| Content | Abstract
The role of accounting system in measuring organizational performance of transport company ( A Case study of ABC Transport). This research work is designed to show that the best companions in the management of any transport is a good accounting system with particular emphasis on ABC transport company. It is worthy to say that good accounting system is really maintained in most privately owned companies in Nigeria. Only few among them lack good accounting system. Hence this project strives to show that good accounting system exist in most private companies. This discussion in this project is done in five chapters. | Assessment of Factors Responsible for Budget Failure in Nigeria
CHARPTER ONE
1.1 Introduction
This research is on Assessment of Factors Responsible for Budget Failure in Nigeria. In any modern state, for a meaningful national economic management and development, public budget is an important instrument. The state’s desire to be democratized, and having adequate civil society participation, prompt response to development and desire to eradicate or reduce poverty level in the country has altogether caused the focus on budget to assume a greater importance. The budget is the principal instrument of fiscal policy. Budget policy exercise control over size and relationship of government receipts (revenue) and expenditure (Edame, 2010). In Nigeria, return to civil rule has given budget its proper status, because the due process of articulating it is guided jealously by the legislature. During military rule budget is only prepared and read to the nation. But under civilian rule budgeting involved wider consultation because of its importance towards nation building and developmental issues.
The annual budget is a document which contains the entire programmes of the government in a given fiscal year. It shows the expectations and intentions of the government in a particular fiscal year. Most importantly, it contains the expected revenue and expenditure of government within a given financial year. Olomola (2009), observed that the role of budget in an economy cannot be overemphasized. A budget is an important economic instrument of national resource mobilization, allocation and economic management. It is an important economic instrument for facilitating and realizing the vision of government in a given fiscal year. A budget has to be well- designed, effectively and efficiently implemented, adequately monitored and its performance well evaluated.
1.2 Statement of the Problem
Development in the public sector is attributed to the fiscal and monetary actions of the government. These actions propel the need for effective allocation of resources, social cohesion and fairness dealing with structural development at all unit of the society. But the Nigerian economy is faced with series of imbalances in their implementation of budget and economic policies, despite the availability of the various source of fund to the government. Several budgets have been designed with the sole purpose of economic planning and social development, but have not led to higher level of better service delivery, more accomplishment, more improvement or more resolution of public problems because there are so many variables such as resource leakage, poor management and contractors characteristics that militate against its success. This paper is designed to assess the causes of budget failure with the view to proffer policy recommendations on how to eliminate it.
1.3 Objectives of the Study
The objective of this study is to assess the causes of budget failure in Nigeria. Specifically, the study seeks to:
- determine the budgetary role in the economic planning of Nigeria;
- examine the effectiveness of budgeting in social development of the Nation.
The study tests the following hypotheses
Hypothesis I
Ho: There is no significant relationship between budgeting and economic planning in Nigeria.
Hypothesis II
HO: There is no significant relationship between budgeting and social development in Nigeria.
1.4 Conceptual Issues
Ikelegbe (1996:164) define budget as a statement of purpose, anticipated revenue work proposed to be performed and money allocated to achieve work proposed. The public budget is a financial plan, a programme of action, a management planning and control technique, an evaluation technique and a performance improvement tool. Budget as a plan could be used for economic planning in specifying revenue and expenditure outlines, and as a programme it could be used to execute the social policies as what is to be done or achieved. Budget is the main instrument by which the state manages the economy to ensure growth and stability in the social circle. The fiscal and economic policies in the budget help to stimulate and direct economic growth and stability; it is the instrument by which government affects public welfare.
According to Uchendu (1998) budgets are economic tools deliberately designed through political process to aid in the allocation of available resources among competing demands. He further added that “a public budget is an economic tool deliberately fashioned through the political process to assist in the management of public sector”.
But Tosin, (2003:108) viewed budget as a financial and/or qualitative statement prepared and approved prior to a defined period of time of the policy to be achieved during that period for the purpose of attaining a given objective. According to Bello (2005:88), a budget is a plan of financial operation embodying an estimate in proposed revenue and expenditure as well as the proposed means of financing them for a given period usually a year. He explained further that budget can also be seen as an instrument of economic planning and implementation of social policy, which is to ensure that policies are translated into concrete and feasible objectives. Budget allows the government to decide about each individual revenue and expenditure throughout that period of the plan.
