ACCOUNTING FOR PENSIONS AND GRATUITY

(A CASE OF STUDY OF ENUGU STATE)

THE PROPOSAL

In the Nigerian economic set up, it is evident that he pension Accountant plays a role in the pension and  gratuity   .accounting.

Against this background of this research work titled: ACCOUNTING FOR PENSION AND GRATUITY IN ENUGU STAE”. I have made efforts to examine critically the pension and gratuity accounting in Enugu state.  The research work tried to ascertain whether the sysem of pension and gratuity accounting in use in Enugu state is efficient and effective.

I also ascertained from the employers of labour, users of pension and  gratuity accounting  information and the retrieve how far they have been benefiting  from the services o the pension Accountant other than the roles interfered on him by statute.

For better understanding of the research work, I have organized this write up into chapters; Chapters I to 3, which includes the introduction embody, literature review, methodology and sources of data collection and analysis.

Chapter 4 looks a the data presentation and analysis, the types of pension in Nigeria problems confronting the pension Accounting and solutions

 

In chapter 5, I took at the recommendations and conclusions. I hope that this research work will fulfill the main objectives which I set out to achieve in accounting. For pension and gratuity in Enugu state, the problems and prospects and it will be of immense benefit to the retiree and all these others who may wish to know the system of   accounting for pension and gratuity in Enugu state.

CHAPTER ONE:

• INRODUCTION 1

1.1     Background of the Study                                                                  1

• Purpose of the Study 3
• Statement of the Problem 3
• Research Question 6
• Significance of the Study 7
• Scope and Limitations of the Study 7
• Definition of terms 8

CHAPTER TWO:

• Review of Related Literature 12

2.1     Foreign Related Literature                                                       13

• Local Related Literature 16

References                                                                               35

CHAPTER THREE:

• Research Design and Methodology 36

3.1     Methodology                                                                           36

• Sources of Data and Survey Instrument 36
• Population and Sampling Procedure 38
• Methods of Data Analysis 39

CHAPTER FOUR

• Data Presentation 44

4.1     Types o Pensions in Nigeria                                                    44

4.1.1   Average Salary Scheme                                                                   45

• Final Salary Scheme 45
• Salary Grade Scheme                                                           45
• Revalued Average Salary Scheme 46
• Money Purchase System 46

• Problems of Pension Accountants in Nigeria 47
• Solutions to the Problems of Pension Accountant 49

References:                                                                              51

CHAPTER FIVE

Summary of findings, conclusion and Recommendation                            52

5.1     Findings                                                                                  52

5.2     Conclusions                                                                                      56

5.3     Recommendations                                                                             58

Bibliography                                                                           62

 

 

CHAPTER ONE

INRODUCION

• BACKGROUND OF THE STUDY:

The management and accounting control of the public, such as pensions and gratuity is the heart of governmental administration. This research work describes and explains the statutory administrative and accounting  authorities set up to control the public purse such as pensions and gratuity accounting.  In doing so, the extent of powers of each financial pension division of department of  establishment and that o the auditor-general are delineated. This is followed by an examination of the principles and practice of the various forms in which the pensions are kept. A major characteristics of governmental account, that is pension and gratuity accounting is brought out for focus in process.  Then the accounting aspects of pensions and gratuity in relation to the statutory accounting are developed.

Government business, whether in term of policies, prog rammes, activities and injunction is run in accordance with the laid down formalities; the formalities become more rigorous especially in relation to the accounting and reporting  for the collection and use of  government funds which support the process of governance. The legal formalities in the area of pensions and  gratuity accounting and financial control include laws, rules, regulations, circulars and memoranda etc. The operation of these depend larg ely on the disposition of the executive, the judiciary and the legislatives. The bureaucracy, bottlenecks and concomitant evils associated with the civil service is always X-Ray in these areas.

