THE USE OF ACCOUNTING INFORMATION IN PUBLIC CORPORATION (A CASE STUDY OF NNPC)

CHAPTER ONE

1.1 INTRODUCTION

Public corporation can be defined as the types of
business organization that are established by a special act (or ordinance) of
the parliament. Public corporation and business owned and finance by the
federal, state and local government, as the case may be in the public interest.

     They can
be explained and described also as the type of business) organization
thoroughly and solidly established by act of parliament to provide public
utilities. This participation in the productive and commercial part of a
country’s economy.

       There
are some area in the economy where it is felt that the free enterprises system
and private sector competition should not allowed, as they would exploit the
public such art should be run by the government in the public interest.
Therefore, in Nigeria, where there is a three-tier system of government; the
local government, state government and federal government do run certain
enterprise so as to provide essential service for the people.

TYPE AND FORMATION

   
Public enterprise can be
categorized into public corporations or boards or quasi government department.

  Government
Corporation are enterprise that has commercial functions, which are normally
established of level by an act parliament or decree, which specially refers to
the corporation. Each corporation, board or authority had a particular or
decree establishing it. The cart will take the objective and of the corporation
and specify its power and how it is to be run and managed. At the state level,
public corporation are established by a state judge at the local government
level are established by social edicts.

      For
instance, the National insurance corporation of Nigeria (NICON) was
established. decree 22of July, 1969 to ‘write all classes of insurance  such as fire, motor accident, workmen’s
compensation, marine and aviation, i did Risk…..Among  others.

   The
Nigeria port authority (NPA) was established in 1955 to ’’identify and satisfy
the demand for port facilities and services at minimum cost to the nation’’.

    While the
Nigeria enterprise promotion board was established in 1972 to advance and
promote enterprise in which Nigerians are encouraged to participate fully and
play important roles’’.

   
Others corporations and boards the federal level includes:

i.           
The federal
radio corporation of Nigeria (FRCN)

ii.          
The Nigeria
railways corporation (NRC)

iii.        
The central
bank of Nigeria (CBN)

iv.        
The national
electric power authority (NEPA)

v.          
The Nigerian
telecommunication limited (NITEL)

vi.        
The Nigerian
national petroleum corporation.(NNPC)

vii.      
The Nigerian
coal corporation (NCC)

viii.    
The Nigerian
cost corporation (NCC

Mention may be made to the universities,
polytechnics, college of education and the research institute which is public
sector educational enterprise established by relevant federal act, decree or
state laws in the case is.

    Public
corporations are to be independent of the central government as possible. Thus,
they are by boards or councils each of which has the board of directors of a
company. Each corporation also have general manager or similarly placed officer
who is the chief executive reporting to the board and council.

THE FEAURES OF PUBLIC CORPORATION

      One of
the main feature of the public corporations is that a manager s put in as
supervisor in the running to the business. The board of directors in
responsible to the minister of the government and he parliament. This is one
reason why the public corporation type of business is described a being
controlled by the government.

    Another
special feature f the public corporation type of business to that it is sot-up
and are financed, by the government initially. Only some have issued stock to
the public obtain large capital and long-term capital. This means that the
corporation has on shareholders except in some cases.

     One
other feature in that public corporation is no aimed at malign profit. This
does not mean that they do not aim at making profit. The government can
supplement the public corporation with government grants.  If the earning of the business fall. The
government can do this by taxing the citizens in order to meet its expense.

                   
The public corporation does not share or distribute profit but they have
and meet or pay interest on state issue to the previous owners of the business
on their fixed rates.

      The
feaster of the problem corporation in that it deals with those economic
activities that the community may be benefit from but which offer. The
businessman may was the fact that such a commodities or service is renewed
essential to exploit the consumer. An example of such is electricity.

        
Restriction of then commodities supplied and feature of the public corporation.
An example is the services of the Nigerian Railways Corporation (NRC) whose
services are available only to the area that are covered by real, the
electricity corporation of Nigeria can only supply areas where their electric
cable and wires reach.

