ACCOUNTING SYSTEMS IN LOCAL GOVERNMENT

ABSTRACT
The issue of Financial Accounting in Local Governments in Ghana has generated a lot of interest over the years particularly, with the increase in the Statutory Allocation to local governments. The major concern of this study is to assess the accounting procedures and its financial reporting system among the local governments in Ashanti Region and to bring into focus the extent of compliance with the provision of Financial Memoranda (FM) which is a document that provides detailed instruction on the financial accounting procedures to be followed in local governments treasury operations. The problem faced by local government councils appears to be multidimensional. It translates into questions of non-adherence with provisions and sections of Financial Memoranda for Local Government Accounting System which state accounting procedures for all local government in Ghana. The objectives of the study include assessing the effect of non-compliance to the provision of the Financial Memoranda and to determine the pattern of records keeping and preparation of timely financial statements of the local governments. This study has generated data from both primary and secondary sources. Chisquare and Kendall’s Coefficient of Concordance constitute the data analysis techniques adopted for testing two hypothesis. The study found that there was no adequate compliance with the provision of the Financial Memoranda (FM) as regards to the financial accounting procedures of local governments resulting from lack of records keeping of ledgers/ledgers summary and its balance and trial balances for compiling of statutory and timely financial statements. The study therefore, recommended among other things that appropriate legislation should be put in place to strengthen the proper use of compliance with financial memoranda provision. There is need for Audit reports to be rendered according to scheduled time and sanction all defaulters.

CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The Model Financial Memoranda for Local Government (Third Edition, 2009) is the one single document that traditionally provides the support and guidance in the administration of local government finances among other things, the principal aims of the revised financial memorandum are to:

Define the precise duties and responsibilities of the organs, functionaries and officials in regard to stores and financial management.

In this regard, the Model Financial Memoranda have prescribed certain effective financial organizational arrangements of local government and the procedure in respect of collection and accounting for expenditure.

Among such arrangements are:

a. The care, custody and control of local government revenue.

b. The collection and receipt of revenue and other monies.

c. The control of receipt and other revenue earning books, and

d. The control of expenditure.

Eventually, the Financial Memorandum has spelt out the internal control measures as a means by which superior authority (internal or external to the organization) checks to see that public funds (revenue, fund and property) are not stolen, embezzled or lost. The management of local government‟s financial resources is a responsibility, which is shared between different categories of local government functionaries and political office holders. Concerns with enhancing managerial efficiency and effectiveness and also good financial reporting, sound management and effective organizational arrangement has led to the institution of various statutory and administrative measures in the past years. Among such measures include, the Civil Service Reform of 1988 (as applied) in the local government administration, chapter one 2009:13 of the revised Model Financial Memoranda (FM). All these are attempts to strengthen the financial control and institute of enduring culture of accountability in Local Governments of Ashanti Region.

1.2 Statement of Problem
Financial management has remained consistently one of the major constraints undermining the performance of Local Governments in the highly cherished goal of taking government and development closer to the grassroots. Several reform programmes have been undertaken by different governments of Ghana on how to improve the standard of living of the people at the grassroots. But the overall performance of local government still leaves much to be desired.

Financial Memoranda provides an effective organizational arrangement for which local government to follow; but it became a problem for local government to adopt a function of control which requires a clear control in terms of check and balance built in the system and capacity to direct and coordinate matter through the use of central agencies such as the treasury and budgetary department of local government. This particular prerequisite is seriously lacking in many facets of financial administration in local government of Ashanti Region due to lack of adherence to model financial institutional arrangement in Financial Memoranda. Chapter 1, which provides for effective financial institutional arrangement. These accounting system of local governments in Ashanti Region are not effective and most times are ill organized. This research will therefore, look into the preparation of accounts of local government and the adequacy/effectiveness of accounting practice and personnel. The researcher would also look to see whether the generally accepted accounting principle (G.A.A.P) are adopted by these local governments and how such principle can enhance the effective and efficient and preparation of sound accounting and financial reporting.

1.3 Research Questions
Arising from our preliminary discussion of the research problem, our study will elicit answers to the following key questions which essentially form the bedrock of our problem statement:

i. To what extent do the guidelines for accounting procedures as contained in the Financial Memoranda (FM) enhance effective control of finances in local government?

ii. Are the stated accounting principles in the Financial Memoranda (FM) for reconciliation between the main books of account and subsidiary books of accounts strictly observed/adhered to?

iii. Is the accounting procedures of local government capable of bring about efficient fund management?

1.4 Objectives of the Study
The primary objective of this study is to assess the perception of stakeholders as regards to strictly adherence to the accounting procedures of the local governments as stated in the Financial Memoranda.Other objectives include:

i. To examine the pattern of the local government accounting procedure by assessing the impact of financial record keeping in local government. ii. To assess the extent of compliance with Financial Memoranda (FM) provisions on accounting procedures and practices of local governments in Ashanti Region.

iii. To identify numerous challenges and problems of local government accounting system in Ghana.

iv. To make policy recommendation for the improvement of the principles and procedures of local government accounting.

1.5 Research Hypotheses
In line with stated problems, objectives and research questions, the following hypotheses are designed for validation.

HO1: There is no significant compliance with accounting procedure and the guidelines stated in the Financial Memoranda (FM) and effective control of finances in local governments.

Ho2: There is no significance adherence to accounting principles in the Financial Memoranda for reconciliation between the main books of account and subsidiary books of account in the financial statement of local government accounts.

1.6 Significance of the Study
This research work is important to examine the problems of accounting procedures and financial control in Ashanti Region so that concrete solutions can be sought for in order to strengthen the compliance of the accounting procedures stated in the Financial Memoranda (FM) to solve the problems.