The Pensions and Establishment division of the cabinet office, Enugu  state is one of  the arms of the government, put in place to achieve some specific objectives. It is made up of six sections namely:-

• Teachers’ section;
• Reimbursement service section;
• Civil service section;
• Reconciliation section;
• Pension Registry and,
• Condo nation section with the state audit department as an independent body that examines the work of the pension division.

 

 

• PURPOSE O THE STUDY:

As already pointed out in he introduction, it would be recalled here that the   financial pension division of pension and training department by the decree 102 of 1979, Pension Act, bestowed on it with the responsibilities o  determining  the standard of  knowledge and skill to be attained seeking  to become members of the pension accounting  profession of Nigeria, the system in which pension and gratuity are calculated and also those that qualify f or payment of  pension and gratuity and raising  those standard  from time to time as circumstances  may require. And performing through the pensions and establishments division of cabinet office under the Act, the  functions conferred on it by the Act.

Against this background therefore, this research work tried to find out the system of accounting  for pension and  gratuity, their problems and prospects.

 

• STATEMENT OF THE PROBLEM:

As far as this topic, Accounting f or Pensions and Gratuity in Enugu State is concerned, it had remained a myth. A high  percentage of accountants in the state know little or nothing about it.  The small percentage that possessed some professional knowledge  of the system are those who are involved in pensions and gratuity work in both federal and state establishments and very few indeed. This myth arises from the fact that the knowledge of  pensions and gratuity accounting could only be acquired in two ways:-

(1)     By sourcing in the federal/state pension division of the establishment departments.

(2)     More importantly by being sufficiently interested in the subject area to make a special study and review of  the various establishment publications, financial regulations/memoranda, circulars etc, issued  from time to time on various aspects of the subjects.

It is the wish of I, the project writer to overcome the long-felt need for a knowledge e in accounting f or pensions and gratuity bearing in mind that all public workers in the state civil service hope to aim at earning  pensions and  gratuity at the end  of their service period.

The primacy objective of  this research work is to identify  the contributions of  the pension accountants in the payment of pension and  gratuity in Enugu state. and the constraints facing  them.

To identify whether the users of accounting information are awaiting themselves of the services provided by the pension accountant.

In this connection therefore, I have made effort to look at the activities of the pension accountants both in public and private sectors. Also I equally focused my attention on the role played by institutions of higher learning in the training of accountants to meet the manpower needs o f our economy.

In conclusion, the objectives of  this research work can be summarized thus:-

1. To identify y the system of accounting f or pensions and gratuity
2. To trace factors that militate against early payment of pension and gratuity in Enugu state and to remind the government of Enugu state that it is its responsibility to provide the retiring officers with he necessary materials such as dossiers in case of  teachers, pension forms, Gen 39c and Ges 64R records o service to the retiring  officers.
3. To avoid future shortage o und, so that the state will be in a better position to fulfill its financial obligations to its financial obligations to ever increasing members of retirees. It serves to remind the serving officers that they should plan their retirement well in advance to avoid future challenges of unplanned retirement.
4. To review areas of discrepancies in accounting for pensions and gratuity in Enugu state and suggest solutions.

5. To guide those wishing to make carriers in Accounting profession the demands of  the profession and how to go about it.

 

• RESEARCH QUESTION::

1. Is the level of awareness of the public about pension and gratuity accounting adequate.
2. Are pensions and gratuity funds properly accounted for in Enugu sate?
3. Do poor accounting system and lack of fund delay early payment of  pensions and gratuity.
4. Do you think that educational qualification affects the outstanding of the  working officers of the system of  accounting or pensions and gratuity.

 

• SIGNIFICANCE OF THE STUDY:

This research work when completed will give an in depth study of Accounting for pensions and gratuity in Enugu state, and at the end the researcher must have achieved his aim of adopting  a more regular and systematic method of  accounting  for pensions and  gratuity in the state.

It is also expected to help suggest way of improving the present deplorable conditions of the retirees in the state through its  findings and recommendations.

