Management Of Local Government Finance

Project and Seminar material for Public Administration

Abstract

This research is aimed at examining ‘’The Management of Local Government Finance With particular reference to Kabba/Bunu Local Government Area of Kogi State’’ The research work is divided into five chapters. The researcher used both primary and secondary sources of data collection. In analyzing the data, the use of simple percentage method was adopted for easy understanding. It was revealed that despite the statutory allocation from both federal and state governments as well as internally generated revenue, the local government still experienced persistent inadequate finance. In view of this, the researcher recommended that the local government management should try to be more inward looking by focusing attention on the possibility of exploiting various abandoned means of raising fund. This will reduce heavy dependence on the federal and state grants.

Chapter One

Introduction

1.1 Background of the Study

Local government in Nigeria today can be defined as a government at the grass root level exercised through representative councils instituted to carryout specific power within the defined area.

The National Guidelines for the reform of local government (1976) provides that one of the aims of creating local government in any organized society is delivery of goods and services close to where people live to many people, including scholars. This objective constitutes the most important indicator of success or failure of any local government. For example, when a given locality has an outbreak of strange disease, their first point of call, is the local government dispensary or clinic; when there is insecurity of farm imputs like fertilizer, insecticide and tractors, the farmers will rush to the local government Agriculture department. When the building and roof of any primary school get blown off, you see the school headmaster and parents going to the local government education authority to complain. When feeder roads within some villages get washed by persistent rainfall, people of the community take their complaints to the local government with wider range of functions and responsibilities.

The federal government has been so enthusiastic about local government since 1987. Because of the Federal Government’s commitment to the development of the grass root level, various agencies were established to assists local government in promoting the much needed development. Such agencies include the Directorate of Food, Roads, and Rural Infrastructure (DFRRI). Agricultural Development Project (ADP). River Basin Authorities. Primary Health Care Programmes.

To enhance rapid development at grass root level, the Federal Government has made some fundamental change in local government administration and place a lot of priority on their viability. Autonomy is given to local government and also the introduction of direct and improving funding system in local government.

One wonders if our local governments have measured up to people’s expectations in terms of service delivery, revenue generation and account ability which are variable tool for efficiency management.

The delivery of goods and services which is very crucial to the maintenance of people’s confidence in their local government requires the proper maintenance of up to date accounting records on the goods and services rendered of which this project intends to examine.

The project is therefore divided into five chapters. The first chapter is introduction to the study generally and second chapter reviewed of the related literature respectively. The chapter three gives an insight on how these data were collected from which are analysis, summary, conclusion and recommendation were made. The last two chapters gives the analysis of data collected. It unfolds the real practice of accounting and management of finance of the local government chosen as the case study.

1.2 Statement of the Problem

One of the aims of local government is to promote the economic and social welfare of the people through the use of appropriate economic policies. The Federal Government in recent years granted financial autonomy to Local Government in the federation as a sign of recognition of the implementation of our national development like other tiers of government. In Nigeria, local governments are faced with some problems especially in the management of finance. This study is borne out of the observation that Kabba/Bunu local government in particular finds it difficult to meet its financial obligations inspite of the statutory grants and other sources of revenue. It is disturbing to note that such a local government with abundant sources of revenue and manpower to its advantage with facilities still experience persistence inadequacy.

What is responsible for this problem of not meeting their financial obligations thereby having persistent inadequate finances?
What can be done to check such factors that are responsible for the problem?

The statement of the problem in respect of this study is to thoroughly examine the financial activities of Kabba/Bunu local Government, to determine if the mechanisms for checks and balances in the management of local government finance instituted by the federal government are complied with; is the local government revenue sources adequate to finance its expenditure?

1.3 Objectives of the Study

The study is concerned with pin pointing how public sector such as local government which is the third tier of government in Nigeria can harmonized the available funds or finance at its disposal to achieve the best out of its that is appraising the financial management in public sector

Having in mind that local government occupies a very important position especially as regards to its dealing with people at grass roots, the primary aims of local government is to effectively provide basic essential and social type of services to be governed.

Therefore, the study is aimed at appraising financial management in local government especially where additional responsibilities continue to come up.

It is in this regard that I have undertaken to research on Kabba/Bunu local government so as to ascertain the following:

The reviewing of the internal control system of the local government.
The study of the procedure of book keeping and accounting system of the local government.
The management of the local government fund taking cognizance of the civil service reform as applicable to local government as well as the requirement of the financial memorandum.
Mode of accounting and authorizing expenditure by the local government and mechanisms of actual and estimated expenditure.
The sources of local government fund
The method employed in collecting fund due to the local government and effectiveness thereof.
To expose the minds of students in particular and the public in general to have a sound background and financial management as discipline in the local government administration.
To provide a useful information to the entire management of Kabba/Bunu Local Government.

1.4 Research Questions

Without financial management, can the local Government achieve its goals?
What is the importance of financial management to the Local Government?
What are the achievements of local government through financial management.