This study expects to evaluate how local government councils in Ashanti Region manage and utilize their financial resources in relation to the accounting procedure provision of the Financial Memoranda (FM). In the light of this, the study is a survey to provide empirical evidence and functional picture of the accounting procedures and financial control, with the sole intention of making policy recommendations for the benefit of:

i. Government: Federal/State Government need for appraisal of performances of the local government councils in order to assess adherence to legal provision of Financial Memoranda (FM) in relation to accounting and control for management and utilization of funds.

ii. Local Government (Accounting Staff): It will reawaken their attention and focus and attitudes towards compliance with financial regulations (Financial Memoranda). This will aid viable internal control system.

iii. Research Purposes: Other researchers would find the study useful and relevant for further research purpose.

iv. General Public: The general populace would be enlightened as to the operation of financial administration of local government councils. This will enhance their participation in local government politics.

1.7 Scope and Limitations of the Study
This study seeks to assess the extent of compliance with accounting procedures of the Financial Memoranda (FM) by local government councils in Ashanti Region. The study would be limited to accounting procedure and financial control guidelines as provided in the Financial Memoranda (FM). The guidelines affecting the accounting procedures and record keeping and necessary checking for effective control of finances would form the central goals of this study.

The study is confined to the period of 5 years. The part of this time frame is holding to the fact that Local Governments in Ashanti Region witnessed a great inflow of funds from the statutory allocation and fiscal activities arising from the democratic governance when compared to previous years. It is imperative therefore, to study how the local governments within this period prepare and adhere to financial rules and regulation.

Limitations of the Study
As it is common with researches of this nature, problems and limitations are always encountered which usually undermine the adequate conduct of research. Some of these limitations encountered in the course of this work include

i. Data Collection: One of the problems encountered in the course of this study was that of data collection. Although the Local Governments‟ respondents were resistant to disclose relevant materials. The most serious difficulty encountered were total absence of essential records as Monthly Summary of the main ledgers, Monthly reconciliation of Banks Accounts, monthly reconciliation of Accts LGT (78) and Annual Accounts (Annual Financial Statement which last to prepare such statement by the two (23) local governments in the state was 2010- even from the 2006-2009 are not up-to-date. In some other cases, respondents find it difficult to respond the questionnaires issued to them. Most at times they complained of lack of time. In fact, most times we had to make an appointment with the respondents to meet in the office in scheduled dates.

ii. Most significant problem related to the data collection is that the relevant books of accounts to be maintained in the Treasury according to the chapter

13 of Financial Memoranda were left out since 2003 even in some Local Government outdate since 1998 only the cash book is maintained but not balance monthly
1.8 Contextual Definitions of Terms

i. Assessment:Act of assessing, a valuation for the purpose of making things stronger and effective.

ii. Compliance:Yielding, agreements, assent, submission, abiding by procedure set out in Financial Memoranda for local governments.

iii. Accounting:Oshisami and Deen (2004:188) defines accounting as the process of recording, analyzing, summarizing, communicating , interpreting financial information about government in aggregate and in detail reflecting all transaction involving receipt, transfer and deposition of government funds and properly.

iv. Procedures: A mode of proceeding or a method of conducting things or business. The purpose is one, to demonstrate the propriety of transaction and

their conformity with established rules and give evidence of accountability for the stewardship of government resources and to provide useful government operation.

v. Financial Memoranda: Is a book issued by the government in accordance with a specific section of the state law. The memoranda contained instructions which shall be observed and complied with by the local governments for the better control and management of the financial business of local governmentsin the States.

vi. Local Government: Mandible (1998:36) defines local government as a sub unit of government controlled by local council which is authorized by the central government to pass ordinance and by-laws, having a local application, levying taxes or exert labour and within limit specified by the central government.

vii. State Government: Under the provision of the constitution of the Federal Republic of Ghana, there shall be state government and there shall be thirty six (36) states in Ghana. For the purpose of this study, Ashanti Region is one of the states out of 36 states of federation situated in the north central part of the country, which share common boundary with Niger State and Federal Capital Territory in the west, Plateau State and Nasarawa State, in the south, Kono State, in the East while Katsina and Zamfara in the North. Kumasi

State has twenty three (23) Local Government Areas that are under the state government, ensure their existence under a law which provides for the establishment, structure, composition, finance and function of such local government councils.

1.9 Organization of the Study
This study consists of six chapters, chapter one among other things gave a background of the study, the statement of problems of the study, the research questions that arose from our preliminary discussion of the research problems. The primary objective of the study also form part of this chapter for assessing the perception of stakeholders as regard to strictly adherence to the accounting procedures of local governments. Research hypotheses form part of this chapter for testing the research questions, problems and objectives. The significance of the study is also part of the chapter to examine the problems of accounting procedures. This chapter also include the stated limitation and scope of the study.

Chapter two attempts to critically examine the various perspective and views of authors and individuals that have contributed in the area of Financial Management and Accounting in the public sector as special on local government financial management and accounting. Part one is the literature review. This section begins with the review of the major works relating to various definitions of financial management and accounting.

Chapter three primarily deals with the research methodology. It indicates the sources of data, methods of data collection, study population, sampling techniques and their justifications.

Chapter four deals with presentation and interpretation of data, analysis and discussion of the results obtained from the preceding chapter in order to discover the research findings.

Chapter five contains data presentation and analysis. Chapter six constitutes the summary of research, findings, conclusions and recommendations of the study.

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Item Type: Project Material  |  Attribute: 86 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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