The study evaluated the “effectiveness of financial control establishments in promoting public sector accountability in of Enugu State, Nigeria”. This study was aimed to evaluate the significance of public budget as an instrument of legislative control over public finance, to determine whether the reliance of the Auditor-General on internal audit work influences his audit work and to ascertain the extent of legislative oversight function on state audit performance in Enugu State, Nigeria. To achieve these objectives, the study adopted descriptive survey design. Formal financial control Establishments (Enugu State Ministry of Finance, Office of the Auditor-General of Enugu State and Enugu State House of Assembly) were used for the study. The population of the study was 195 respondents which comprised of treasury staff of Enugu State Ministry of Finance; core Auditors from the Office of the Auditor-General of Enugu State and Public Accounts Committee Members of Enugu State House of Assembly. Primary data was used for the study. Data were collected through questionnaire research instrument on a five-point Likert scale. The reliability of the instrument of the study which was 0.72, was determined using Spearman ranking. The validity of the instrument was measured using content validity, and this was done by three public sector experts from both the academia and public sector. Data collected were analysed using simple linear regression and Pearson product moment correlation, at 5% probability level of significance with the aid of SPSS (v.22). The findings revealed that: The public budget is a significant instrument of Legislative control over public finance (r = .649, p < 0.05). in Enugu State, Nigeria. Performance of the Auditor-General is significantly dependent on internal audit work (r = .955, p < 0.05). There is a statistically significant relationship between State audit performance and legislative financial oversight (r =.83, p < 0.05). It recommended that the legislature should be more transparent, accountable and competent in the performance of their oversight activities if they are to improve public budget control and accountability. The office of the Auditor-General and Internal Audit Unit in Enugu State, Nigeria should be further strengthened by way of being adequately staffed, equipped, funded and independent to make them more effective institutional mechanisms for financial control and accountability. Lastly, the 1999 Constitution should be amended to give a time frame for the Public Accounts Committee of House of Assembly to consider and report back to the whole house matters arising from the audit reports of the Auditor-General in order to improve his performance.
1.1 Background to the Study
Nigeria was colonised by Britain but had her independent in 1960. Nigeria is a federation of thirty-six States and seven hundred and seventy-four Local Government Areas, It has a population of over one hundred and forty million people and the dominant source of income is oil (Oyelakin, 2003). Nigeria is a country endowed with abundant natural economic resources. But despite the abundance of national wealth, Nigeria has remained underdeveloped and is ranked among the poorest nations of the world (King, 2003; Soludo, 2007). Since there is an abundance of resources, Nigeria’s poverty level and underdevelopment can only be attributed to mismanagement and corruption, facilitated by weak, inappropriate and malfunctioning public sector.
During the colonial era, the British installed a financial control measure that is still being practised today in the Nigerian public sector. The legal framework for the control of public finance is still based on the laws that were transferred to Nigeria by the British colonial administration at independence. Most of these laws have been scantily amended. The two most relevant legal frameworks that predate independence and which are still used today are the Finance (Control and Management) Act No. 33, 1958 and the Audit Act No. 38, 1956 (Anyafo, 2000). Other legal documents that influence financial control practice include the Constitution of the Federal Republic of Nigeria; the Appropriation Acts; Financial Regulations and Finance and Treasury Circulars (Daniel, 2002).
Ugwoke (2005) opines that the Nigerian public sector is made up of the governments of the Federal, States, Federal Capital Territory, Local Governments and all their Ministries, Ministerial Departments and 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) 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, distribution of income and economic stabilisation.
In Nigeria, the various 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 an important factor in creating and sustaining an enabling environment for development (Asselin, 1995).
The importance of good financial management system in carrying out the functions of government has not lost its relevance. Based on this, the financial accountability of most countries is embedded in the Constitution to ensure the discharge of financial accountability. Oshisami and Dean (1984) remarks that in recognition of the importance of finance as a basis for political power, and the opportunities which absolute control offers for its abuse, control over public finance is divided. The division is formally recognised constitutionally.
In view of the enormous responsibilities placed on government for the welfare of its citizens, the public sector needs a lot of resources.
1.7 Statement of the Problem
The public sector performs an essential role in public financial management and economic development. The public sector is entrusted with public financial resources. It is therefore anticipated to stick to the utmost ethical standards, transparency and accountability to guarantee optimum utilization of scares public resources which could be actualise through a combination of individual professionalism, personal standards and a rigorous control framework (Chan, 1988). Safeguarding and control of public resources led to the institution of government financial control establishments, responsible for the monitoring of activities of government officials to ensure transparency and accountability in governance (Dauda & Kumanjock, 2015). To promote financial accountability in Enugu State, power over public finance is shared between the Executive (Ministry of Finance), Legislature and the Supreme Audit Institution or the Office of the Auditor General. They are statutorily empowered to harness all public resources for the benefit of the generality of the citizens. The question is, has the Nigerian Public office holders adhere to the principle of public accountability and voluntarily account for their activities while in office? These establishments have not been able to function effectively (Akinbuli, 2013).