Edame, (2010) on the other hand; sees “Economic planning as a deliberate governmental attempt to coordinate economic decision making over the long run and to influence, direct and in some cases even control the level and growth of a nation’s principal economic variables (income, consumption, employment, investment, saving, exports, imports etc.) to achieve a predetermined set of development objectives. The budget then becomes a link between financial resources and human needs or behavior. It becomes a means of meeting the people’s needs, that is, policy objectives and political development. | MONETARY POLICY IN NIGERIA BANKING INDUSTRY( A CASE STUDY OF FIRST BANK OF NIGERIA OWERRI BRANCH)
CHAPTER
1.0 INTRODUCTION
This research is on Monetary policy in Nigeria banking industry ( a case study of first bank of Nigeria Owerri branch). Currently, monetary policy has been taken to be a very vital measure in controlling the Nigeria economy this is one of the principal functions of the first bank of Nigeria (CBN). The CBN caries out this responsibility on behalf of the federal Government of Nigeria through a process outlined in the first Bank of Nigeria Decree 24, 1991 section 8 sub sections 1 and 2, the Governor shall keep the president informed of the monetary and banking policy pursued or intended to be pursued the Bank. The president after due consideration may, in writing, direct the bank as to monetary and banking policy pursued or intended on the board which shall forthwith take all steps necessary or expedient to give effect there to Monetary policy is a programme of action undertake by the monetary authorities, generally the first bank, to control and regulate the demand for and supply of money with the public and the public and the flow of credit with view to achieving predetermined macroeconomic goals
1.1 Background of the Study
The federal Government have seen economy as a result of unstable exchange rate. Is cobbling, and have decided to improve and maintain to strengthening balance of payment and maintenance of stable domestic price level.
1.2 Statement of the Study
In this report, the impact of monetary policy in Nigeria banking industry will be investigated. The investigation on the impact of this monetary policy in Nigeria banking industry's will enable its complete distribution even to the local communities. It will also enable its ascertainment on the likely problem that will occur on the process of implementing monetary policy. It will also go a long way. Way in making people know how to spend their money.
1.3 Objective of the Study
The objective of this study is to ascertain know the high rate of employment.
1.4 Research Question
For the purpose of this study the following question will guide this work.
- How does C.B.N implement their monetary policy?
- How does the C.B.N uses the monetary policy in controlling the price stability of the state?
- How does monetary policy increase the growth of the economic productivity.
1.5 Research Hypothesis
For the purpose of the work, the following hypothesis will be tested.
Null hypothesis; if the impact of monetary affect the banking industry
Alternative hypothesis; if the impact of monetary policy does not affect the banking industry.
1.6 Significance Of The Study
This project proposal is significant in the following ways:
- To prospective study who wants to know more on the impact of monetary policy in the banking sector.
- The study will be relevant to those who work in the bank to help them know how impact monetary policy in banking sector.
- To the Government on how to plan to improve the impact of monetary policy in banking industry's.
1.7 Delimitations And Limitation
This study will cover areas of academics, business, Government and banks.
1.8 Limitation
A study of this nature cannot be carried out without difficulties in the process. An important constraint is the time constraint. This research proposal work and examination and the research were complied with a very short period of one week.
Another constraint is finance, a research of this nature involves adequate search ( raw materials)
Lastly, difficulty in securing relevant data for the study. | The Impact of product development on banks performance ( A Case study of first bank plc )
The need for this study being the impact of product development on bank performance was to determine the rate at which the performance of this product is helping the economic development an growth in the banking industry in the terms of employment and amended in 1997. The public became aware of the importance especially through the introduction of privatization and the N25 billion capital bases for banks. There is no gainsaying therefore that the Nigerian capital market has come a long way to stay as the powerhouse for mobilizing and allocating long-term capital funds for commerce and industry. | THE ROLE OF FINANCIAL CONTROL INSTITUTIONS IN PROMOTING FINANCIAL ACCOUNTABILITY IN THE PUBLIC SECTOR: A STUDY OF PLATEAU STATE NIGERIA UNDER DEMOCRATIC REGIMES
CHAPTER ONE
INTRODUCTION
This project focuses on the role of financial control on selected institutions in promoting financial accountability in the public sector with a study of plateau state under democratic regimes. Nigeria, a federation of thirty-six States and Seven Hundred and seventy-four local governments, was a colony of Britain but became an independent State in 1960. It has a population of nearly one hundred and twenty million people and the dominant source of income is oil (Oladosu and Oyelakin 2003:1).
Nigeria has been divided into six geo-political zones - South-South, South-West, South- East, North- East, North -West and North- Central. Plateau State falls within the geo-political zone of North-Central. The State was first created as Benue-Plateau in 1967. It later became Plateau State with the creation of Benue State in 1976. Nassarawa State was also created out of Plateau State in 1996.
The Nigerian public sector consists of the governments at the Federal, States, Federal Capital Territory, Local Governments and all government parastatals. The public sector plays an important role in economic development. It provides services which the private sector may not be willing or able to provide. Chan (1988:15) argues that
the public sector provides many essential services to society. It plays an essentially compensatory function; that is, it performs those functions that the market economy does not do efficiently or lacks the incentive to do at all.
Musgrave and Musgrave (1976) classify these functions as
- Resource Allocation - the provision of public goods and services.
