311
- of Benefits by the Retirees under - Entities (PSEs), 847, 850
Non-contributory - financial reform initiatives, 925
- procedure for, 1298-1302 - Servants, 1095
Procurement - Service Procurement Methods, 869-
- definition of, 856 871
- in - service reform, 1132
- Public Sector, 956-890
- Award of Contract that
Qualifications of Beneficiary Desk Officers,
requires pre-qualification, 891-
1422-1423
924
Qualifying Pensionable Service, 1266
- in Nigeria, method of, 868-869
Quality and Cost-Based Selection (QCBS),
- Planning
898-899
- Committee Composition, 878-879
Quality –Based Selection (QBS), 900
- function of, 878
- practice as Global Norm, 856-857 Reagan, Ronald 1099
- Procedure, 870-871 Receipt
- Reform strategies adopted by the - and Withdrawal of Deposits, 1185
Nigerian Government, 857-861
- Book Issue Note (RBIN), 1227, 1236 - supervision of, 1278

- Voucher, 1164, 1177 - from service, 1454
Receipts Book Register, 1359 - of Advances, 976-977
Receivables, 1336 - on ground of abolition, 1271
Recognition of Inventories, 834 - Savings Account (RSA), 1261-1262,
Reconciliations, 999-1000 1264, 1279-1284, 1286-1287,1293-
Reconciling Bank Statement with the MDAs 1294
Cash Book Balance, 1003-1006 - and Remittance of Contributions,
Record Keeping of Procurement 1285-1286
Proceedings by MDAs, 888-889 Returned Store, 845
Recoverable Revaluation Model, 819-822
- Amount, 788 Revenue
- Service Amount, 788 - and Investment Directorate 952-955
Recurrent - general functions 955-956
- and Loan Service Unit, 947 - Audit, 1227-1232
- Expenditure, 1356-1357 - under
Reform Initiatives, 926, 1133 - Cash Basis, 1227- 1229
Reforms in the Office of the Auditor- - TSA/E-Collection, 1229-1230
General for the Federation, 1198-1199 - Cash Book, 1455, 1458
Register of Bills Received, 1359 - Division, 961-963
Regularity Audit, 1221-1222 - Leakages by Collusion, 965
- Guide, 1198 - Mobilisation, Allocation and Fiscal
- Process Flow, 1222-1224 Commission (RMAFC), 933, 962
Re-imbursement of Imprest, 1194 Revised Treasury Cash Book in Public
Rejection of Bids, 884 Sector under IPSAS Accrual Accounting
REMITA, 1230 Basis, 1133
- Retrieval Reference-RRR, 1230 Rights under licencing agreements, 813
Remittance Role of Auditors in combating fraud and
- of advances 1182 corruption, 1248-1249
- Register, 1191 Roosevelt, President 1102-1103, 1106
Remittances/Cash Transfers, 1190-1192
Request for Salary
- Expressions of Interest to be - Variation Advice, 1169,1171-1172
advertised, 904-905 - vouchers, 978, 1165-1173
- Proposals (RFP), 901-902 Schedules, 1176-1177
- contents of, 901-902 Scott, Gen. 1101
- preparation and issue of, 895-896
Requisition Book, 837,841-842 Secretary to the Government of the
Research and Development (R&D), 813, Federation (SGF), 1095
817-818 Sectorisation of MDAs, 1027-1028
Resettlement Allowance, 1444 Selection
Residual Value of an Asset, 788 - Criteria, 902-906
Retirement - Methods, 871-872, 898-901
- benefit under Pension Reform Act, Service Concession Asset, 789
2014 1264-1265 Settlement of the On-Payment Vouchers, 979
- Benefit, 1262-1263 Site visit, 882
- benefits of employees exempted Sole-source Selection or Direct Contracting
from Contributory Scheme (SSS), 900-901
1515 Index
Source Statutory
- Document Files, 957,960 - age of service, 1268
- documents in posting of Treasury - Allocation, 1313-1314, 1338, 1350
Cash Book, 974-975 - Authority on E-payment, 984-985
Sources - Corporation (Parastatals) or
- of Enterprises, 1207
- Authority, 1190 Steps
- receipt into Development Fund, - in Performance Audit, 1214-1215
1022, 1045 - of the Selection Process, 895
- receipts of store items, 843 Stock taking
- Revenue accruable to Foreign - procedures of, 827
Mission, 1457-1458 Store
- Revenue to State Government, - Accounting and Custody, 827-842
1313-1315 - Audit, 1240
- Revenue to Tertiary Institutions, - Issue Vouchers (SIV), 837, 841, 843-
1380-1382 844
- State government revenues, 1311 - Keeper, 842-843
Specific Identification method, 835-836 - Ledger, 827, 837-838
Spectacle Advance, 1190 - Keeper/management accountant
Spending Limits, 1357-1358 842-843
Spouse at post, 1452 - Officer, 842-843
Stabilisation Fund, 930-931 - roles of, 827
Staff - Receipt Voucher (SRV), 837, 840,
- strength of the S 842-843 843-844
- Welfare Sche, 1304-1305 Submission of
Staled Cheques, 980 - Bids, 881-882
State - Proposals, 907
- Board of Internal Revenue, 1148 - Research Proposals, 1412-1413
- Government Subsidiary
- Accounting, 1311-1313, 1350 - Account, 1182-1195
- Financial Statement under - definition of, 1182
IPSAS Accrual Basis of Accounting, - of MDAs, 1183-1185
1332-1335 - Journal Voucher (SJV), 948
- Joint Local Government Accounts Sub-treasury, 925
(SJLGA), 1354 Supplementary Journal Voucher (SJV), 1179
- Revenue and Control Mechanism, Support Staff, 1438
1316-1317 Supreme Audit Institution (SAI), 1198-1199,
Statement of 1208, 1220
- Accounting Policies, 1030, 1070, Sustainable Debt Management, 1160
1319
- Assets and Liabilities, 1035-1037 Tally Card/Bin Cards, 837,839
- Capital Development Fund (CRF), Technical
1040-1045 - and financial bids, 891
- Changes in Net Assets/Equity, - Proposal specific aspects of, 908-
1061-1064 909
- Financial Performance 1058-1060 - evaluation of, 909
- Financial Position, 1054-1070 - Sub-committee, 932-933
Statistical Report, 1030, 1318-1319 Techniques for the Measurement of Costs,
835-836
Tendering - benefits of, 1143

