INTERNAL PUBLIC SECTOR ACCOUNTING AND INTERNAL AUDIT FUNCTIONS IN NIGER DELTA DEVELOPMENT COMMISSION (NDDC)
ABSTRACT: To circumspect and examine Internal Public Sector Accounting and Internal Audit Functions in the Niger Delta Development Commission (NDDC) is the purpose I embark on this research. Ironically, the research was carried out utilizing information from the primary source (Internal Audit Department of NDDC) and information sourcing from the helpful secondary sources from library-like newspapers, journals, textbooks, magazines, and lots more. Information was also sourced from the internet. Furthermore, the literature of references unveiled merits, drawbacks, encouragement, and notable constraints of the Internal Public Sector Accounting and Internal Audit Functions in the Niger Delta Development Commission (NDDC). Most of the revelations formed the anchors of information used. It should be borne in mind that several policies, objectives, and aims of the Niger Delta Development Commission (NDDC) were not practically achieved. This is attributable to a lack of good financial control mechanism, political will, and stilled manpower. Paradoxically, the organization is in no doubt not driven by dedicated manpower that has the development of the Niger Delta at heart as they should.
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CHAPTER ONE
1.0 INTRODUCTION
Accounting generally is to give a history of past events to the end-user of the event on-demand. Paradoxically, associating accounting to the business world as we know it today, readily come to the mind of the listener. Accounting, therefore, relates to identifying, recording, classifying, and summarizing and interpreting of transactions/interested parties. The end-users of the accounting information are enumerated below with some elucidations.
- Owners of the business
- Lenders to the business
- Suppliers
- Government
- Employees
- Prospective investors
- Managers
- Customers
BUSINESS OWNERS
Many businesses are owned by sole proprietors, shareholders, or partners. A sole proprietorship is a business owned by one person and also managed by the owner or in some cases dedicated, in rare cases, to another person to manage-either as a salesgirl or boy or family member. Shareholders are holders of shares in a company registered with the Corporate Affairs Commission (CAC). Usually, two or more persons incorporate a company. Sometimes a company is managed by directors who are shareholders of the concern and in some cases, the directors may not be shareholders of the concern. Partnership business is a business owned by two or more individuals carrying on a business together with the aim of profit-making. Sometimes partners act as directors of the partnership business and manage the same.
Business owners are concerned about the accounting information of the business to know the progress of their business.
Most businesses do borrow money from their banks or private individuals to finance the business. The lenders are interested in the accounting information to ascertain the viability or otherwise (default) of the business to redeem the money (principal and interest) borrowed.
SUPPLIERS
Businesses these days do not operate solely on a cash basis. Some of the business transactions are done on credit. The business customers do supply goods/services to the business on credit. The essence of the accounting information to the supplier is to know if the business can be able to settle its liability or not.
GOVERNMENT
Accounting information in the financial statement is helpful in the provisions of information from which PAYE, Insurance, CIT, VAT, and other taxes are calculated. Government agencies that are responsible for these taxes procure the needed information from the accounting financial statement.
EMPLOYEES
Employees are interested in the accounting information of the business they work, as contained in the financial statement. The representatives (union) of the employees use the accounting information as their anchor to bargain for the welfare of the employees.
PROSPECTIVE INVESTORS
Many investors would be interested to invest their resources in an existing business. Such investors will rely on the accounting information provided in the financial statement of the business to form an opinion on whether to invest in the business or not.
MANAGERS
It is obvious that the business managers needed constant day-to-day information about the outside world, the business operates in and also information about the business itself, to enable them to take decisions on matters that will favor the business. Most of these in formations are provided by the accounting information and other accounting related literature.
CUSTOMERS
One of the users of accounting information is the customers. The concern of customers in a business is to be informed about the liquidity of the business. Most of this information is contained in accounting information- from the financial statement.
Away from general accounting, we shift focus to public sector accounting. Public sector accounting water down to accounting rendered on behalf of the public- namely local, state, and federal governments. Organizations, agencies, and institutions that are not privately owned, are said to be owned by the public. The government of the day runs these organizations, agencies, and institutions on behalf of the public, hence the need for accountability. Certainly, the public would want to know how the government at all levels procure and spend funds to run these organizations, agencies, and institutions. Public sector accounting readily has an answer to that.
Some of the public sector organizations in Nigeria today are public corporations and industries, health authorities, departments of the federal government, local authorities, tertiary institutions, intervention organizations like Niger Delta Development Commission (NDDC), and so on.
The known common objectives of these public sector organizations are stewardship, systematic records maintenance, and financial control. Public money procured through taxes, grants, loans, and other sources on behalf of the public is accounted for, indicating lawful and adequate use of the money.
Systematic records are maintained by public sector organizations. The purpose of these records is to estimate financial requirements and assessment of the efficiency and effectiveness of the organization to judiciously use the financial resources at their disposal, for maximum benefits.