- Income Distribution - the adjustment of the distribution of wealth or income in the society to conform to some principle of fairness.
- Stabilization - the use of fiscal policies to achieve high employment, price stability and economic growth.
In a Federal system like Nigeria, the different tiers of government perform these functions in varying degrees. Governments at all levels desire to deliver good governance to all their citizens. This is because “good governance is central to creating and sustaining an enabling environment for development” (Asselin, 1995:3). A strong link exists between economic development and good governance, and between good governance and fiscal transparency.
The importance of good financial management in achieving the objectives of government has not lost its relevance. Because of this, the financial accountability of most countries is enshrined in the Constitution to facilitate the discharge of financial accountability. Oshisami and Dean (1984:36) remark that in recognition of the importance of finance as a basis for political power, and the opportunities which absolute control offers for its abuse, power over finance is divided, the division being formally recognized Constitutionally in virtually all countries.
Global practice shows that power over finance is shared between the Executive and the legislature and in some cases with an independent body - the Supreme Audit Institution. Has this Constitutional sharing of power over finance achieved the desired result?
In view of the enormous responsibilities placed on government for the welfare of its citizens, the public sector needs a lot of resources. In pursuit of this, the government needs to put up a framework for the management and control of the public purse. The formalities established in relation to accounting and financial control support the process of governance
The term ‘control’ has long been recognized as one of the principles of management. Control exists in most human endeavors. Most authorities agree on what constitutes control. Lucey (1996:137) states that control is concerned ‘with the efficient use of resources to achieve a previously determined objective, or set of objectives, contained within a plan’. Similarly, Koontz, Donnel and Wiehrick (1980:81) define control as the measurement and correcting of activities of subordinates to assure that events conform to plans. Ekwonu (1996:35) states that control ‘is the measurement of the performance of the activities of subordinates in order to make sure that objectives and plans devised to attain them are being accomplished’. All these definitions point to the fact that control exists to ensure that organizational objectives are met through measurement of performance. The control process according to (Koontz et al 1980:722) involves three steps:
- Establishing standards
- Measuring performance against these standards and
- Correcting deviations from standards and plans
Finance occupies a special place in the conduct of government business. Public finance has been defined by Buhari (1993:66) as ‘a branch of economics concerned with the finance and economic activities of the public sector’.
From these definitions, we can state that public finance not just deal with the ways government raises money, but also the manner such money is expended with the aim of achieving economic growth.
In Nigeria, the Federal government raises money through the following major sources: Petroleum profit tax, Mining, Company income tax, Import duties, Export duties, Excise duties, Interest and repayment of loans granted by the government (Buhari, 1993:169).
Others include; Education tax, Value added tax, Pay-as-you-earn, Fees and charges, Royalties, Rent of government property, Grants, aids and loans.
The money raised through the above sources is expended on the following items: Administration, Infrastructural services, Productive services, Defense, Interest on internal and external loans, and Diplomatic missions (Buhari, 1993:168)
In connection with government finance, we can identify two basic groups of control- administrative and financial control; the former referring to those techniques which have indirect bearing upon expenditure operation while the latter denote techniques of control relating to fiscal control. The emphasis of this study is on financial control.
Financial control is a very important type of control in the management of government finance. Oshisami (1992:29) defines it as the process which ensures that financial resources are obtained at cost considered to be economical and utilized efficiently and effectively for the attainment of established objectives.
A comprehensive definition of financial or fiscal control is given by Ekwonu (1996:33) as the sum total of the work, which guides, directs and interprets the budget cycle. It covers the activities of the Executive branch, involving finance and the ministries... the audit department and the legislature...
In a democratic era, financial control may operate internally and externally.
Within the Executive arm of government control by the finance ministry is internal while audit by the Auditor-General and legislative oversight constitute external control.
- Institutions of Financial Control in the Public Sector
There are formal and informal institutions of financial control over public revenue and expenditure. The formal institutions of financial control include the Executive arm of government, Legislature and Office of the Auditor-General or Supreme Audit Institution. The informal institutions of financial control include; the media, the organised civil society and donor agencies.
With respect to the formal institutions of financial control, the Constitution of the Federal Republic of Nigeria, 1999, establishes a cycle of financial accountability for public funds. The cycle provides that:
- Legislature authorizes expenditure
- The Executive controls the collection and issue of funds. In addition, it prepares the accounts.
- The prepared accounts are audited by the Auditor-General and
- The Auditor-General submits the results of his audit to the Legislature through its Public Accounts Committee (PAC). PAC acts on the report by inviting accounting officers to appear before it where need be.
The wisdom in sharing these responsibilities is that absolute conferment of this power on one arm of government can create abuses in financial administration. In other words, financial administration requires a series of checks and balances so that public funds are not wasted or misapplied. But, is this what we find in practice? Are these checks and balances observed?
