2017 budget:  Another huge joke?

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. 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. Gratefully the Senate has woken up to its responsibility, and in the process given the government, and not just the Minister of Budget and Planning a bloody nose.

On 28th July, 2010 the Federal Executive Council approved the adoption of the International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS) for the Private and Public Sectors respectively. Consequently a Standardized National Chart of Account was developed and adopted to be used by federal, states and local governments in line with the provisions of the Government Financial Statistics (GFS) of the International Monetary Fund (IMF).

The objectives of IPSAS includes  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 , nationalization ,  and non – exchange transactions. After all, these are the purposes 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.

The world today is a global village, so standardization 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.

The six (6) main segments of IPSAS are; Administrative Classifications- it depicts organizations 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 twenty- one (21) programmes were identified for implementation by the federal, states and the local governments. Fund Classification- denotes funds under which public funds are authorized (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 analyzing impact of government expenditure on health, education etc.

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- organizations (MDA’s) summary and detail capital receipts – internal and external borrowings, aid& grants by sub- organizations ring fenced to capital projects. These are the projections the hitherto sleeping Senate is now asking for.

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 the government is  busy preparing for 2017 budget. Why must the government insist on borrowing to fund the 2016 budget? God save Nigeria!

The major problem with the 2016 budget was that the approved format was deliberately ignored by the executive. 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. Its inclusion would have provided a comprehensive overview of fiscal prospects to all stakeholders.

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 36 states 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. Again, the Senate is right in asking for these projections. The legislature, which due to high turnover of members “didn’t” know, has grown up and is now asking questions.

The roadmap for the appropriation process is clear, and the National Assembly must insist on it. 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 from the same fate that befell the 2016 budget.

 

Emmanuel Ado