a.

Characteristics of National Chart of Accounts (NCOA):

The NCOA is based on the following key characteristics:

(i) The NCOA was designed after due consultations with all the Local Government Councils, States and Federal Government of Nigeria in consideration with their peculiar needs;

(ii) It is expandable and flexible;

(iii) Each item has a unique code;

(iv) It is used for both budgeting and accounting;

(v) It is in compliance with IPSAS cash and accrual bases;

(vi) It is in compliance with Government Financial Statistics(GFS) 2001; and

(vii) It is incompliance with Classification by Functions of Government (COFOG).

b. Structure of National Chart of Accounts (NCOA)

(i) Administrative segment: The Administrative segment assigns responsibility for each transaction whether revenue centre (receipt) or cost centre (payment).

(ii) Economic segment: Every receipt must be from a particular source for example, contractor‟s registration fee. Likewise, every expense must be on a particular item or object for example, purchase of drugs and medical supplies. It answers “What” question of every transaction.

(iii) Functional segment: Functional classification categorizes expenditure according to the purposes and objectives for which they are intended. Functional Classification or Classification by Functions of Government (COFOG) is defined as a detailed classification of the functions, or socio- economic objectives, that general government units aim to achieve through various kinds of outlays. Functional classification organises government activities according to their broad objectives or purposes (for example, education, social security, housing, etc.). Government expenditure is measured according to internationally recognised functional categories. A functional classification is especially useful in analysing the allocation of resources among sectors. Functions and sub- functions will be assigned at the point of budget and planning for every transaction or initial set up.

(iv) Programme segment: The programme classification identifies various set of activities to meet specific policy objectives of the government for example, pre-primary education, poverty alleviation and food security.

(v) Funds segment: The fund segment addresses the “Financed by” element of a transaction. Fund refers to the various pools of resources for financing government activities. It will fast track the implementation of IPSAS particularly with respect to the full disclosure of government revenue including external assistance.

(vi) Geographic segment: It addresses the “Where” (location/station) element of every transaction. It is for location or physical existence of transaction so that an analysis of government budget and expenditure along the various geopolitical zones, states, and local government councils in the country can be done. The use of geographic codes will make it easier for agencies with over sight function like monitoring and evaluation (M&E) mandates to locate projects across the country.

d. The steps for budgeting with National Chart of Accounts (NCOA)

All the six segments of the chart of accounts must be completed on the budget entries, even if the value for a given segment is in active. Onynumeric values can be budgeted. Meanwhile, the following steps should be taken to ensure completeness of using the Chart of Accounts for budgeting:

(i) Identify the government institution(cost and revenue centre) from the hierarchy of administrative and codes provided in the chart of accounts;

(ii) Identify the economic items that would be executed during the fiscal year;

(iii) Identify the functions intended to be performed by government institutions (revenue and cost centre);

(iv) Identify the programmes intended to be carried out by the government institution;

(v) Determine the sources of financing the budgeted amount for each budget line; and

(vi) Identify the planned location for the economic transactions or government institution.