The financial accountability cycle provides that the Executive arm of government collects, disburses and prepares the accounts of government. The other formal institutions of financial control are excluded from this very vital stages. Their involvement in public sector financial control is only visible when funds have been expended. Is this not the same as calling a medical doctor to give an autopsy report? What guarantee do we have that this sharing of financial responsibilities promote sound financial management in the public sector? Haven been excluded from the critical stages of collection and disbursement of public funds, can the Legislature and State Audit significantly influence public finance?
In the cycle of financial accountability established by the Constitution, the budget is a legislative instrument of financial control over the Executive. Funds should be expended according to legislative intent as expressed in the budget. Has the Legislature been able to control public expenditure using the budget?
The Office of the Auditor-General is a creation of the Constitution. Therefore his status and duties are constitutionally determined. His basic duty is to report on the accounts prepared by the Executive. In his report to the Legislature he states whether the Executive has complied with legislative approval in its execution of the budget. For the Auditor-General to be able to play this important role he has to rely on the financial data supplied by the Executive. He also needs a strong Legislature to help implement his findings. In practice, does the Auditor-General derive the required support from the Executive and Legislature to perform his Constitutional duty? Has he been able to discharge the functions of his office as stipulated by the Constitution?
Informal institutions of financial control may promote financial accountability over public finance and these include; the mass media, the organized civil society, the World Bank and other international donors.
A vibrant media may promote financial accountability by reporting the findings of the Auditor-General. By exposing wrong doings the media may influence the behavior of public officials who may not want to be publicly exposed.
The organized civil society too, may play a significant role in promoting financial accountability in the public sector. This can be achieved by an active inter-reaction between them and the legislature. Krafchick and Wehner (2002:1) argue that inter-reaction between legislatures and civil society organizations is increasing in many countries... From the legislature’s perspective, the input of civil society can help to make the legislature’s engagement with the budget more effective.
The donor community today is an important institution that promotes financial accountability in recipient countries. They encourage borrowers to strengthen domestic institutions of financial control. Sahgal (2001:1) states that “most donors are now looking for ways to improve their performance in terms of promoting good governance and accountability.”
While these informal institutions may also promote financial accountability, however, it is the formal institutions that are the focus of this research.
Researches targeted at strengthening the institutions of financial control over public funds have ignored the influence of the link between the institutions of control, especially the influence of the Legislature on State Audit performance. For example the researches of Ball et al (1999); Bartel (1996); Asselin (1995); Premchand (1989); Hogy (2004); Dye and Stapenhurst (1998); Martinez-Soliman (2003); Krafchik (2002); Sahgal (2001) and Ahsan (1994) emphasize strengthening the institutions of financial control over public funds in isolation, without establishing the interaction between them.
These researches address the problem of public sector financial accountability arrangements on institutional basis only. They fail to identify the shortcomings of the present cycle of financial accountability over public funds in Nigeria. This research intends to address these shortcomings in the context of Plateau State of Nigeria.
Control of public finance is very important to public governance. That is why power over public finance is enshrined in the Nigerian Constitution. To promote financial accountability in Plateau State, power over finance is shared between the Executive, Legislature and the Supreme Audit Institution or the Office of the Auditor General. Have these institutions been able to play the roles assigned to them?
It is observed that there is the problem of non or partial implementation of the budget by the Executive arm of government in Plateau State. The budget is the legislative instrument of control over public finance.
Related to the issue just raised above, is the problem of spending without legislative authority. The checks and balances on public finance requires that the Executive cannot spend without legislative approval. Even where voted funds fall short of requirements, the spending agency must apply for supplementary appropriations provisions and obtain legislative approval for such additional expenditure before incurring them. It has been alleged that this requirement of the law is not usually followed.
The Executive arm of government which implements budgets is required to ensure that expenditures are properly covered in the relevant Appropriation Acts. Funds are supposed to be apportioned to spending departments in line with the approved budget. It has been noted that public expenditure are frequently made on items not budgeted for, which of course means that such expenditure have no legislative approval. Once the budget has been approved, it is alleged that funds are shifted to purposes other than those for which they were meant.
Limits of expenditure are imposed by the budget. However, spending agencies do not observe these limits when incurring expenditure. In the course of budget implementation, a vote book is maintained to ensure that approved budgetary limits are not exceeded. This aspect of expenditure control is often abused. We may ask, why should spending agencies not respect limits when incurring expenditure? With all these abuses, what has happened to the legislative oversight function?
The performance of the Auditor General in Plateau State has been called to question. It is alleged that the Auditor General is incapable of discharging the functions of his office which is constitutionally prescribed. If this is true, why?
The Plateau State Legislature is seen to be weak and unable to discharge its constitutional responsibility of exercising its power of financial oversight on the
Executive arm of government. This problem is alleged to have adverse effects on the performance of the State Auditor General.