Financial control in the public sector is imperative to achieve the required productivity and sustain general satisfaction, as money is channeled to the planned budget. Consider a planned public expenditure of N 900B in 2018 with a receipt of N 750B and N150B borrowed. To control such amount requires great financial discipline, still, focus, and total dedication. Proper budgeting and accounting system is totally required for checks and balances. Written internal regulations about income and expenditure patterns and its concomitant accounting procedures and the accounting control mechanism applied are the order of the day in financial control.
FEDERAL GOVERNMENT ACCOUNTING
Different government departments, through fund basis accounting methods, operate federal government services. Government income from different sources like taxes is wired into a federation account. Between 2012 and 2016 N28.58 trillion was wired into the federation account. It is on record that three major sources such as value-added tax (VAT), mineral and non-mineral revenues remitted the N28.58 trillion into the account. VAT source remitted N3.7 trillion mineral revenues remitted N18.15 trillion and non-mineral revenues contributed N6.68 trillion. Different departments usually draw money from the federation account which is used to offset the services they rendered. Different levels of government benefit from the allocation of funds from the federation account to finance the expenditures incurred in the service provided. Political consideration and to a large extent social priorities of the government influence the size and amount of allocation to different departments subject to cash limit.
LOCAL GOVERNMENT ACCOUNTING
Funds allocated to the local government from the federation account and other sources of funds such as fine, levy, grants, and so on are used by the local government to finance its expenditures. Local government expenditures also cover market stalls building, provision of primary health care muno pump water scheme, and lots more.
Furthermore, auditing gives credence to public sector accounting income sources and for checks and balances and greater productivity. To a large extent, an audit of the financial statements results in fraud and error prevention. Auditing procedures ensure that laid down accounting rules and standards are adhered to, and errors corrected. We have many types of audits such as statutory audit (this is stature imposed audit as the law required the same), private audit this is an audit not imposed by laws and it is guided by engagement letter). Management audit also known as operations or efficiency audit this audit covers management efficiency and effectiveness), interim audit (this audit is carried out before financial year-end ad required by management or the concern financers like investors or bankers). Internal audit (this is an audit employee of the concern conducted, where the internal control mechanism of the concern is adhered to); and continuous audit (audit work is conducted on a day-to-day continuous basis in regular intervals). Financial and regularity audit (financial audit ensured that financial and accounting procedures and controls are in place and efficient in operations, and regularity audit ensures that expenses are performed on service so approved, statutory) and effectiveness audit (this audit is concerning the examination of the program and policy and objective of the company, and whether the sane have been adhered to), and value for money audit (this is examining the economy, effectiveness and to a large extent efficiency of the management performance.
PUBLIC SECTOR ACCOUNTING USERS
The users of government accounting are divided into internal and external users.
INTERNAL USERS OF PUBLIC SECTOR ACCOUNTING
The internal users of government accounting are the employees, trade unions, subordinates, and management of various ministries.
Government employees use the public sector accounting to bargain for salaries and welfare increase for the workers. The trade unions of the public sector like Nigeria Labour Congress (NLC) also use the public sector accounting to bargain for the employee’s welfare and salaries increase and other benefits. The heads of various departments and ministries of different strata use the public sector accounting for planning and control of their various units.
EXTERNAL USERS OF PUBLIC SECTOR ACCOUNTING
Some of the users of public sector accounting are the general public, financial institutions, local and foreign investors researchers, other government, contractors and suppliers, and regional groupings. The general public uses the public sector accounting to examine the performance of the government of the day.
International monetary fund (IMF) banks, International Finance Corporations (IFC), and other financial institutions do assess government capability to wire loans, in the time frame, it was given to its request. Foreign and local investors are interested in government accounting information to assess government performance to enable them to circumspect the viability of them investing in any of the government projects.
Researchers and prospective researchers would want to rely on the information provided by the government accounting ad a guide for their research project, Other government other than the government reporting to use accounting information of the government to execute resolution, projects and lots more.
Contractors and suppliers are interested in government accounting information. They usually use the government accounting information to know the viability of the government to wire for the goods and services rendered to them and on the stipulated time. ECOWAS, OPEC, ECA, EEC, and other regional groups are highly interested in government accounting information. These regional groupings with the aid of government accounting information, decide on the type of intervention projects they can provide help to any government of their choice.
