The Impact Of Financial Management In Controlling Fraud In The Local Government System

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The Impact Of Financial Management In Controlling Fraud In The Local Government System


Abstract


This research work was aimed at studying the Impact of Financial Management in Controlling Fraud in Olamaboro Local Government Council. The objective of this work is to provide realistic strategies on how the resources of the local government can be effectively controlled so as to avoid fraud and misappropriation. The researcher used both primary and secondary methods in collecting data. Analysis of the data was done through the use of simple percentage method for easy understanding. It was revealed after the investigation that effective financial management and control is very necessary for good governance in Olamaboro local government area. And for this to be possible, there must be accountability for any money spent. At the end, the researcher also made the recommendations that there is need to appoint competent staff to ensure that appropriate records such as balance sheets are kept and updated, and that the need for the internal and external auditors to work together cannot be over emphasized.


Chapter One


Introduction

1.1 Background to the Study

The question of financial control and management or Accountability has received a lot of attention in all governments of the world. Nigeria right from the colonial period in particular towards the attainment of independence also devised a way of controlling government finance.

There is no way public sector especially that of local government area can operate without adequate finance. It will be needed to satisfy the aspirations of the masses.

Government is saddled with the responsibility of providing security of lives and properties, educational services as well as construction of roads and bridges. These and many other services required that a lot of finances are needed and are generated to be spent on doing every thing for them but failed to realize that government resources are limited while the societal needs are unlimited.

However, there is a need to manage the limited resources so that social expectation can be met. Today, that desire to get rich quickly among the political administrators and the top officers of local government is a shameful practice that subjected them to defraud local government financial resources careless spending of public fund.

Besides, the act of accounting or giving bribes and 10% kick back, tips, embezzlement, misappropriation tax evasion, over-invoicing under invoicing and all sort of fraudulent practices is the general observation and complaint of the public. These raised the need for major central and management of financial resources.

To this end, financial management is another effective tool that can limit misappropriation, embezzlement and all such fraudulent practices especially in local government administration.

People’s fraudulent act can only be controlled through effective financial management according to Pandey (1979) financial managements is that management activities which are concerned with the planning and controlling of the firms financial resources.

Bagaji (2002), defined financial management as a liability which entails the establishment of a pattern of control over receipt and expenditure so that public funds can be used for their purposes.

Effective financial management is the same answer for prevention of fraud, embezzlement and misappropriation of funds.


1.2 Statement of the Problem

It is observed that the account of Olamaboro local government is not prepared in accordance with the rules and regulations (constitution). Non-payment of revenue into government account, fraud and executive embezzlement is rampant. Citizens of Olamaboro local government area itself were complaining of abandoned projects not executed and the local government also in the same way, complains of inadequate funds to meet up with the obligations. It is on this note that the researcher wishes to see if financial management could prevent fraud in Olamaboro local government area and ensure effective financial management in controlling local government financial resources.


1.3 Objectives of the Study

  1. To ascertain whether accountability and transparency has put to check the circumvention of due process in financial and non-financial activities of the local government council in Nigeria.
  2. To ascertain whether the inhabitants of local government council have benefited from the proceed of accountability and transparency through the improvement of social amenities.
  3. To ascertain whether the accountability and transparency have affected the official and non-official financial behavioral attitudes of council staff in Nigeria..

1.4 Significance of the Study

  1. The current study will be of importance in nature to control fraud in Olamaboro local government
  2. The study will provide financial information for the management to take quick decision where possible
  3. The study is going to be useful for planning and budgeting during the year
  4. It will equally be useful to evaluate the effort of local government area in preventing fraud among the officers

1.5 Research Questions

  1. Could financial management be effective in controlling fraud in Olamaboro local government area?
  2. What are the strategies used in controlling fraud in Olamaboro local government area?
  3. Why little generation of funds or revenue in Olamaboro local government area?
  4. What are the causes of fraud in the local government area?

1.6 Scope of the Study

The study is carried out to analyze the effects of financial management in controlling fraud in a public sector. The current work covers an aspect of resources control, fraud prevention and especially treasury management.

The study will be limited to Olamaboro local government headquarters especially in the treasury department.

However, the result shall be generalized on the entire Olamaboro local government area and all the local governments in Nigeria. The study covers the entire staff of treasury department of Olamaboro local government area who are responsible for policy execution. It examines the causes of fraud, the techniques for controlling it and the level of staff involvement for the 2013-2014.


1.7 Definition of Terms

Financial Management:

Pandey (1981), defines financial management as that managerial activity which is concerned with the planning and controlling of the firm’s financial resources.

Management:

Nwachukwu (1988), defines management as getting things done through other scientifically defined coordination controlling of the organization resources.

Finance:

Inegebeneber and Agodudu (1995), defined finance as concerned with cash or resources for purchasing goods

Fraud:

Aliyu (2002), conceptualized fraud as deception or cheating in one way or the other, which is not acceptable by law.

