Financial Control In Public Sector As A Measure For Preventing Fraud And Fund Misuse (A Case Study Of Federal Inland Revenue Service Ilorin)

Project and Seminar Material for Accountancy / Accounting

Financial Control In Public Sector As A Measure For Preventing Fraud And Fund Misuse (A Case Study Of Federal Inland Revenue Service Ilorin)

Table of Contents

  • Title page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of contents

Chapter One


  • 1.1 Background of the Study
  • 1.2 Statement of the Research problem
  • 1.3 Objective of the study
  • 1.4 Significant of the study
  • 1.5 Research Question
  • 1.6 Scope of the study
  • 1.7 Limitation of the study
  • 1.8 Study plan
  • 1.9 Definition of key terms

Chapter Two

Literature Review

  • 2.1 The public Sector
  • 2.2 Difference between Public and Private Sector Accounting
  • 2.3 Accountancy and Financial report
  • 2.4 Frauds and fund misuse
  • 2.5 Causes of Frauds and fund misuse
  • 2.6 Types of Frauds
  • 2.7 Detection and Prevention of Frauds
  • 2.8 The internal control system
  • 2.9 Internal and External audit
  • 2.10 Scope and Internal Audit

Chapter Three

Research Methodology

  • 3.1 Definition
  • 3.2 Method of data collection
  • 3.3 Population and sample size
  • 3.4 Sampling Techniques
  • 3.5 Method of Data Analysis

Chapter Four

Analysis and Presentation of Data

  • 4.1 Introduction
  • 4.2 Data Collection
  • 4.3 Data Analysis
  • 4.4 Analysis of fraud and fund misuse data question

Chapter Five

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • Reference

Chapter One


1.1 Background of the Study

Public sector could be described as the government arm of a country. The three tiers of government in relation to Nigeria include the federal government, the state government and the local government.

Fraud and fund misuse over the year has been a threat to Nigeria economy. The need to prevent it gave birth to financial control system.

Fraud as a conscious premeditated action of a person or group of people with the intention of uttering the truth or fact for selfish personal and monetary gain”

Fraud involves the use of decent and trick and some times highly intelligent cunning and know-how.

The action takes the form of forgery, falsification of documents forging and uttering of signatures and out right.
Fund misuse on its own, occurs in most cases intentionally and it is thus a method of fraud perpetration in most pubic sector establishment.

The need for fraud and fund misuse prevention could be derived from a report fact contained in an extract from the human development report 1994 prepared by the united nations development programme (UNDP) stating that “Developing countries of the world save on estimated $125billion between 1987 and 1994 from reduced military spending but those funds cannot be linked with any development project that can improve the standard of living of their national” what were the fund used for?

1.2 Statement of the Research Problem

In Nigerian today, it’s a fact that accountability in its entire ramification has been unfamiliar to out public sector. This pathetic situation is assumed to be the cumulative effect of various problems confronting “financial control”. In Nigeria Public sector establishment. As a result, this research is being conducted to highlight the problem of frauds and misuses of funds in public sector and the need and significant importance of financial control system in the public sector.

Some of the major problems inhibiting financial control in public sector are as follows: Poor enforcement, procedures, late finalization of accounts, poor enforcement of laid down procedures or financial control, insufficient financial regulations and poor internal control system in various departments.

There is poor number of qualified accountants and professional in other management field to institute sound financial control system and this may be attributed to poor condition of services obtained in the public sector compared with that of private sectors. It is important to note, there is inadequate attention to revenue collection and expenditures resulting in under utilization, incremental budgetary system which encourage accounting officers and other privilege employees to misuse funds and perpetrate funds. There is also the problem of daily up-rise of financial requirements without constant review of a control procedures and existence of antiquated accounting and financial rules procedures development in accounting technology and government spending. The misuse of poor remuneration to public servant compared with other sector encourages inefficiency and fraudulent practices in public sector and poor services to the populace in turn encourage the third parties to perpetrate frauds in public sector.

There factors are problems inhibiting the effective application of both internal and external financial control system in public sector.