Niger Delta development commission (NDDC) is associated with the nine crude oil-producing states-in the Southern, Nigeria. These states are Abia, Akwa-Ibom, Bayelsa, Cross River, Delta, Edo, Imo, Ondo, and Rivers. NDDC is an intervention agency established to attend to the needs of the Niger Delta States. NDDC is one of the known Federal government agencies. It was established in 2000 by the president of Nigeria, Olusegun Obasanjo. It has the sole mandate of developing the member states that constitute the commission. Later president Umaru Yar’dua who succeeded president Olusegun Obasanjo as the president of Nigeria established Niger Delta Ministry in September 2008, and NDDC was made a parastatal under the Niger Delta Ministry- and as such NDDC is being supervised by the ministry. NDDC was mandated to develop important infrastructure in the member states and also to educate and train the youths of the member states, so as to checkmate militancy against oil exploration in the region. The establishment of the NDDC was the direct responsibility of the federal government to curtail such hostilities; The agitation centered on environmental degradation, lack of development, unemployment, and total neglect of the region and resource control among others. NDDC was established to address some of the grievances. The commission tried to address some of the mandate covers like agriculture, fisheries, water supply, health, employment, roads, jetties and waterways, housing, and lots more.
In no qualm, the commission is indeed reconstructing damages done by the government of Nigeria and oil-producing companies for over 52 years as a result of oil activities in the regions. NDDC was established on Act No 6 of 2000 under the laws of the Federation of Nigeria. NDDC also referred to as the commission was established as a corporate body with the right to sue and also to be sued on its corporate body name. The commission has a corporate board. The board is made up of the chairman and a representation of each of the nine oil-producing states of the region such as Abia state, Akwa-Ibom state, Bayelsa State, Cross River State, Delta State, Edo State, Imo State, Ondo State, and Rivers State. The members of the board, including the chairman, are appointed by the president and confirmed by the Senate on consultation with the members of the house of representatives. The commission also has an advisory committee that consist the governors of each of the state of the commission. The advisory committee advises the board as well as monitors the activities of the commission. The Act establishing the commission saddled the commission with numerous functions and powers to operate its activities to develop the member states.
It is in the public domain that the commission is saddled with N2.5 trillion debt and needs N1.2 trillion to far-reaching projects that are ongoing. The commission is said to have jettison probity and accountability in its activities. It is a growing concern that some principal directors awarded themselves contracts that worth billions of naira in the last four years of the commission operations. It was alleged that the immediate past Managing Director (Professor Nelson Brambarfa) and the former immediate past executive Director Finance and Administrative (Chris Oyirrindah) were invited by EFCC for withdrawing N2.8 billion in cash within two weeks interval. It is also in the public domain that some of the workers revealed that most of the transactions of conducted by the immediate past executives were irregular and totally carried out outside the known stipulated commission’s mandate. All these financial improprieties compelled the Minister for the Niger Delta (Godswill Akpabio) to suspend payments for all the contracts that were executed by the outgone commission’s management. The minister further directed that payments already made for jobs executed in the last month by the immediate past executives will be subjected to audit and forensic analysis. All these current measures are to determine if the transactions were genuine and record properly kept. It is unfortunate that the commission since inception was unable to execute a legacy project like a specialist hospital in any of the nine states of the commission. Paradoxically, because of financial recklessness, the commission is unable to complete its permanent headquarters at the Eastern by-pass Po Harcourt. The commission still hires N200,000 million rent each year at its current headquarters Aba road Port Harcourt.
1.1 Statement of the Problem
According to Olagunju (2008), public sector accounting is accounting work performed for federal, state, and local governments. Internal public sector accounting in Niger Delta Development Commission (NDDC) therefore, relates to accounting work performed by the employees of the commission on behalf of the federal government. Nonchalant attitude to task by internal public personnel in NDDC is not exempted in the commission. Lapses here and there, and on adherence to laid down procedures of public sector accounting in internal accounting processes results in low productivity and short-comings in service delivery. As reported/published in a local tabloid TOP NEWS about dealings in NDDC ” the lid is being opened on some transactions which were allegedly said to be irregular and outside the stipulations of the mandate of the commission.” This development indicates that the laid down rules of public sector accounting are not followed in internal accounting of the commission.
Furthermore, according to Okezie (2004). An audit is an independent examination of opinion on the financial statements of an enterprise, by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation.” Therefore, an audit is an independent examination of the financial records of the business by the audit. In the words of Cook and Winkle (1976) “Internal auditing is the type of audit examination performed within an enterprise.” The internal auditing of NDDC is not following laid down the procedure into, resulting in weak internal financial control. This study tends to address some of these anomalies to improve or the internal public sector accounting and internal audit in NDDC and to accommodate allowance for imponderables.
1.2 Objective of the Study
This study tends to circumspect, analyze, and suggest solutions for improving internal public sector accounting and internal audit functions in the Niger Delta Development Commission (NDDC)- performance. NDDC as an intervention agency has contributed in no small measure, through projects and training beneficial to the people of Niger Delta states reduced drastically hostilities and disruptions of crude oil exploration and production. This has also contributed to many ways for the development of the Niger Delta States.