Local monopolies are also brought by the business
of the public corporation this important feature means that is difficult for
other business to compete with the corporation. An example of this is that no
other form of business may or will install in electric power station in a dies
where the Electricity Power Authority of Nigeria has setup its station. In
fact, paramagnet will not approve the move.                                                                                                           
                                                               Another
characteristics of public is discriminating services render or goods supplied.
For example the NEPA can charge less on the supplied to factors or industries
than on power supplied to private domestic consumers. This possible because
their services generated cannot be transferred from one customer to another.                       

The last main feature of the public corporation is
that it always operates below full capacity. This is so because the establishment
needs large fixed capital. Therefore, the existing demand of the public as a
whole to be able to meet any future increases in demand.

SOURCE OF CAPITAL    

        Public
corporation are normally set up by the government and financed wholly by it.
Thereafter, they are expected to generate fund through their services to the
public to be paid to government account. The major aims of establishing them is
not to make profit although, the ones that have purely commercial functions are
required nowadays to generate enough fund to cover their services and make
profit for the government. The three sources of capital that can be identified
in the financing of the public corporation are government financial grants,
bank loans and internally generate revenue.                         

1.    Government Financial Grant: the government
makes budgetary provision for the government department and financial grant to
the statutory corporation which rendered social services and is prevented from
charging the full price for their services. Subsidies became imperative to make
up the deficit in internally generated revenue.           

2.   Loans
from Banks: public corporations through their boards and councils are empowered
to negotiate and dices loans from the local hank to executive certain project.              

3.  
Internally Generated Revenue: statutory corporation, boards and
authorities utilize their internally generated revenue to finance part of the
operations.

REASONS FOR THE ESTABLISHMENT OF
PUBLIC CORPORATION

ØEssential Services: the establishment provide
services which are vital to the citizen end which   should to provide without the motive of
profit for the overall god of the masses.    

ØAvoidances waste And public publication: it should
be more economical to run water and 
electricity undertaking as states monopolies because laying water pipes
and power lines across the roads and in people’s houses would be wasteful. Such
activities would also give rise to public relationship problems, which are more
easily solved by the government botches than the private enterprises.

ØCapital requirement: the local needed to establish
most of the public utilities are so large that it cannot be afforded by private
enterprises.

ØGood infrastructural base: a good network of road
and railways, powers, communications etc. Will lay a solid foundation for paid
economic development land progress of the country. They are strategies to the
government and the people. Therefore, only the government can run them in the
public interest.

ØEven development: the policy of most government is
encourage even development and bring about equitable distribution of the
country wealth, to achieve these objectives the key industries and
organizations should be in the ranks of the government.

ØSocial cost: the social cost of some undertaking
make the government the most suitable candidate to establish and run them. For
instance, to lay a rail or pipeline across towns, citys and village would
result in the destruction of cash crops and dispossession of the citizens’
land; the establishment of a claim wouki involve the destruction of cash of
crops and displacement of villages. Under these circumstances, the government
in the only organization that can carry out the undertaking because of the
coercive power, which it possess.

CONTROLS AND MANAGEMENT

The activities of statutory (public) corporation
are checked by the following measures adopted by government policy.

The government department are responsible to the
government through the appropriate minister of commissioner.

The government is to appoint member of their
various boards and councils. The boards and councils run the corporation
according to their government policy.

Public influence plays some parts too. The public
maintains an eye on the activities of the public utilities and usually ready to
voice their opinion and dissent through the press anytime something goes wrong.

PROBLEMS FACED BY
PUBLIC CORPORATION

Ø   Poor condition of service for staff: it is often
that the unified grading system makes it difficult for the public corporation and
companies to attract staff with exceptional quantity.

Ø  Poor management: many board and council members see
their appointments as opportunities to take a slice to the public take. It is
often alleged that many board member spend all their time pursuing contracts
and arranging for distributorship.

Ø  General laxity on the party of staff: in the
private sector, staff work hard because they know that if the company fails to
breakeven, it sold probably liquidate and they would lose their job, the
situation does not occur in the public service where customers who have come to
buy goods or services might be turned away or asked to’’ come tomorrow’’.
Because the staff concerned might be busy doing other work.