Public financial control in Plateau State also suffers from poor financial record keeping. Where financial records are poorly maintained, can the reliance of the Auditor General on these records adversely affect his performance? In addition, if it is true that financial records are poorly maintained in Plateau State, is this a function of the qualification of those who keep these records? How do these problems listed above impact on financial accountability in Plateau State?
The questions of this research are as follows:
- Is the Budget a significant instrument of Legislative control over public finance in Plateau State?
- Are the rules and regulations governing the use of public funds being observed in Plateau State?
- Does the quality of legislative financial oversight enhance the performance of State Auditors?
- Does the reliance of the Auditor-General on financial statements prepared by the Executive enhance his performance?
- Is there any relationship between educational/professional qualification and the number of financial records kept in Plateau State?
- Do the formal institutions of financial control play their roles as spelt out by the Constitution?
This research sets out to evaluate the role of the formal institutions of financial control over public finance in Plateau State. Specifically the research has the following objectives:
- To evaluate the significance of the public budget as an instrument of legislative control over public finance in Plateau State.
- To determine whether the reliance of the Auditor-General on the financial data supplied by the Executive enhances his audit work.
- To examine the quality of legislative oversight function on State Audit performance.
- To investigate the significance of the qualification of Treasury staff on the number of financial records kept.
- To recommend measures on how to improve financial accountability in Plateau State.
Hypothesis One
Ho The public budget is not a significant instrument of Legislative control over
public finance in Plateau State.
H1 The public budget is a significant instrument of Legislative control over
public finance in Plateau State.
RATIONALE/JUSTIFICATION
The budget is an expression of legislative approval on how public funds should be disbursed. Budget implementation is used to judge the Executive’s conformance to this legislative approval.
This hypothesis is formulated to find out whether or not the Executive complies significantly with Legislative approval during budget implementation.
Hypothesis Two
Ho The performance of the Auditor-General is not significantly dependent on the
financial statements prepared by the Executive arm of government.
H1 The performance of the Auditor-General is significantly dependent on the
financial statements prepared by the Executive arm of government.
RATIONALE/JUSTIFICATION
The Auditor-General is an agent of the Legislature. The Auditor-General has the duty of overseeing the management of public funds and the quality and credibility of governments’ reported financial data. The Auditor-General ensures that the budget is implemented according to legislative approval. This hypothesis will reveal whether or not the Auditor-General is able to exercise his duties inspite of his reliance on the financial statements prepared by the Executive.
Hypothesis Three
Ho State Audit performance is not significantly dependent on the quality of
legislative financial oversight.
H1 State Audit performance is significantly dependent on the quality of
legislative financial oversight.
RATIONALE/JUSTIFICATION
This hypothesis seeks to establish whether the quality of legislative oversight (through its public accounts committee) has any influence on State Audit work. Does the quality of legislative financial oversight influence the work of State Auditors?
Hypothesis Four
Ho: There is no significant difference between the qualification of treasury
operating staff and the number of financial records kept.
H1: There is significant difference between the qualification of treasury staff and
the number of financial records kept.
RATIONALE/JUSTIFICATION
Where there is a culture of poor financial record keeping, no meaningful control can be exercised. Good financial record keeping is a necessary condition for the production of auditable financial statement. The aim of this hypothesis is to evaluate whether qualification has a significant effect on financial record keeping in Plateau State.
- SIGNIFICANCE OF THE RESEARCH
A research on the public sector, especially on financial control is very important. This research is significant in a number of ways.
The research will assist financial policy makers in Plateau State and indeed other States in Nigeria formulate policies that will promote financial accountability. The academic community will benefit tremendously from this research. Other researchers may use this research to investigate further issues on public finance control.
The three formal institutions of financial control in Plateau State, that is, the Executive, the Legislature and the Auditor General will discharge their financial responsibilities effectively if the recommendations of this research are implemented.
This research evaluates the role of the formal institutions of financial control over public finance under a democratic setting. This is because the institutions of financial control are fully operational only during democratic dispensations. The Legislature does not exist during military rule.
The role of the informal institutions of financial control such as the media, the organised civil society and international donor agencies though important are not the immediate focus of this research.
Plateau State which is chosen as the case study is an old State - first created as Benue-Plateau State in 1967. The State has witnessed flashes of democratic rule from 1979 to date.
The research period covers years under democratic regimes. These are 19791983; 1991-1992; and 1999-2003. The research period covers ten years of democratic rule. The broken periods are periods of military rule.
The research covers only ministries. Parastatals are excluded because the 1999 Constitution S. 85 (3) does not authorize the Auditor-General to audit or appoint external auditors for government parastatals. Local governments are also excluded since they are guided by a different financial rule called the financial memoranda.
A number of limitations were encountered in this research. The major ones included:
- Literature Review - Getting materials for literature review was difficult - An extensive search for literature took over one year. The cost incurred in obtaining the relevant materials was also enormous.