Control:

Johnson (1991) defines control as the process by which managers ensure that resources are obtained and used effectively in accomplishment of a goal.

Financial Control:

Abubakar (1992), defined financial control as ‘’the institutionalization of administrative and statutory measures to ensure that appropriate funds are spent according to set down rules and regulations, minimization of waste, checking dishonesty and extravagance and the promotion of economy and effectiveness in the conduct of the financial activities of government.

Impact:

For the purpose of the work, impact means effective change either negative or positive

L.G.A:

An abbreviation that connotes Local Government Area

Public Sector:

Basu Rumri (2001) defined public sector as the arm of government policies and actions.

Financial Resources:

Simply means cash or money or revenue of a local government for financing capital and recurrent project.


1.8 Organization of Study

The project is limited to the Impact of Financial Management in Controlling Fraud in Local Government Area. with particular reference to Olamaboro Local Government Area.

The study is organized into five chapters;

  1. Chapter one is all about general introduction or the background of the study, statement of the problem, objectives of the study, significance of the study, research questions, scope of the study and definition of terms.
  2. Chapter two talked about literature review, concept of fraud, financial management in public sector, curbing fraud through financial management, expenditure in public service and its control through financial management, expenditure in public service and its control through finance in Olamaboro local government area, and the tools of financial management.
  3. Chapter three dwells mainly on research methodology, design, method of data collection, population and sample of the study instrument used in data collection and method of data analysis.
  4. Chapter four comprises data presentation, analysis of data and discussion of findings.
  5. Finally, chapter five as usual, focuses on summary, conclusion and recommendations.

Chapter Five


Summary of Findings, Conclusion and Recommendations

5.1 Summary of Findings

The following findings were made from the hypotheses tested.

  1. Local government council has adopted accountability and transparency as a good check with the helpnof due process in financial and non-financial activities which is capable of producing desired result
  2. The inhabitants within the local government council have benefited from the proceed of accountability and transparency in improvement of social amenities.
  3. The process of accountability and transparency has affected the official and non official financial behavourial attitudes of council staff in Nigeria.

5.2 Counclusion

Despite the likelihood that the introduction of EFCC, ICPC and due process in the system of government for proper accountability and transparency in financial management of Nigerian local government council. The management of the local council needs to meet up with a lot of measures in place for proper accountability and transparency.

These include the following:

  1. The officials of the local government council should Endeavour to adhere properly to the procedure established by them for such control of council fund.
  2. The staff of the council should be adequately motivated to detach their mind from any corrupt practices.
  3. The council officials (especially the chairman) should be audited by the external auditor yearly before they vacate from their office for proper accountability and transparency.
  4. The council should make sure that the revenue collection of it should be contracted out; proper returns should be made by the agent.
  5. Training and re-training programmes and seminars should be organized periodically for the members and staff of the council to increase their moral and ensure efficiency and effectiveness in doing their work.
  6. The research work was painstakingly conducted to educate people in the importance of proper accountability and transparency is all about. There is need for proper supervision of the council staff and officials to ensure that, they are efficiently and effectively monitored and managed in line with the constitution adopted for the local government council in the country.
  7. This research has gone further to discourage any council that have a weak internal control system rather the councils should employ more dedicated and capable hands to argument the existing ones.

5.3 Recommendations

After more careful evaluation of transparency in financial management and accountability in Nigerian local government council and having seen the adverse effect of improper accountability in the government system, to remain silent over these will endanger the rapid development of property in the local government council in the country.

In the light of this, the following recommendations were made based on my finding during this research work.

  1. First and foremost, the recommendation is to advice readers to conduct further research on this topic because the findings so far are based on the data collected and analyzed. Therefore, this research should not be regarded as sacred.
  2. The accounting working system of the council should be computerized, since most of the systems are done manually.
  3. There should be adequate sensitization through workshops, seminars and lectures on the need for transparency and accountability in the government system.
  4. The researcher equally recommends that the staff employed to man sensitive position like the cashier, accountant, secretary to mention but a few, should be qualified with no qualification less than B.SC or HND in the relevant professions.
  5. The government should build an in-house ICPC, EFCC and due process office in all the local government councils. This will go a long way to deter any fraudulent practices which can lead to improper accountability and transparency in the system.
  6. The state government in conjunction with the federal government should make sure that the accounts of the local government are audited periodically and monitored by them. This will go a long way in reducing corruption in the society. Finally, the salaries and other fringe benefits of the staff of the council should be paid as and when due in order to reduce any fraudulent act practices and bridge the gap for an effective and efficiency transparency and accountability in the government system.
  7. The conclusion drawn from this study should not be considered to be final. There is need for further research, other local government council; Nigeria in this field investigates more on proper accountability and transparency in the government system.

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