Ø  Bad economic condition: the worldwide economic
recession and the consequently poor condition of the Nigerian economy also
affect the public corporation to the same extent.

Ø  Exclusive centralization: the lack of
decentralization of public utilities like PHCN makes their management weak and
decision making slow.

Ø  Frequent change of board members: the frequency
with which the boards and councils are reconstituted tends to defeat the
purpose for which they are appointed.

 
1.1 STATEMENT OF PROBLEM

   
The statement of this study in the use of accounting
information in public corporation, NNPC as a case study considering the
behaviour relationship the use of accounting information in public corporation.

  
1.2 THE PURPOSE OF THE STUDY

                The purpose of this study was
to examine how useful accounting information is in public corporation.

1.3 RESEARCH QUESTION

    1. Will the accountant/cashier of the NNPC
District office Ibadan not be able to tell what kind of accounting record is
maintained in their corporation?

         Table

2. Will accountant/cashier of the
selected start ‘1’ the NNPC no table to state the various kind of management
accounting techniques used in the corporation?

 TYPES OF MANAGEMENT ACCOUNTING TECHNIQUES

3. Will
the account/cashier not be able to mention the final account prepared in the
organization

Table

4.
Will the accountant / cashier of the corporation not able to state the uses and
uses of their trial balance (final account).

        Table

This
table above present the reviews of the staff in the corporation of the various
use of final account. All the respondents in each of the staff being question
i.e. 100% agreed and common on the uses or user of the final accounts as shown
on the table above.

5.
Will the accountant/ cashier not able to state the problems encountered in the
accounting information of their corporation?

 Table

1.4
OBJECTION OF THE STUDY

        The purposes of the study were to
examine how useful accounting information is in public corporation.

1.5      RESEARCH HYPOTHESIS

    Accounting information generated by
accounting system of any business organization serves various users with divers
need and user such information.

1.6     SIGNIFICANT OF THE STUDY

This
study is deducted; the result could help the management and board of directors
to show its stewardship and Accountability in the operational activities of
their workers.

1.7    SCOPE OF THE STUDY

Accounting
information, its usefulness is draw from four types of accounting viz:
Financial accounting cost accounting, management accounting public sector
accounting, more also, the derivation function of accounting in Bus,

FINANCIAL
ACCOUNTING

              Lucey (1988) define accounting as
that part of accounting which covers the classification end recording of actual
transaction of an entity in monetary terms in accordance with established
concept, principles, accounting standard and legal requirements and present of
accurate as possible of the effect of the transaction over a period of time and
end of the time ‘’Degrees (1984) state that financial accounting specializes in
stewardship function and concern mainly with financial statements. Hornggren
(1985) has placed accountants task of supplying information into the
compartment store keeping attention directing and problem solving arid that
financial accounting specialize in store keeping describe both internal and
external parties to evaluate organization performance and position.

MANAGEMENT
ACCOUNTING

                 Statement of management,
accounting board number one defined management accounting as ‘’the process
identification, measurement, accumulation, analysis, preparation,
interpretation of plan , evaluate and control with an organization and to
ensure appropriate use of an accountability and to ensure appropriate use of an
accountability for is management in operational activities.

Management accounting is also concerned which
measuring the economic consequences and implication of management decisions it
concern itself particularly with money as measure of economic performance and
with using the measure to help managers to manage the affair of the business.

Blasker [1986] assets that cost and
management accountants specialized acknowledge and experience is directed to
collection, interpreting and communication a wide range of information and
advice regarding costs, cost trends measurement of performance against standard
budget, pricing and the effect of change in volume of sales and production and
other information needed for sound day-to-day control resources.

                       Decoster (1982) in their
view of control firm operation decisions which begins when resources have been
committed to the firm, emphasized management needs to make special intra-firm
resources allocation.

             The stress that the goal of
management accounting is to optimize the use of these financial resources
committed to business.