- Questionnaire Administration - During the main research, we had to deal with an enlarged number of participants in the research. Since the questions were randomly administered, many of the participants were seeing the questions for the first time. Many of them felt that participating in this research would amount to “leaking of government secret”. They were visibly uncomfortable - that was even in spite of assurances given by research assistants that the information required was strictly for research purposes. Some of them asked for time to make up their minds as to whether to complete the questionnaires. For this category of respondents, research assistants had to plead and make repeated visits before the questionnaires were completed and returned.
- Secondary Data Collection - Getting information on public sector activity is difficult. But it is even more difficult getting information on financial activities. Information that is supposed to be publicly available is treated as confidential. Enquiries for financial information are viewed with suspicion. A very high official must authorize the release of such financial information. But getting such an official to authorize the release of the information is pretty difficult. The research assistants were suspected to be agents of opposing political parties. They were thus to be kept at arms’ length. It took a long time to convince the custodians of the required information to release the information.
- State of Emergency - The state of emergency declared in Plateau State on the 18th of May 2004 adversely affected this research. The Plateau State House of Assembly, it will be recalled was also suspended during the period. Reaching out to the suspended members to participate in the research was difficult. Even where contacts were established eventually, completing the questionnaire was not seen to be of any immediate importance. Some of the lawmakers told me that their immediate concern was whether they would be reinstated. They eventually participated. Democratic structures were restored at the end of the state of emergency in November 2004. To God be the glory.
| THE IMPACT OF FINANCIAL CONTROL INSTITUTIONS IN PROMOTING FINANCIAL ACCOUNTABILITY IN NIGERIA: A STUDY OF IMO STATE NIGERIA UNDER DEMOCRATIC REGIMES
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Nigeria has been divided into six geo-political zones - South-South, South-West, South- East, North- East, North -West and North- Central. IMO State falls within the geo-political zone of North-Central. The State was first created as Benue-IMO in 1967. It later became IMO State with the creation of Benue State in 1976. Nassarawa State was also created out of IMO State in 1996.
The Nigerian public sector consists of the governments at the Federal, States, Federal Capital Territory, Local Governments and all government parastatals. The public sector plays an important role in economic development. It provides services which the private sector may not be willing or able to provide. Chan (1988:15) argues thatthe public sector provides many essential services to society. It plays an essentially compensatory function; that is, it performs those functions that the market economy does not do efficiently or lacks the incentive to do at all.
Musgrave and Musgrave (1976) classify these functions as;
- Resource Allocation: The provision of public goods and services.
- Income Distribution: The adjustment of the distribution of wealth or income in the society to conform to some principle of fairness.
- Stabilization: The use of fiscal policies to achieve high employment, price stability and economic growth.
In a Federal system like Nigeria, the different tiers of government perform these functions in varying degrees. Governments at all levels desire to deliver good governance to all their citizens. This is because “good governance is central to creating and sustaining an enabling environment for development” (Asselin, 1995:3). A strong link exists between economic development and good governance, and between good governance and fiscal transparency.
The importance of good financial management in achieving the objectives of government has not lost its relevance. Because of this, the financial accountability of most countries is enshrined in the Constitution to facilitate the discharge of financial accountability. Oshisami and Dean (1984:36) remark thatin recognition of the importance of finance as a basis for political power, and the opportunities which absolute control offers for its abuse, power over finance is divided, the division being formally recognized constitutionally in virtually all countries Global practice shows that power over finance is shared between the Executive and the legislature and in some cases with an independent body - the Supreme Audit Institution. Has this Constitutional sharing of power over finance achieved the desired result? In view of the enormous responsibilities placed on government for the welfare of its citizens, the public sector needs a lot of resources. In pursuit of this, the government needs to put up a framework for the management and control of the public purse. The formalities established in relation to accounting and financial control support the process of governance
The term ‘control’ has long been recognized as one of the principles of management. Control exists in most human endeavors. Most authorities agree on what constitutes control. Lucey (1996:137) states that control is concerned ‘with the efficient use of resources to achieve a previously determined objective, or set of objectives, contained within a plan’. Similarly, Koontz, Donnel and Wiehrick (1980:81) define control as the measurement and correcting of activities of subordinates to assure that events conform to plans. Ekwonu (1996:35) states that control ‘is the measurement of the performance of the activities of subordinates in order to make sure that objectives and plans devised to attain them are being accomplished’. All these definitions point to the fact that control exists to ensure that organizational objectives are met through measurement of performance. The control process according to (Koontz et al 1980:722) involves three steps:
- Establishing standards
- Measuring performance against these standards and
- Correcting deviations from standards and plans
Finance occupies a special place in the conduct of government business. Public finance has been defined by Buhari (1993:66) as ‘a branch of economics concerned with the finance and economic activities of the public sector’.
