|Kemi Adeosun Nigeria's Finance Minister|
Emmanuel Ado is host of Let's talk - Budget Transparency
Nigeria is very notorious for coming up with fantastic and grandiose plans. We have had the era of Fixed Term Planning, Rolling Plan, Fixed Medium Term Plan, the National Economic Empowerment & Development Strategy (NEEDS), Vision 2020.
They all fizzled out and have gathered dust in archives- the money wasted and the beautiful ideas touted as our guaranteed part to greatness jettisoned. Always moving, but motion without movement.
If officials of the Federal Ministry of Budget&Planning and the Budget Office, have their way, the International Public Sector Accounting Standards (IPSAS ) project,would suffer same abrupt abortion,like the other policies before it.This is the only explanation for the refusal or failure of the Budget Office to present the 2016 budget in the six(6) Segments of the National Chart of Accounts and Templates of IPSAS Compliant Budget Format.
And thank God, the Senate has woken up to its responsibility. And has severally given the government, not just the Minister of Budget and Planning a bloody nose.
On 28th July, 2010 the Federal Executive Council approved the adoption of the provisions of the International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS) for the Private and Public Sectors respectively.
Consequently a Standardised National Chart of Account to be used by Federal, States and Local Governments designed in line with the provisions of the Government Financial Statistics (GFS) of the International Monetary Fund (IMF), was adopted.
The objectives of IPSAS include improving accountability and transparency, greater disclosures,that would provide information for better decision-making and value for money, especially in areas of capital expenditure- loans, asset purchase, nationalisation and non exchange transactions. These after all is the purpose of government.
The decision of the Goodluck Jonathan administration is backed by several laws, including the Finance (Control& Management) Act of 1958, and the Fiscal Responsibility Act of 2007. By that decision, IPSAS Compliant Budget Format became the approved basis for budget preparation and implementation in Nigeria. And the Buhari administration has signed off, by implementing Treasury Single Account (TSA), a key component of IPSAS. IPSAS is a package.
The six main segments of IPSAS are: Administrative Classifications- it depicts organisations receiving budgetary resources, Economic Classifications- detailed breakdown of budget revenues, borrowing and expenditures, Functional Classification- it shows the revenue and expenditure by functions of government, such as Pubic Order and Safety Matters.
Programme Classification- planned budgetary allocation to specific programmes, such as poverty alleviation. And 21 programmes were identified for implementation by the federal, states and the local governments.
Fund Classification- denotes funds under which public funds are authorised (Consolidated Revenue Fund, Capital Development Fund etc).
Geo-Location Classification - location of projects or government institutions undertaking transactions. The National Chart of Accounts (NCOA), is key in ensuring that budget data is captured in greater detail, including source and reason for every transaction, which is currently missing, because the Budget Office presented the 2016 Budget expenditure in Administrative and Economic segment, as opposed to programmes.
Programme is the preferred option, due to the inadequacies of the Administrative and Economic option in analysing impact of government expenditure on health, education etc.
The world today is a global village, so standardisation of governments financial reporting has become imperative. IPSAS is an international framework for government financial reporting. It has set rules on how the accounting system measures, records and processes economic transactions, including presentation and disclosure requirements.
IPSAS provides complete and accurate view of public sector financial statements. There is also greater credibility being the same accounting standards used by most governments of the World and better planning and management, as a result of more precise estimates of income and expenditure. Emphasis- precise estimates of income and expenditure.
Federal, State and Local Governments budgets must be prepared based on the six segments of the National Chart of Accounts and Templates of IPSAS Compliant Budget Format. The difference between IPSAS and the former budget system based on administrative and economic classification, is that it doesn't offer much.
It is not surprising that the 2016 budget suffered and has continued to suffer "internal bleeding". For instance,the medium term projections of aggregate revenue,expenditure and financing by economic and programme and actual of the two preceding years was missing, so Nigerians were denied a comprehensive overview of the fiscal policies.
It also lacked summary and detail revenue from the federation accounts, summary and detail independent revenue of the federal government by sub-organisations (MDA's) summary and detail capital receipts - internal and external borrowings, Aids & Grants by sub-organisations ring fenced to capital projects. These are projections the sleeping Senate is now asking for.
The consequence of preparing the budget based on economic and administrative is that 83% of the total capital expenditure of the 2016 budget would be spent in the Federal Capital Territory. And the balance 13% in the other 36states of the federation. It is a scandal of gigantic magnitude that a president that made reconstruction of the North East, a cardinal programme would be spending only 2,145,411,867 billion naira in Yobe State and 7,439,000,272 billion naira.
In Borno state devastated by the Boko Haram insurgency. But if the 2016 budget was prepared based on the 6 segments - Geo-Location and economic etc, the president would have seen at a glance the spread of capital expenditure projects and the nature of the assets that would be acquired to advance economic development, not just in the 36 states and Abuja, but in the 744 local government areas. This is the power of IPSAS.
For instance the Medium Term Projections of Aggregate Revenue, Expenditure and Financing by Economic and Programme and Actual of the two preceding years was not included in the 2016 Budget. It's inclusion would have provided a comprehensive overview of fiscal prospects to all stakeholders. Again, the Senate is right in asking for these projections.
The media has consistently tagged the demands of the Senate, as signs of brewing crisis between the Senate and the executive. There is definitely no crisis. The Senate only finally woke up to its responsibility. Why has the Minister of Finance who issued the Fiscal Sustainability Plan (FSP) that was approved at the 67th meeting of the National Economic Council(NEC) on the 19th May 2016, hasn't by November provided the performance implementation to date of the 2016 budget, and they are busy preparing for 2017?
And are still seeking to borrow to fund the 2016. God save Nigeria.
The major problem with with the 2016 budget was that the approved format was deliberately ignored by the executive.And the legislature,which due to high turn over of members "didn't" know and never bothered to find out,approved the trash that was presented to it.
The Fiscal Responsibility Act is the roadmap for the appropriation process,the Senate must insist on it. In accordance with the FRA, the process should commence with the Medium Term Expenditure Framework and its underlying Medium Term Sector Strategies. And they must be conservative.
The Fiscal Responsibility Act is like lawyers would say is unequivocal that the MTEF is the basis for the preparation and implementation of budget. It is heart warming that the senate is insisting on doing the right thing. Will presenting the budget in the appropriate format equal development? Yes. The National Assembly owe it as a duty to Nigeria and themselves to save the 2017 Budget.