Furthermore, notwithstanding that there are internal public sector accounting and internal audit functions in NDDC, the commission still witnesses irregularities and a lack of stipulated accounting procedures adherence. There is a need for the federal government through its supervisory agency (Ministry of Niger Delta Affairs) to stamp out irregularities in the commission. This would be achieved through further research and development of practicable internal public sector accounting and internal audit functions in NDDC. In so doing, reckless spending of funds would be on check and this would lead to the execution of projects, training, and services for the benefit of the Niger Delta States people.
1.3 Hypothesis
The commission impact in the economy of the Niger Delta region is not felt by the majority of the people. This development is as a result of a lack of transparency in the part of the commission’s executives. It is disheartening that it is on record that most of the executives awards the contract to themselves. Therefore, the need to redefine the method the commission performs its operations to encourage inclusive benefits of the commission to the Niger Delta region is imperative.
1.4 Significance of the Study
The significance of this research project is to discuss the issue concerning the role internal public sector accounting and internal audit functions play to the growth and development of Niger Delta oil-producing states and its positive impacts on the people of the region. Not only that the research project offered proper recommendations, paradoxically that will benefit the management of the commission, the region people, and the federal government, which would help to utilize available funds for further development of the region. In a nutshell, the study further offered recommendations that will be of immense help to the internal public sector accounting and internal audit functions of the commission’s officials. It also recommends to the federal government to increase the budgetary allocation for the commission for greater developmental performance. Finally, the study also recommended sanctions in any official found wanting on fraudulent practices. The study stipulates for the prudent management of resources available to the commission for greater productivity and accountability.
1.5 Scope and Limitation
The scope of the research study to be followed is purely the trend of the role relevant and impact of internal public sector accounting and internal audit functions of NDDC in addressing infrastructural, human capital development, and checkmating militancy hostilities and disruption of oil production in the oil-producing states of Niger Delta. Relating to limitations, focus if geared on the performance and inevitable constraint of the commission because of incessant demand of the region’s people, especially due to insufficient funds available to the commission. At present, the commission’s budgeted fund per year is to be N216 billion.
1.6 The Theoretical Framework
The Marxian political-economic approach is viewed. This approach is primarily associated to material conditions. This is so because man’s primary needs are economic. Man’s actions anchor on economic activities. Man’s relationship to life in terms of production, exchange of goods, and services lie solely on the decisiveness of the state. To this end, Mac Weber, Uyacheslav RYBSKOV, Dimitry BILENKIN, Kadt Mars, Vladimir Lenin, and other originators and proponents of the political economy. It shall be borne in mind that emphasis is on historical dialectical materialism. This trend indicates that the present is influenced by the past. Society tends to reach and maintain perfection through co-operation, decision, and innovation.
This study tries to view the history of internal public sector accounting and internal audit functions in NDDC and how the distribution of the commission’s resources affects the material lives of the oil-producing Niger Delta states people. The economic decision by the operators of the Niger Delta Development Commission favors certain privilege classes at the expense of the majority of the people of the region.
1.7 Literature review
The Phenomenology of NDDC
The phenomenon of NDDC has attracted the concern of modern scholars in the globe, Hobbies, and Machiavelli (1774) in Rendell Collins explained human behavior in society as being influenced personal interest relating to competition in material society, full of opportunity, weakness, and threat. In-class theory, Karl Marx stipulated that personal material interest trigger conflict and crises in society. Marx was of the considered view that crisis and conflict in human life are traceable to the controllers of state pioneer, and resources and other members of the society. In no qualm, conflicts and crises usually erupt sometimes because of excessive authority and power domination among some classes at the expense of others in society. Human history is awash with the resistance of domination by a class of the society against others. People usually resist tyranny, oppression, and margination in the society. Hence revolt to tyranny, oppression, and margination in human society is as old as the human race.
NDDC INTERVENTION IN THE OIL PRODUCING NIGER DELTA STATES-ECONOMY
The NDDC is a product of incessant crisis and disruption of the exploration and productions of crude oil in the oil-producing states of the Niger Delta Region. It was established as an intervention agency to address the issue of environmental degradation as a result of crude oil exploration and production in the Niger Delta States. The commission also was mandated to address the issue of development of the region, infrastructural and human capital. The commission assumed the role of intervention frontally. Today the crises, disruption, and agitation occasioned by the negligence of the region are totally reduced. It is noteworthy that the role played by the commission to address the different needs of the oil-producing states of the Niger Delta region is commendable. The commission can do more to pilot the economic growth and development of the oil-producing states of the Niger Delta region as time progresses. It is imperative to say that many view the performance of commission under the supervision of secretary to the government of the federation as adequate, hence the call for the transfer to the ministry of Niger Delta Affairs (NNDA). It is expected that the current ministry (NNDA) of supervision would drive the performance of the commission to the next level of distribution the dividend of the commission to nooks and crannies of the oil-producing states of Niger Delta Region.
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