IMPACT OF ACCOUNTABILITY ON PUBLIC SECTOR FINANCIAL MANAGEMENT IN NIGERIA (A CASE STUDY OF SELECTED LOCAL GOVERNMENT AREAS OF LAGOS STATE)
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IMPACT OF ACCOUNTABILITY ON PUBLIC
SECTOR FINANCIAL MANAGEMENT IN NIGERIA (A CASE STUDY OF SELECTED LOCAL
GOVERNMENT AREAS OF LAGOS STATE)
ABSTRACT
Fiscal
accountability is central to public financial management. Public financial
management cannot be realized without effective fiscal accountability. The
study examined impact of accountability on public sector financial management
in Nigeria (a case study of selected local government areas of Lagos state). In
specific terms, the study investigated the extent to which regulatory laws,
compliance reporting and legislative control influence financial management of
the Nigerian public sector. The study sampled seven public agencies in Nigeria
namely NDLEA, NERC, NOA, NDIC, BPE, DMO and NPC. Questionnaire was used to
collect data from respondents, who are accountants and auditors in selected
agencies. The descriptive statistics and multiple regression analysis were
employed for the analysis of data. Findings revealed that regulatory laws,
compliance reporting and legislative control strongly drive financial
management of selected agencies. The study suggested amongst others that
Government should put in place strategic
structure that enables building of fiscal accountability framework and make
enabling regulation that protect whistle blowers and creating enabling environment generally for fiscal
accountability. These truly have the capacity to enhance financial management
in public sector in Nigeria.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Financial
management focuses on decision making about the use and management of the
finances of an organization or corporation. Financial management is a subset of
managerial activities that concentrates on how to plan and control the
financial resources of an organization. Financial management also involves the
sourcing and optimal utilization of funds for the smooth running of an
organization. Financial management centers on the identification of possible
ways of maximizing the net-worth of an organization, allocation of scarce
productive resources between competing demands and execution of strategies to
attain the stated objectives of such organizations. To this end, public financial management can
be describe as process of sourcing, controlling, planning, coordinating,
organizing and directing the financial resources of government’s parastatals.
These parastatals can be federal ministries, state ministries, local councils,
government agencies and departments.
The local
government is the lowest level of government which is closest to the people.
Local government in this present dispensation emerged from the pre-colonial
transitional system of government which was highly localized according to
peculiarities of the state. The local council represents the basic unit through
which any nation administers her people at grass-root level. The implication of
its constitutionally guaranteed governance structure and its proximity to the
people necessitate the need for accountability in financial management, and their
norms in governance, more evident at this level (Adiogu, 2013). But contrarily, local governments in Nigeria
are often recognized as a breeding ground for barefaced corruption and near
absence of accountability in the conduct of public service. Local government
council however, instead of discharging their functions as development centers
to the people at grassroots, acquired notoriety for corruption, fiscal
indiscipline and gross financial mismanagement. Agbo (2012) maintained that
lack of integrity; accountability and transparency at the local government
level constitute a set-back to the wellbeing of the people. In addition to
these, stealing, embezzlement, nepotism, misappropriation of public funds,
ill-use of public assets and circumvention of financial and non-financial
issues has become customary in Nigerian local governments.
Public
accountability is a characteristic of a modern-day democratic society.
Accountability in the public sector across the globe is given maximal attention
because public fund is in the hands of the government. Those in authorities
assume fiduciary status with attached responsibilities requiring them to render
stewardship accounts to those for whom the authority is held in trust (Haruna,
etal, 2015). Public officers are expected to be accountable by demonstrating
effective use of public assets and funds in the discharge of services and
pursuit of government’s objectives.
1.2 STATEMENT OF
PROBLEM
The public
sector is saddled with the responsibility of harnessing public resources,
collection of monies (revenue) and their expenditure for the betterment of the
populace. The principle of accountability is based on trust, faith and
resources vested on the management of an organization (private accountability)
or government (public accountability). There is a strong need for public
officers that are accountable to the general public to deliver complete,
relevant and accurate information about the management of public funds. The
public sector which is regarded as the manager of public resources, statutes
and mechanisms for national development has lost its goodwill in the eye of the
citizenry due to lack of proper accountability.
Haruna,
etal, (2015) alluded that government ministries, agencies and departments are
not duly adhering to the tenets of accountability. This assertion conforms to that of Akinbuli
(2015) who stated that the duties and trust vested on public officers are not
effectively and efficiently performed. There has been disrespect for
accountability in public sector. Majority of public parastatals in Nigeria do
not keep good records of account and they rarely publish annual reports and
audited financial statements as at when due. Financial mismanagement,
inefficiency, ineffectiveness, maladministration and negligence have been
identified by scholars as the characteristics of public sector in Nigeria.
