(A CASE STUDY OF FINANCIAL CONTROL SYSTEM
IN ENUGU SOUTH LOCAL GOVERNMENT AREA)
One of the most researched and
least understood variables of public sector accounting is how the
accountability and stewardship of financial control is conducted. People
have been speculating on how the funds generated are managed but now researchers
have conducted systematic investigation of funds and leakage in local
government revenue system.
Even with this, there is still
an increasing difficulty and doubts in establishing the fact that the revenue
generated are put in good use.
There is also an evaluation of
the source of revenue to the local government, and the impact of financial
control system in the local government revenue system particularly the revenue
collection points where all derivable revenues are kept for safe custody.
Secondly, to find out if really
there is grant from the federal and state government to the local government
areas and how it’s being spent.
Finally to know the reason, the
local government cannot employ their resources in funding projects.
Findings and recommendations
have gone a long way to establish proper financial control system in local
government and it’s improvement
TABLE OF CONTENTS
Purpose of the study
Significance of the study
Statement of the problems
Scope and limitation
Definition of terms
Local Government Reform
Local government accounting functions
Sources of revenue to the local government
Rural development functions
Research Design &
Area of study
Sample and sampling procedure
Sources of data
Procedure for data analysis.
Presentation and Analysis of
Test of hypothesis
Analysis of survey results
Summary of findings
Public sector is that sector of
the economy established and operated by government or agencies distinguishable
from the private sector organized on behalf of the whole citizens.
The public sector is devised
despite the privatization and commercialization of some government agencies and
parastatals; the sector is still large. Almost all the activities in the
public sector have to do with political choice, which plays a vital role in
It is a government accounting.
It is also defined as composite activity of collection, analyzing, recording,
summarizing, reporting and interpreting the financial transaction of government
units. The government either provides services on natural scale or else
redistributes funds, which are managed on semi-autonomous basis.
In Nigeria for instance, public
sector accounting is based on the principal of fiscal federalism. This
implies that the fiscal structure o the government is a reflection of its
federal and political structure.
The Federal Republic of Nigeria
is made up of three levels of government namely Federal, State and Local
governments otherwise known as the three tiers of the political
structure. All the three tiers of government are guided b the
constitution of the Federal Republic of Nigeria form which the government
decides on who gets what and how. Allocation of resources to the three
tiers of government is granted and this is executed through the process of
budgeting. Unique thing about public sector accounting is that legal
instruments demand and delimits the form the financial statement should take;
many a time they follow budgeting classification.
In public sector, we have the
federal government accounting, state and local government accounting
respectively. The accountings in the federal and state level are the same
in that both are made up to the same ministries, parastatals, agencies and
The 1976 local government
reforms and the 1988 implementation guideline on application of civil service
reforms in local government service established a standard or uniform
multi-purpose single tier government structure throughout the federation,
consequently, each local government account system is a replica of the other in
terms of personal position and functions accounting system. Financial
information flow budgeting and budgetary control system approved source of
revenue and general administration significantly, a local government is allowed
only six departments viz: Personnel, Works and Housing and Transport, Health
and Social Welfare, Education, Agriculture and Natural Resources, Financial and
Supplies, Planning Research and Statistical Department, out of the six
departments, only the finance department headed by the local government
treasurer is authorized to collect and keep all the revenue.
According to financial control
management Act of 1958, which charged the federal ministry of finance as the
only government department that is responsible for making the finance of the
federal republic of Nigeria. Financial management control Act 1959 also
empowered the federal ministry of finance to issue finance regulation, which
are binding on other units.
The economics of government has
shown that a government can be described as a group of people statutorily
mandated to generate public funds and convert such funds into social goods and
services (public utilities) so as to bring about socio-economic and political
development in their area of control. The extent to which a government is
able to provide public goods and service depends on the amount of revenue
generated both internally and externally over time. This is why a
government should devote enough revenue generation and improve its committee to
the provision of infrastructural foundation to the development. However,
to carry out its functions and achieve its objective effectively, a government
must be viable. Its total expenditure must be less than its total revenue
so that the remaining revenue may be channeled towards capital profit
In Nigeria the government
income earnings management is such that each tier of government has its own
exclusive source of revenue as spent out in the constitution, with the state
and local government receiving the major part of the annual revenue from the
federal government and the local government as well gets revenue allocation
from the state government purse.
From the above, local
government source of revenue can be derived and classified into two external
and internal. The external source is from the federal and state
government revenue allocation, which are made according to revenue sharing
formally adopted at the time internal source of local government revenue are as
stated in 1979 constitution where the local government is directly responsible
for its revenue policy, strategy, revenue collection and expenditure.