It is observed that there have been reported cases of non-accomplishment of budget, budget disparity, budget indiscipline, poor or non-performance of budget and poor budgetary implementation (Olurankinse, 2013).
The budget is the legislative instrument of control over public funds. As good as our budget is, the performance of which can be measured in terms of accomplishment is nothing to write home about. Budget implementation is far from reality and the disparity between budget and its implementation are so wide and kept on abating as years pass by (Obara, 2013). Related to the issue just raised above, is the problem of spending without legislative authority. The checks and balances on public finance require 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 observed that this requirement of the law is not usually followed (Olaoye & Ogunmakin, 2014).
The Executive arm of government which implements budgets is required to ensure that expenditures are properly covered in the relevant Appropriation Acts. Funds are meant to be apportioned to various spending departments based on their approved budget. It has been noted that public expenditures are frequently made on items not budgeted for, which of course means that such expenditure has no legislative approval. Once the budget has been approved, it is observed that funds are used for purposes other than those for which they were approved (Oke, 2013). This aspect of budgetary control is usually abused. We may ask, why should spending agencies fail to comply with incurring only legislative approved expenditure? With all these abuses, what has happened to the legislative oversight function?
Ehigiamusoe and Umar 2013, argued that legislative oversight committees have not been effective in stimulating Ministries, Departments and Agencies (MDAs) to the attainment of budget accomplishments and accountability. They argued that some legislative committees use oversight activities to intimidate rather than to encourage MDAs to perform at optimum levels especially in the areas of budget implementation accountability. This problem is assumed to have adverse effects on the performance of the Auditor General.
The performance of the Auditor General seems not to have ensured the successful execution of projects, neither has it done much in ascertaining that government derived value for money spent on projects in Enugu State. It is observed that the Auditor General is incapable of discharging the functions of his office which is constitutionally prescribed (Ijeoma & Nwufo, 2015). If this is true, why?
Furthermore, if the public accounts committee live up to expectations as per its functional role, why are the masses so perplexed about the prevailing condition of accountability of public sector financial activities and the rampant financial crimes across the country? Since we have by the legislature, Public Accounts Committee, what impact does its function has on public accountability? If public sector accountability is ensured by public accounts committee through an audit process, why then do we have rampant financial crimes? In other words, in what ways public accounts committee influence public accountability and with what outcomes so far achieved (Pere & Osain, 2015).
The entire establishments of public sector financial control seem to have collapsed. Consequently, there are increases in the mismanagement, scandalous embezzlement, extravagance, wastage, misappropriation, contract abandonment, overprizing of goods/service, salaries padding, capital flights and all other sorts of corruption (Udu, 2013).
It is against these backdrops, which gave rise to poor economic and social development that this study sought to fill in the gap in the literature on the effectiveness of financial control establishments in promoting public sector accountability and how it can be used to enhance effective and efficient utilization of scarce public resources in Enugu State, Nigeria.
From the empirical review, the researcher observed that there is sparse literature on the subject matter despite the importance of public sector accountability in sustaining economic development in Nigeria. Many researchers on the subject matter such as Dauda and Kumanjock (2015) who studied the efficacy of the Office of the Auditor-General of Nasarawa State in ensuring public sector accountability used only one statutory establishment of Public Sector Financial control which is Office of the Auditor-General. Also, Pere and Osain (2015) who studied the functional impact of public accounts committee on public sector accountability in Nigeria equally used one statutory establishment of Public Sector Financial control which is House of Assembly (Legislature). But this study used all the three statutory public sector financial control establishments in order to establish their relationships in promoting public sector accountability.as well as larger scope than the previous works on the subject matter.
1.8 Objectives of the Study
The main objective of this study is to evaluate the effectiveness of financial control establishments in promoting public sector accountability in Enugu State, Nigeria.
Specific objectives include to:
a) evaluate the significance of the public budget as an instrument of legislative control over public finance in Enugu State, Nigeria;
b) determine whether the reliance of the Auditor-General on internal audit work influences his audit work in Enugu State, Nigeria; and
c) examine the extent of legislative oversight function on State Audit performance in Enugu State, Nigeria.
1.9 Research questions
The research questions in this study highlight the main areas of concentration. Hence, making attempt to find answers to the following questions will help to clarify the relationship between public financial control Institution and sustainable development.
The questions of this research are as follows:
1. What is the significance of Budget as an instrument of Legislative control over public finance in Enugu State, Nigeria?
2. To what extent does the reliance of the Auditor-General on internal audit works influence his performance in Enugu State, Nigeria?
3. What is the extent of legislative financial oversight functions on the performance of State Audit in Enugu State, Nigeria?