This research work will help to highlight ways and means of increasing he revenue base of the state by reorganizing  its present tax collection system in he state so that the multi-millionaires that had been eroding  payment of  tax are minimized and also as a signal to service officers that they should plan their retirement well in advance to enable them f ace the challenges o f retired life.

 

• SCOPE AND LIMIKTATIONSW OF THE STUDY:

Life they say is not a bed of  roses. That some factors would work against the success of this project was naturally probable, hence I expected to accommodate them.  This work will cover he period 1990 to 1997. The study will therefore,  focus on the  payment of pensions and gratuity which I deemed necessary to restrict within Enugu state, principally within the period under reference.  However, reference will be made to past payments where necessary to enable us compare the past with the present system of  payment of  pensions  and gratuity and probably look into the future.

The problem of  getting  in touch with the circulars, memorable and other governmental publications was another problem.  Most of these publications were not found even in the establishment department of the state.

 

• DEFINITION OF TERMS:

• PENSION: Is a periodic payment made to a retired officer, usually monthly, who worked for the prescribed number of years.  It is paid as long as the individual is alive.  However, It terminates at the death of the pensioner
• GRATUITY: It is a jump sum payable to a worker who has served his organization for a prescribed number of years.  Gratuity is paid once and his benefit is payable only at retirement.  The qualifying age for gratuity has been changed from 10 to 5 years by 1992 Pension Reform.
• REIMBURSEMENT: Payment to a person who has expected money out-of-pocket.
• CONDONATION/MERGER OF SERVICE: Is overlooking of some irregularity in one’s services rendered by an officer to avoid a break-in-service and his service be considered as straight forward services and to quality for pensions and gratuity.
• MIXED SERVICES: An officer  with mixed services can be referred to as an officer who served in more than one public service in pension able circumstances.  The public service may be the state or  federal government service or statutory bodies/approved service like the Nigerian Railway Corporation or University of Nigeria.  It may be mentioned here that with the introduction of uniform pension conditions in Nigeria with effect from 1^st April, 1974 as a result of public service review coupled with the creation of more states in the country, the federal military government took over pension liabilities of the former states up to 31^st March, 1976.  Therefore, any civil servant in this sate or elsewhere appointed before 1^st April, 1976 has mixed services, that is  federal (from date of appointment to 31^st March 1976) and Enugu state (from 1^st April 1976 to date of retirement) services, see Appendix D.
• PENSIONABLE AGE: Is the age at which pensions and gratuity can be circulated for an officer and this has now been reduced from 15 qualifying years to 10 years by the 1992 Pensions Reform.  Services outside the above stated age will not be taken into account for purposes of computation of officers’ retiring benefits in the case of “leave without pay”.
• LENGTH OF SERVICES:  May be taken as the period an officer entered the public service up to the date prior to his retirement. In this connection, the preceding note – “service as a minor” should be taken into consideration.
• APPOINTMENT: May briefly be defined as sharing the retiring benefits between various governments and or statutory bodies according to services rendered to each.  The sharing is now done on time basis instead of SAPE (Statement of Aggregate Pension able Emolument) basis see Appendix D, and the preceding notes.
• SCHEDULED AUTHORITIES/APPROVED SERVICES:
• A scheduled authority is a body scheduled under the pension Act which operates a pension scheme comparable to the civil service and is regarded as a public service for example;
• Nigerian Railway Corporation.
• Nigerian Coal Corporation.
• Nigerian Broadcasting Corporation.

(ii) APPROVED SERVICE:  An approved service is a service with a quasi-government/body which is now required among other things to formulate a pension scheme comparable to that of the civil service.  Example; University of Nigeria, West Africa Examinations Council etc.  Therefore with the introduction of a new Pensions Formula as from 1^st April, 1994 services with an approved service which fulfills the above conditions may now be regarded as a public service.  In this connection, transfers into and out of an approved service/scheduled body to any other arm of the public service schools court as continuous services, see Appendix D.

 

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