- Documents, 882 - implementation challenges, 1143-
- Methods, 871-872 1144
Tenders Board, 919 Treatment of Losses of Government Funds,
- Committee, 919 1082
- Thresholds and Competitions, 872 Type of Procurement/Contract in Government,
Terms of Reference (TOR), 896 879-882
- for Complex Assignments, 898 Types of
Tertiary Education Trust Fund (TETFUND), - Advances, 1182
1378-1402, 1407-1414, 1416-1417, 1419- - benefits, 1269-1274
1420, 1425-1432 - Book/Document to be kept by MDAs,
- Departmental structures and functions 1001
of, 1393 - Consultants, 897-898
- Education support service department, - Imprest, 1192-1193
1393 - Account and their limits, 1182
- goals of, 1391-1392 - Payment Voucher Forms, 1165-1166
- human resources, 1393-1394 - Presidential instruments, 1094
- organisational structure of, 1389-1390 - Public Sector Audit, 1214-1221
Tertiary Institutions and Fund Accounting,
1379-1380 Unacceptable Procurement Practices, 859-
TIN (Tax Identification Number), 918 860
Tools Ledger, 837,839 Unallocated Stores, 828-829
Trade Union dues, 1148 - purposes of, 829
Training of Foreign Affair Staff, 1439 Un-applied Fund, 1150
Transactions covered by e-payment, 990 Unclaimed Wages Register, 1164, 1169,
Transcript, 1015-1021, 1133 1173-1174
- preparation processes, 971 United Nations
Transfer - Commission on International Trade
- from one employment to another, 1287 Law (UNCITRAL), 857
- of - Model Law on Public Procurement,
- Account from one Pension Fund 857, 862
Administrator to another, 1287 - Conference on Trade and
- Assets of the Pension Offices Development (UNCTAD), 988
existing before the Act, 1296-1297 Unservicable Store for destruction, 1078
- entitlement from non-contributory Upgrading of the Federal Treasury Academy,
to Contributory Pension Scheme, 926, 1133
1287-1289 Use of Operational Account, 990
Transitional provisions for Private Sector, Useful Life, 789
1302-1303
Transparency in MDAs, 1117
Transport Allowance, 1451-1452
Validity of the Bid, 880
- /Overseas Tours, 1446-1447
Value Added Tax (VAT), 921, 937, 943-944,
- payment voucher, 1165
1158, 1314-1315, 1338-1339, 1350, 1406
Treasury
- Account, 935
- Cash Book, 971-1021, 1177, 1185
Value-for-Money Audit (VFMA), 1220
- inspectorate, 1071
Variable Overhead Absorption Rate
Treasury Single Account (TSA), 926, 945,
(VOAR), 832
1132-1133, 1138-1147, 1151-1155, 1158,
Variable overhead cost, 832
1185, 1229
1517 Index
Variation Control Sheet, 1169, 1172 Withdrawal from RSA, 1293-1294