 COST ACCOUNTING

The
institute of cost and management accountant defined cost accounting as that act
of management accounting which established budgeted and standard cost and
actual cost of operation, processes, department or products and the analysis of
variance, profitability or social use of fund (lucey 1988)

                     Cost accounting is an
aspect of management accounting, which is concern need with measuring the
economic performance value of the resources consumed in producing goods and
service.

It
is also a process of collection, summarizing and made the information to the
management showing cost and benefit of pursuing each of the available course of
action open to the management P.F. Bourke in his book titled ‘’what does it
cost state that’’ it is generally accepted that the purpose of cost accounting
is to provide data to enable products costing for investor, valuation: and
profit determination and for planning and controlling’. Anderson (1978).

PUBLIC
SECTOR ACCOUNTING

K.Oshisanmi
and R.N Dean (1985) in this book titled ‘’financial management in Nigeria
public sector’’ also defined public sector accounting, otherwise known as
governmental accounting, as the process of recording.

       Analysis, summarizing , communicating
and interpreting financial information about government in aggregate and in
details, reflecting all transaction involving the receipt, transfer and
disposition of government funds and property of P.S.A. can be defined as an
information system involving identify, recording, classifying in marketing
terms.

THE
USE OF ACCOUNTING INFORMATION IN PUBLIC CORPORATION 

    The uses of accounting information in
public corporations are:

(i)          
Evaluating business performance

(ii)        
Assessing the effectiveness in achieving
the corporation’s objectives.

(iii)      
Assessing the liquidity of the
corporation, its present or future requirement for additional capital and
long-term loans.

(iv)      
Estimating remuneration capacity

(v)        
Evaluating employment opportunities

(vi)      
Assessing position and prospects of
individuals department in the corporation.

(vii)     
it is used by board of direction to make
both the short-term and strategic decision within the organization

(viii)   
It is used for classification and
recording which items are stationary score items are categorically identified
in monetary terms.

(ix)      
It is enable the lender of supplier to
the organization to know the financial soundness of the indebtedness.

(x)        
It is used as financial instrument to
portrayed the stewardship and accountability of the corporations.

(xi)      
It is used to show the degree of
fairness achieved in the allocating or distribution of the organization
surplus.

1.8        PLAN OF THE STUDY

 This project work comprise of five
chapters;  chapter one of the project
works deals mainly with the intro diction 
of the study, which comprises of background of Accounting information in
public corporation, the arms and objections of the study, scope and limitation
of the study, the statement of problem of research  and plan of the study.  Chapter two of the project also deals with
the review of pest, the view and findings other person and text books that have
previously researched and the subject of the study. The purpose of this study
has been defined as the examination of the uses of accounting information in
public corporation in Nigeria. Chapter three of this project deals with the
brief history of some companies like mobil,Gulf (now chevron), Agip, Esso and
Texaco, satrap (now Elf) which are into the country to take up concessions that
had deed relinquished by shell. And some after comprise like Organization of
Petroleum Exporting Countries (OPEC). Nigeria National Oil Corporation (NNOC).

                Chapter four of this project
deals with the data presentation with the data presentation with the data
analysis and interpretation of the study. Chapter five of this project deals
with summary of finding the project, conclusion and recommendation of the
study.

1.9
DEFINITION OF TERMS

  I. Budget: Accounting to the terminology of
the institution of cost and management accountability, budgeting is a plan,
quantified in monetary terms, prepared and proved prior to defined period of
time, usually showing planned income to be generated and or to be employed to
attain give objectives.

2.
Budget control: is the establishment of budget relating to responsibility of
executive to the requirement of a policy and their compassion of actual budgeted
result either to cure by individual action, the objection of the policy or to
provide a basis for it revision.

         OBJECTIVE OF BUDGETARY CONTROL

    The objective of budgetary control is to:

i.           
Combine the ideals of all levels of
management doing budgetary preparation.

ii.          
Centralize control

iii.        
Show management when action is needed to
remedy a situation.

iv.        
Plan and control income and expenditure