The local government has power
to fix rate and fees payable by the people in its jurisdiction and to determine
how the fees are collected. Although some local governments are more
viable than others in terms of financial base, the full realization of a local
government revenue generation and collection depends on its effective
management. Unfortunately, most local government lose about sixty percent
(60%) of their internal generated revenue that is more than three hundred and
fifty million (N350m) annually to leakage in the collection and management
present. It is not perplexing that in spite of the unalternative salary
structure in the local government system and most repellent working
environment, professionals and unskilled persons still strive to gain
employment in the local government system while those already employed state
anything to remain in service. This is why some concerned and
nonpolitical local government chairmen and other officials to beef up their
local government revenue are usually frustrated by unscrupulous revenue
Most local government however
either by omission or commission neglects otherwise highly viable sources of
revenue while they clamuor continuously for increased statutory
allocation. Within this set-up, it is convincing that the local
government can actually generate and spend more funds on capital project
development if roper managerial concept is adopted by the chairmen and more so
where a stable federal government system is in place.
However, one of the major
reasons for this is the persistent political instability in the country such
that both appointed and affected local government chairmen serve their tenure
of office in a situation of high uncertainty, which neglects careful, planning
and systematic implementation. Still the chairmen hardly know much about
the local government system before their appointment or election and have at
the back of their minds a profit making venture and so they spend a better part
of their times trying to figure out what is happening in their internal revenue
PURPOSE OF THE STUDY
The major aim of this research
is to aid local government and improve on their revenue generation and
collection, to that point where all collection are actually collected and
safely paid into the treasury and hence know how the collected revenue is controlled
or managed. This evaluation will be done in the following ways:
(a)To investigate and expose how and where local government money
leakage in their internally generated revenue and collection process occurs.
(b) To recommend strategies by which local
government can detect and prevent revenue leakage.
(c)To determine also the problem facing local government chairmen
in the control and management of public fund.
(d) To investigate on the accountability for
stewardship and management of funds.
(e)To determine the problem facing the local government on the
(f) To monitor performance and evaluate the
management of public funds in local government.
(g) To provide information that will be useful
for planning and budgeting in local government.
(h) To provide financial information useful for
determining and predicting the economic condition of the government units.
SIGNIFICANCE OF THE STUDY
This research work will be of
great important basically to five groups such as the local government area
under study, other local government areas, the readers, future researchers and
the researcher himself as enumerated below.
(a) This work is of
importance to the researcher because this study is an academic exercise and
part of the requirements for the award of a Higher National Diploma in Accountancy
Department by the Institute of Management and Technology, Enugu.
(b) For other local
government areas with related problems of financial accounting officers to be
aware of how to manage and control the funds of the public without being
questioned in the course of accountability.
(c) The readers of
this project will be able to have profound knowledge of how revenue generated
is managed and why there is leakage of the generated revenue.
(d) It will help the
local government area under study as a corrective device after their area of
deficiency have been highlighted with regard to the generated and management of
STATEMENT OF PROBLEMS
One of the most researched and
understood variables of public sector accounting in the accountability of their
financial control system people have been speculating on how the funds
generated are managed. Only in recent years have researchers conducted a
systematic investigation that yielded useful insight into the funds
The problems they have are:
(a)Whether the source of revenue available to the local government
authority is enough for them.
(b)There is doubt that revenue generated is put into good use.
(c)There is misappropriation and leakage of revenue in the local
(d)At times public doubt if the means of revenue collection is
flexible or not.
(e)An insight will be given into the impact of financial control
in local government development.
(f)There is a particular concern on how the public finance is
controlled. This feasibility study of the financial control system of
local government will critically make an assessment of the methods used by the
chairmen and accounting officers in embezzlement of public funds.
A hypothesis is an intelligent
guess or a conjectural statement of the relationship between two or more
variables. Hypothesis is formulated in this research work to provide an
avenue to the solution to a research problem.
For the purpose of this study,
I wish to test as follows:
H0: The Financial control system
in Enugu South Local Government is not adequate.
H1: The Financial control system
in Enugu South Local Government is adequate.
H0 is the null
H1 is the
This hypothesis will be tested
at the end of this study from the analysis of the data obtained.
1.6DEFINITION OF TERMS
(a) Financial Regulations: these are written
rules laid down by most authorities to regulate their finance.
(b) Fund: A specified amount of money raised for
a particular purpose.
(c) Public Accountability: This means that the
persons charged with, determines drafts and carries out policy in central
TERMS AND CONDITIONS APPLY
For more informations on project materials and more