The problems
associated with lack of accountability in public sector financial management especially
in local government councils are employment racketeering, corruption in
procurement, siphoning of funds meant for infrastructural development into
personal bank accounts, stealing of public assets, illegitimate internal
revenue collection, award of contracts to wrong contractors, friends and
families, payment of salaries and allowances to ghost workers, lack of
documentation of overhead expenditures, misappropriate of funds by council
executives for illegitimate personal
gains, destruction of documents that are
not favorable to the council chairman or officer-in-charge to avoid prosecution
after service, nepotism, etc. Most of government parastatals are not totally
complying with the principles of accountability. Little wonder, Appah (2012) averred that
accountability is very difficult to achieve in the Nigerian public sector.
To this end,
this study examines the impact of accountability on public sector financial
management in Nigeria – a case study of some selected local government areas of
Lagos State.
1.3 Objectives of the Study
The main
objective is to examine the impact of accountability on public sector financial
management in Nigeria.
The specific
objectives of the study are:
To examine the impact of regulatory law on
financial management in public sector in Nigeria.
To assess the impact of legislative control
on financial management in public sector in Nigeria.
To investigate the impact of compliance
reporting on financial management in public sector in Nigeria.
1.4 Research questions
The
questions of interest in the study are:
To what extent has regulatory law
influenced financial management in public sector in Nigeria?
To what extent has legislative control
influenced financial management in public sector in Nigeria?
To what extent has compliance reporting
influenced financial management in public sector in Nigeria?
1.5 Research Hypotheses
The research
hypotheses guiding the study are stated as follows:
H01: Regulatory law has no significant
impact on financial management in public sector in Nigeria.
H02: Legislative control has no significant
impact on financial management in public sector in Nigeria.
H03: Compliance reporting has no significant
impact on financial management in public sector in Nigeria.
1.6 Operationalization of Variables
The study
examines the impact of accountability on public sector financial management in
Nigeria. Accountability represented by regulatory law, legislative control and
compliance reporting on financial management in Nigerian public sector. The
dependent variable is financial management and the explanatory variables are
regulatory law, legislative control and compliance reporting. The functional
form of the model can be expressed as:
Y=f(X)…………………………
(1.1)
Y=f(X1, X2,
X3)…………….. (1.2)
Where:
Y= Financial
management
X=
Accountability, proxied as regulatory law (X1); legislative control (X2) and
compliance reporting (X3).
Model One:
Impact of Regulatory Law on Financial Management
Y=f(X1)…………………………
(1.3)
Y=β0 + β1X1+
µ……………… (1.4)
Model Two:
Impact of Legislative Control on Financial Management
Y=f(X2)…………………………
(1.5)
Y=β0 + β1X2+
µ……………… (1.6)
Model Three:
Impact of Compliance Reporting on Financial Management
Y=f(X3)…………………………
(1.7)
Y=β0 + β1X3+
µ……………… (1.8)
1.6 SIGNIFICANCE OF
THE STUDY
This study
through its findings will help to identify the possible factors attributable to
improper accountability in financial management in the Nigerian public sector.
It is equally expected that the study will provide relevant suggestions that
will improve the stability, effectiveness, efficiency and service delivery of
public sector in Nigeria.
The study
will be of substantial benefits to accounting practitioners as it will help
them improve on their routine work and as regard the effective management of
the finances of their respective parastatals. Financial analysts will find this
work invaluable as it serves as a basis for advising their clients on
investment decisions.
Furthermore,
this research work will propel the management of local government councils,
state and federal ministries, agencies and departments to formulate policies
that will enhance the process of accountability, transparency and probity in
their operations. It will also assist various agencies established by the
government in fighting corruption within their parastatals. Students will
equally find this study as a guide in their future research undertakings on the
subject matter.
1.7 SCOPE AND LIMITATIONS OF
THE STUDY
This study
examines the impact of accountability on public sector financial management in
Nigeria by prioritizing on selected government areas of Lagos State. Five local
government areas of Lagos State were selected as case study and they include
Alimosho LGA, Badagry LGA, Kosofe LGA, Eti-Osa LGA and Lagos Island LGA.
The
limitations encountered in the study are time constraint, cost constraint and
unwillingness of respondents to provide the necessary data.
The time
allotted to carry out this study is relatively short considering other academic
engagements of the researcher. Due to paucity of funds, the study’s coverage
was limited to only five local government areas of Lagos State. Furthermore,
the respondents, who are account officers in the selected LGAs were somehow
unwilling to participate in the survey exercise. Nevertheless, a robust and
fact-finding research is carried out.
1.8 DEFINITION OF KEY
TERMS
The
definitions of key terms are presented as follows:
Accountability
This refers
to a relationship based on the obligation to demonstrate and take
responsibility for performance in the light of agreed expectations.
Financial
Management
This is
concerned with making decisions about the provision and use of a firm’s finances.
It is a managerial activity that centers on planning and controlling a firm’s
financial resources.
Public
Sector
This refers
to the fraction of the economy that is controlled by the government. It further
includes the organizations, ministries, departments, parastatals and agencies
established by the government.
Local
Government
This is the
third tier of government in Nigeria. It is the government at the lower level
that controls the local affairs of the people at grassroots levels.
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