From these definitions, we can state that public finance not just deal with the ways government raises money, but also the manner such money is expended with the aim of achieving economic growth.
In Nigeria, the Federal government raises money through the following major sources: Petroleum profit tax, Mining, Company income tax, Import duties, Export duties, Excise duties, Interest and repayment of loans granted by the government (Buhari, 1993:169).
Others include; Education tax, Value added tax, Pay-as-you-earn, Fees and charges, Royalties, Rent of government property, Grants, aids and loans.
The money raised through the above sources is expended on the following items: Administration, Infrastructural services, Productive services, Defense, Interest on internal and external loans, and Diplomatic missions (Buhari, 1993:168).
In connection with government finance, we can identify two basic groups of control- administrative and financial control; the former referring to those techniques which have indirect bearing upon expenditure operation while the latter denote techniques of control relating to fiscal control. The emphasis of this study is on financial control.
Financial control is a very important type of control in the management of government finance. Oshisami (1992:29) defines it as the process which ensures that financial resources are obtained at cost considered to be economical and utilized efficiently and effectively for the attainment of established objectives.
A comprehensive definition of financial or fiscal control is given by Ekwonu (1996:33) as
the sum total of the work, which guides, directs and interprets the budget cycle. It covers the activities of the Executive branch, involving finance and the ministries... the audit department and the legislature...
In a democratic era, financial control may operate internally and externally.
Within the Executive arm of government control by the finance ministry is internal while audit by the Auditor-General and legislative oversight constitute external control.
Control of public finance is very important to public governance. That is why power over public finance is enshrined in the Nigerian Constitution. To promote financial accountability in IMO State, power over finance is shared between the Executive, Legislature and the Supreme Audit Institution or the Office of the Auditor General. Have these institutions been able to play the roles assigned to them?
It is observed that there is the problem of non or partial implementation of the budget by the Executive arm of government in IMO State. The budget is the legislative instrument of control over public finance.
Related to the issue just raised above, is the problem of spending without legislative authority. The checks and balances on public finance requires that the
Executive cannot spend without legislative approval. Even where voted funds fall short of requirements, the spending agency must apply for supplementary appropriations provisions and obtain legislative approval for such additional expenditure before incurring them. It has been alleged that this requirement of the law is not usually followed.
The Executive arm of government which implements budgets is required to ensure that expenditures are properly covered in the relevant Appropriation Acts. Funds are supposed to be apportioned to spending departments in line with the approved budget. It has been noted that public expenditure are frequently made on items not budgeted for, which of course means that such expenditure have no legislative approval. Once the budget has been approved, it is alleged that funds are shifted to purposes other than those for which they were meant.
Limits of expenditure are imposed by the budget. However, spending agencies do not observe these limits when incurring expenditure. In the course of budget implementation, a vote book is maintained to ensure that approved budgetary limits are not exceeded. This aspect of expenditure control is often abused. We may ask, why should spending agencies not respect limits when incurring expenditure? With all these abuses, what has happened to the legislative oversight function?
The performance of the Auditor General in IMO State has been called to question. It is alleged that the Auditor General is incapable of discharging the functions of his office which is constitutionally prescribed. If this is true, why?
The IMO State Legislature is seen to be weak and unable to discharge its constitutional responsibility of exercising its power of financial oversight on the
Executive arm of government. This problem is alleged to have adverse effects on the performance of the State Auditor General.
Public financial control in IMO State also suffers from poor financial record keeping. Where financial records are poorly maintained, can the reliance of the Auditor General on these records adversely affect his performance? In addition, if it is true that financial records are poorly maintained in IMO State, is this a function of the qualification of those who keep these records? How do these problems listed above impact on financial accountability in IMO State?
The questions of this research are as follows:
- Is the Budget a significant instrument of Legislative control over public finance in IMO State?
- Are the rules and regulations governing the use of public funds being observed in IMO State?
- Does the quality of legislative financial oversight enhance the performance of State Auditors?
- Does the reliance of the Auditor-General on financial statements prepared by the Executive enhance his performance?
- Is there any relationship between educational/professional qualification and the number of financial records kept in IMO State?
- Do the formal institutions of financial control play their roles as spelt out by the Constitution?
This research sets out to evaluate the role of the formal institutions of financial control over public finance in IMO State. Specifically the research has the following objectives:
- To evaluate the significance of the public budget as an instrument of legislative control over public finance in IMO State.
- To determine whether the reliance of the Auditor-General on the financial data supplied by the Executive enhances his audit work.
- To examine the quality of legislative oversight function on State Audit performance.
- To investigate the significance of the qualification of Treasury staff on the number of financial records kept.
- To recommend measures on how to improve financial accountability in IMO State.
Hypothesis One
Ho: The public budget is not a significant instrument of Legislative control over public finance in IMO State.