1.10 Research Hypotheses
Based on the explanations contained in the background of this study, we propose the following hypotheses:
1. The public budget is a significant instrument of Legislative control over public finance in Enugu State, Nigeria.
2. The performance of the Auditor-General is significantly dependent on internal audit work in Enugu State, Nigeria.
3. There is a significant relationship between State Audit performance and the quality of legislative financial oversight functions in Enugu State, Nigeria.
1.11 Significance of the Research
Research on the public sector, especially on financial control and management is very necessary. It is necessary to carry out this study in view of the prevailing poor living conditions in Nigeria as a result of poor financial control.
The significance of this study derived from the effort to contribute to existing literature on the matter of public sector financial control. Furthermore, it proffers suggestions to improve on public financial management system with regards to enhancing economic development. Thus, the financial policy makers in public sector will find this study useful to set up a sound public financial management system to address the prevailing problems of economic recession in Nigeria. Hence, the study draws the attention of public sector administrators on good financial planning and control to extend sustainable development projects to the country as the only way to show good governance.
The academic community will benefit tremendously from this research. Other researchers may use this research to investigate further issues on public financial control.
The three formal establishments of financial control in public sector, that is, the Ministry of Finance, the Legislature and the Office of the Auditor-General will discharge their financial responsibilities effectively if the recommendations of this research are implemented.
1.12 Scope of the Study
This research evaluates the effectiveness of public sector financial control establishments in promoting public sector accountability under a democratic regime. This is because the establishments of financial control are fully operational only during democratic dispensations. The Legislature does not exist during military rule.
The role of the informal establishments 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.
Enugu state which was created in 1991 was used as a study. The State has witnessed flashes of democratic rule from 1991 to date. The research period covers years under democratic regimes. These are 1991-1992 and 1999-2016. The research period covers eighteen years of democratic rule. The broken periods are periods of the military regime.
The study will cover the three statutory public sector financial control establishments; State Ministry of Finance, Office of the Auditor General of the state and State House of Assembly under a democratic dispensation. Parastatals are excluded because the 1999 Constitution S. 85 does not authorise the Auditor-General to audit or appoint external auditors for Government Parastatals. Local governments are also excluded because they are guided by a different financial rule called the financial memoranda.
1.8 Limitations of the Study
Collecting data on public sector activities were difficult. Data that is meant to be publicly available is treated as confidential. Inquiries for data were viewed with suspicion. The researchers were suspected to be agents of opposing political parties. We were thus to be kept at arms’ length. Some Government officials refused to supply the necessary information probably due to their ignorance of the main purpose of this study.
We overcame these limitations by convincing them that the data were purely for academic purpose.
1.9 Operational Definition of Terms
This refers to gathering, classification, analysis, communication, and interpretation of financial information aimed at aiding informed decision bordering on planning and control.
Public Sector Accounting
This is the process of recording, classifying and analysing financial information about government units and activities to be able to ascertain the amount of funds received, disbursed and balance left in such units and from such activities.
This refers to an estimate of revenue and expenditure for a year ahead chargeable to the revenue and capital accounts.
Public Financial Management
In the context of this study, it refers to the efficient and effective utilisation of public resources to meet the needs of the public in an equitable manner.
It shifts the emphasis from traditional public administration to public management. Public financial management systems permit greater flexibility of inputs and processes in return for greater emphasis on outputs and performance. Whereas the traditional public administration focuses on adherence and compliance with legislative appropriations, the Public Financial Management focuses on performance evaluation and result-oriented accountability.
This refers to the abuse of public office through the instrumentality of private agents, who actively offer bribes to circumvent public policies and process for competitive advantage and profit. Beyond bribery, public office can also be abused for personal benefit through patronage and nepotism, for example, the theft of state assets or the diversion of state revenues
This refers to the obligation to demonstrate that work has been conducted in accordance with agreed rules and standards and the official reports fairly and accurately on performance results. Implied in the above definition are the indispensable roles of due process, transparency, and feedback in achieving accountability.
The control comprises those elements of an organisation (including its resources, systems, processes, culture, and tasks) that, taken together, support people in the achievement of the organisation’s objectives.
This means the whole system of controls, financial and otherwise, established by the government in order to carry on their activities in an orderly and efficient manner, ensure adherence to government policies, safeguard public assets and secure as far as possible the completeness and accuracy of the records. It includes organisation, segregation of duties, physical controls, authorization and approval, arithmetic and accounting, personnel management, and management controls.
This is 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.
Financial Control Establishments
This refers to public sector statutory establishments that are responsible for ensuring effective and efficient control and utilisation of public finance. They include: Enugu State Ministry of Finance, Office of the Auditor-General of the State and Enugu State House of Assembly (Public Accounts Committee).
This represents the Staff of Enugu State Ministry of Finance that are needed to provide necessary information and responses, as a result of their direct participations in the main activities of the establishment.