Verification of Assets, 1237-1238 Withdrawal Gratuity, 1270
Virements or re-allocation of voted moneys and World Bank, 950, 1132, 1312
supplementary estimates, 1374-1375 - Public Financial Management (PFM)
Vote Book Audit, 1239 activities in Nigeria
Vote Books, 961 - observations on, 1161-1162
- Sponsored fiscal sustainability plan,
War Labour Disputes Act, 1103 1132
War Service, 1269 World War 1, 1102
Washington, George 1100-1101 World War 11, 1099
Way Bill, 837, 842
Weighted Average cost method, 835-836 Yar’Adua, Umaru 861, 984
Wilson,President 1102

Public Sector Accounting and Administrative Practices in Nigeria (Vol 2)

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Public Sector Accounting and Administrative Practices in Nigeria (Vol 2)

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Public Sector Accounting and

Administrative Practices in Nigeria

Safari Books Ltd.

© 2019, Daniel Goddey Iwebuke

All rights reserved. This book is copyright and so no part of it

ISBN: Paperback - 978-978-56613-3-0

T his book is dedicated to His Excellency, Senator (Dr.) Ifeanyi

Chapter Twenty Two Accounting for Investment Property

Chapter One Overview of Public Service in Nigeria .. 1

Chapter Ten Government Revenue, Collection &

National Chart of Accounts (NCOA) code 795-796

Table 27.5: Distribution to Local Government Councils of

T he traditional and ancient nation-state is a conglomerate of

Dr. James Kayode Naiyeju, JP, OON

T here is now a general global awareness about the need to pay

I would like to acknowledge the Almighty God for the wisdom

Goddey Iwebuke Daniel Esq., BSc, FCA

Accounting for Investment Property — IPSAS 16 and

22.0 Capital Expenditure

The capital expenditure should be analysed to determine if the

22.1 Definition of Some Key Terms

22.1.2 Property, Plants and Equipment

22.1.4 Fair Value

22.1.5 Carrying Amount/Value

22.1.7 An impairment Loss of a Cash-generating Asset

22.1.8 Depreciable Amount

22.1.9 Entity-specific Value

22.1.10 Recoverable Amount

22.1.11 Recoverable Service Amount

22.1.12 Residual Value of an Asset

22.1.13 Componentisation of Asset

22.1.14 Useful Life

22.1.15 Service Concession Asset

22.2 Property, Plants and Equipment and Its Applicable

22.3 Cost of Property, Plants and Equipment comprises the

22.4 Criteria for Recognition of Property, Plants and Equipment

22.5 Other Assets

construction. When the asset is ready for use, it will need to be

22.5.2 Heritage Asset

22.6 The Life Cycle of PPE from the Time of Acquisition

i. In addition, an entity shall disclose in the notes to the GPFS

a. In accordance with IPSAS 3, an entity shall disclose the

effect in subsequent periods. For PPE, such disclosure may

22.8 National Chart of Accounts

22.9 Accounting Documentation

22.10 Accounting Procedures

22.10.1 Acquisition of PPE

iii. Post all expenditure in respect of outright acquisition to

22.10.2 Constructed PPE

22.10.3 Donated/Granted PPE

22.10.4 Swapped PPE

22.10.5 Taken over or Inherited PPE

22.10.6 Reclassified PPE

22.10.7 Provision for Depreciation of PPE

22.10.8 Provision for Impairment of PPE

22.10.9 Revaluation of PPE

Details Code Dr (N) Cr (N) Remarks

Details Code Dr (N) Cr (N) Remarks

PPE (Vehicle and

Cost = 400,000-40,000 =360,000 divided by 4 = N90, 000.00

Details Debit (N) Credit (N) Remarks

22.11 Investment Property — IPSAS 16

22.11.2 Classes of Investment Property

An interest in a property held by a lessee under a finance lease can