1.3 Objective of the Study

The objective of the study are as follows:

  1. To confirm the existence of financial control system in public sector.
  2. To explain the role of internal control system
  3. Detection and prevention of errors, frauds and misuse of public fund are indicated.
  4. To explain the effect of tax office at improving tax collection procedures.
  5. The relevance of auditing for effective control in public sector is explained.
  6. To discuss the importance of auditing in the tax office.

1.4 Significance of the Study

This study has much relevance and implication to the case study, all government ministries and parastatals, private sectors and Nigerian economy as a whole. the terrible affect of funds and misuse of public fund in government treasury leads to a basic set back paramount in public sector today. The set up of Nigeria and other developing countries of the world today is characterized with embezzlement, corruption and gross indiscipline and it’s the concern of every government of developing countries and even develop, countries to institute sound financial control strategy to save their respective economy from imminent collapse. This therefore calls for a study in this area.

1.5 Research Questions

  1. Does financial control has been a major exercise in the public sector
  2. Does fraud involves the use of decent and trick and some terms highly intelligent cunning.
  3. Does adjustment for debtors and creditor are made at the end of the year in order to correct expenses or revenue into account in private sector.
  4. Does public sector provide information necessary for faithful efficient, effective and economical management of a operation of and the entrusted to it.

1.6 Scope of the Study

The study has been majorly carried in Ilorin areas office of federal Inland Revenue Service. The system of financial control of the organization as a whole follows the same pattern with other areas and zonal offices. Reasonable exposures have been made of external and internal control devices applicable in the area office or efficient operation and other relevant financial control system operative in the organization as a whole as far as possible.

1.7 Limitation of the Study

Many problems were encountered during the course of this research work but in which I tried my best in order for the problems not to hinder the effectiveness of this research work.

1. Financial Problems:

But in which I have to sources for more fund from my sponsors.

2. Time Constraints:

In which I rescheduled my program so as to give enough time for the research work.

1.8 Plan of the Study

This study is plan into five chapter, chapter one will consist of introduction and chapter two will cover there view of selected literature, research methodology in chapter three and analysis will be presented in chapter four, the last chapter which is chapter five will contain summary, conclusion and recommendation.

1.9 Definition of Key Terms

The Public Sector:

Could be described as the government arm of a country. The three tiers of government in relation to Nigeria includes the federal government, the state government and the local government each tier of government lies its own role, power, responsibility, as described by the constitution and relevant decree.

Fund Misuse:

This is the most susceptible factor which fraudster usually relies upon when for instance, a figure is not properly written, it can easily be manipulated by fraudsters.

Internal Control System:

The meaning attached to the term “internal control” American institute of certified public accountants is a follows. It is the whole system of controls financial and otherwise adopted within a business to safeguard its assets.

Internal Audit:

Means an independent appraised function established within an organization to examine and evaluate its activities as a services to the organization.


Can be defined as an independent examination of the expression of an opinion on the financial statement of an enterprise by an appointed auditor in accordance with the term of his engagement in the compliance with relevant obligations and profession requirement.

External Audit:

Is an independent observation. The function of and external auditor is to examine the financial statement prepared by the management with a view to express opinion on the truth and fairness of the accounts.

Advance Fees Frauds (419):

This is a situation whereby a person promises another person of a contract already awarded and ask him to pay on advance fee to formalize the contract, thereafter the person disappears.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary

The increasing in government revenue and expenditures today has created the need for better control system.
The effort of government on financial control is aimed at ensuring the success of its set goals and objectives which are constantly being tracked down by frauds and misuse financial control system in the crub the plague of frauds and funds misuse, poor accountability in the public sector has been a major problem record being kept by inexperience accountant are inadequate, thus creating room for most of the frauds in the public sector by both employees and non-employees. This research work has thus been made to highlight the confirmation of financial control in public sector.

The public sector which comprises federal, state and local government does not have profit making as it’s primary motives. It has three major aims, namely,

Legislative, executive and judiciary of which legislature and executive exercise greater control on finance to prevent frauds and funds misuse. Frauds involve use of trick, deceit and highly intelligent cunning and know how to falsify document and outright theft. It is caused by factors such as poor control system, negligence and inadequate training of staff resulting in huge loss to the government yearly.