H1: The public budget is a significant instrument of Legislative control over public finance in IMO State.
RATIONALE/JUSTIFICATION
The budget is an expression of legislative approval on how public funds should be disbursed. Budget implementation is used to judge the Executive’s conformance to this legislative approval.
This hypothesis is formulated to find out whether or not the Executive complies significantly with Legislative approval during budget implementation.
Hypothesis Two
Ho: The performance of the Auditor-General is not significantly dependent on the financial statements prepared by the Executive arm of government.
H1: The performance of the Auditor-General is significantly dependent on the financial statements prepared by the Executive arm of government.
RATIONALE/JUSTIFICATION
The Auditor-General is an agent of the Legislature. The Auditor-General has the duty of overseeing the management of public funds and the quality and credibility of governments’ reported financial data. The Auditor-General ensures that the budget is implemented according to legislative approval. This hypothesis will reveal whether or not the Auditor-General is able to exercise his duties inspite of his reliance on the financial statements prepared by the Executive.
Hypothesis Three
Ho: State Audit performance is not significantly dependent on the quality of legislative financial oversight.
H1: State Audit performance is significantly dependent on the quality of legislative financial oversight.
RATIONALE/JUSTIFICATION
This hypothesis seeks to establish whether the quality of legislative oversight (through its public accounts committee) has any influence on State Audit work. Does the quality of legislative financial oversight influence the work of State Auditors?
Hypothesis Four
Ho: There is no significant difference between the qualification of treasury operating staff and the number of financial records kept.
H1: There is significant difference between the qualification of treasury staff and the number of financial records kept.
RATIONALE/JUSTIFICATION
Where there is a culture of poor financial record keeping, no meaningful control can be exercised. Good financial record keeping is a necessary condition for the production of auditable financial statement. The aim of this hypothesis is to evaluate whether qualification has a significant effect on financial record keeping in IMO State.
- SIGNIFICANCE OF THE RESEARCH
A research on the public sector, especially on financial control is very important. This research is significant in a number of ways.
The research will assist financial policy makers in IMO State and indeed other States in Nigeria formulate policies that will promote financial accountability. The academic community will benefit tremendously from this research. Other researchers may use this research to investigate further issues on public finance control.
The three formal institutions of financial control in IMO State, that is, the Executive, the Legislature and the Auditor General will discharge their financial responsibilities effectively if the recommendations of this research are implemented.
This research evaluates the role of the formal institutions of financial control over public finance under a democratic setting. This is because the institutions of financial control are fully operational only during democratic dispensations. The Legislature does not exist during military rule.
The role of the informal institutions of financial control such as the media, the organised civil society and international donor agencies though important are not the immediate focus of this research.
IMO State which is chosen as the case study is an old State - first created as Benue-IMO State in 1967. The State has witnessed flashes of democratic rule from 1979 to date.
The research period covers years under democratic regimes. These are 19791983; 1991-1992; and 1999-2003. The research period covers ten years of democratic rule. The broken periods are periods of military rule.
The research covers only ministries. Parastatals are excluded because the 1999 Constitution S. 85 (3) does not authorize the Auditor-General to audit or appoint external auditors for government parastatals. Local governments are also excluded since they are guided by a different financial rule called the financial memoranda.
A number of limitations were encountered in this research. The major ones included:
- Literature Review - Getting materials for literature review was difficult - An extensive search for literature took over one year. The cost incurred in obtaining the relevant materials was also enormous.
- Questionnaire Administration - During the main research, we had to deal with an enlarged number of participants in the research. Since the questions were randomly administered, many of the participants were seeing the questions for the first time. Many of them felt that participating in this research would amount to “leaking of government secret”. They were visibly uncomfortable - that was even in spite of assurances given by research assistants that the information required was strictly for research purposes. Some of them asked for time to make up their minds as to whether to complete the questionnaires. For this category of respondents, research assistants had to plead and make repeated visits before the questionnaires were completed and returned.
- Secondary Data Collection - Getting information on public sector activity is difficult. But it is even more difficult getting information on financial activities. Information that is supposed to be publicly available is treated as confidential. Enquiries for financial information are viewed with suspicion. A very high official must authorize the release of such financial information. But getting such an official to authorize the release of the information is pretty difficult. The research assistants were suspected to be agents of opposing political parties. They were thus to be kept at arms’ length. It took a long time to convince the custodians of the required information to release the information.
- State of Emergency - The state of emergency declared in IMO State on the 18th of May 2004 adversely affected this research. The IMO State House of Assembly, it will be recalled was also suspended during the period. Reaching out to the suspended members to participate in the research was difficult. Even where contacts were established eventually, completing the questionnaire was not seen to be of any immediate importance. Some of the lawmakers told me that their immediate concern was whether they would be reinstated. They eventually participated. Democratic structures were restored at the end of the state of emergency in November 2004. To God be the glory.
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