Public sector accounting, as earlier discussed has been identified to be a major factor in determining financial control efficiency. Its system of accounting is based on quite distinctive institutional structure; provision of information necessary fro faithful, efficient, effective and economical management of resources has been taken to be one of the objectives of public sector accounting and financial reporting. Greater risk has been conferred on accounting officers in ensuring strong control on issues relating to finances in the public sector organization through efficient use of internal checks being an integral aspect of internal control system.

Internal audit in the public sector is concerned with the appraisal of organizational activity which ensured compliance with internal control system and report on the financial activity of the organization and reports on the accountant general of the federation.

Taxation in Nigeria has been an activity of long existence but has been accorded greater priority due to the need for government to generate greater fund through it. Taxation nowadays is an issue of federal and state affairs as a result of Raisman commission of 1958. the federal government under exclusive jurisdiction and minister; the company income tax, petroleum profit tax, while it has concurrent jurisdiction with states over the administration of personal income tax and capital gain tax, forming the major function of the federal collection procedures. The board takes the process of assessment, notification of assessment and collection. Assessment under the board is classified into three government, self assessment (introduced in 1991 budget) and provisional tax are used for relevant tax payers according to the nature of the record kept and professional and or statutory requirement. Assessed tax is conveyed through notification of assessment in cases other than self assessment is payable within stipulated time with the collection receipt for amount paid. It is noteworthy to note that measure such as withholding taxes, tax clearance certificate and interest on late payment are recent measure paid in places to improve revenue generation by the Board inland revenue. Payment procedures in the board control are also being carried out on various branches of the board. Document, such as the vote book, are used for expenditure controls in various offices of the board.
Internal auditor’s acts as watch dog on the organization’s transaction and external auditor act as independent observer of this accounting records of the board.

External audit is being carried out by accountant general of the federation. As regards auditing in the board, tax audit which is examination of tax payer’s record other than the board’s record cannot be over-emphasized. It is basically meant to ensure that correct income is declared and to determine the actual tax payable. It’s frequently being carried out where frauds are suspected and particularly in relation to the newly introduced self assessment programme.

5.2 Conclusion

From the study, it can now be concluded that financial control which includes internal control, external audits and other forms of external control establishing in the public sector are of paramount important in almost every organization.

The importance is such that only by collusion of staff can make fraud and fund misuse possible and that it can only be possible (if at al it’s possible) at a minimum rate before being detected. It’s eventually found out that in cases the best means maximizing return in all public sector organization is to institution a second financial control strategy which will make frauds and funds misuse almost impossible between staff and even third parties.

5.3 Recommendation

The relentless effort of federal Inland Revenue has no doubt been seen in the proceeding chapter for the generation of greater revenue. The following are the problems facing the control effort of the organization and suggested recommendation.

Poor or ineffective accounting system is noted in the Board. Though, the account sections has been putting in it best effort, the board stills needs qualifies accountants to carry out some functions within the board especially in the area offices where there are no.

It is also noted that the staffs of the boards are not adequate. The service board caters for the taxation need of thousand of prayers and thus the board needs more staff to cope with the increasing taxation need of the masses.
Alternatively, adequate fund should be released by the federal government to enable the speedy completion of computerization of the board’s record for the provision of accurate, effective and valuable record. This will hasten and improve assessment progresses.

An internal of five years audit for tax payers filling self assessment returns make the system to be less effective. Audit should be done every two years, at least, during this probation period of the system Bi-annual examination of records. Better incentive should be given to the staffs of the revenue board to ensure their faithfulness. Finally tax clearance certificate should be required from every set of taxable person having a deal with private and public sector establishment including aspiring political leaders.

Suffer tax clearance requirement should be promulgated in Decrees/acts so that they would see tax avoidance and evasion as social stigma.

Adopting of the above requirement will definitively improve the revenue generation ability of the board and it will ensure greater revenue generation from other forms of taxation other than petroleum profit tax which has been the major area of revenue.

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