1.5 Significance of the Study

It is intended through this study to draw attention of the interested persons, local government and accountants in particular to know how local governments are being financed and effective ways by which these finance are generated and managed.

Also, due to the recent attention given to local government, this project is timely and useful to everybody particularly the project will assist local government staff and administration to appreciate the needs for maintenance of reliable and up to date financial records.

It is also to emphasise the need for further training so that the management of funds will not be blamed on the training programme of the local government.

1.6 Scope and Limitations of the Study

This project is based on empirical evidence of historical data on financial management Kabba/Bunu local government. The study also considered the revenue generated both internally and externally and its application.

The budgeting and budgetary control measures of the government was also looked into as well as internal control systems applied by the local government as regards the system and procedure of book keeping and accounting and the level of authority of approval of expenditure within the financial regulations of the local government.

1.7 Limitations of the Study

Due to large number of local government in the country, the study is limited to only one local government council considering their various locations and access to the data analysis and presentation.

Time and financial constraints are the major limitations of the study. Though, Kabba/Bunu local government was chosen due to its familiarity which the researcher has so as to get access to the data required the problem of relevant data was encountered.

Finally, the project will be limited to the data obtained from the treasury, department of Kabba/Bunu local government headquarters, interview with top management official and observation as well as the references and journals obtained from the local government, public library and the school (Kogi State Polytechnic, Lokoja) Library.

1.8 Definition of Terms Finance

Finance:

Is a body or principle and theory dealing with arising, investing, managing and returning funds by individual and organization. It is a good determinant for any successful organization.

Local Government Treasury:

Means the department of local government set up to administer the finances of the local government under the Finance and General Purpose Committee.

Treasurer:

Is the head of finance department (treasury) and chief adviser to the council on financial matters.

Finance And General Purpose Committee:

This is established in accordance with the provision of state edict to manage and control the financial affairs of the local government.

Expenditure:

This term means to spend therefore, expenditure in the context refers to a situation whereby the government utilize the various forms of revenue collected to provide social and economic services to the people in an efficient manner.

Budgeting:

This is the statement of the proposed expenditure and expected revenue of the government during a period of time usually one year.

Tax:

This is a compulsory levy on both the human and materials resources of nation, collected by the government from private, individuals, companies and groups for meeting the cost to public services.

Head/Sub-Head:

This is the system of numbering or otherwise designation account in a manner that facilitates identification and quick access to required information.

Chapter Five

Research Findings, Recommendations and Conclusion

5.1 Summary of Findings

The subject matter of this research is the problems and prospect of contemporary local Government finance/Management in Nigeria with a particular reference to Kabba Local Government Area: A number of interesting and thought provoking information were gathered in this study.

For effective diagnosis of this study there were hypothesis formulated which acted as guides. The results of these hypothesis and other findings are hereby presented.

There was an ample that the greater number of local governments employees are unqualified.
It was discovered that local governments receive grants from both the state and federal government.
That the grants are not enough in financing the expenditure projects of the local governments. This was buttressed by the fact that even though the local government receives grants and allocation from federation account. It is still chained in financial problems. At least it has not been able to pay its employees for almost two years now.
Kabba Local Government over on funds from hiher levels. That is it usually over depends on the sate and federal governments for sponsorship. This has bill affected its operations as external funds are only provided as supplements to internals generated ones. This equally has put its status as an autonomous entity into danger
That Kabba local government has made been unable to tap all internal revenue generating opportunities to argument its overall revenue base for enhance results. This is because of its over-dependence on statutory allocation and grants from the state and federal governments.
The study also unveiled that even other taxes to be collected by the local government on improve its financial base to an admirable extent.
It was equally detected that the management system of Kabba local government is effective in operation.
That the employment of low caliber staff has no significant negative relationship with the efficiency and productivity of the local government.
Owing to increased statutory responsibilities of the local government, an increase from 201-251 in the federal government statutory allocation of the federation account would not be enough to defray a reasonable proportion of such responsibilities.
There have been case poor financial planning and control. These have resulted in the failure of the local government to curb-excess expenditure, which is attributed to poor budgetary control, infact, Kabba Local Government performance in the areas of revenue generation and expenditure administration leaves much to be delved.

5.2 Conclusion

Given the current political and financial autonomy enjoyed by the local government in Nigeria and it s increase statutory responsibilities, it is of a great essence that Kabba Local government look in words for the generation of necessary fund require to finance the numerous expenditure programmes.

Though statutory allocation from the federating account has been increased form is/-20/1 it should not be relied upon as the only source only been as supplementary to internally sensitized funds. Continue dependence on statutory allocation and other forms of external financing will not only result in poor performance of assigned functions but would also betray the autonomous status granted the local government by the 1989 constitution and refunded in the 1992 budget the federal government of course local government system is still young. Nevertheless, local government financial management has good prospects of future development through the ranting of full autonomy to the local government to the best vehicle for rural development local government management should year towards including management management into its managements system. This would ensure that the financial transactions of local government are not only properly recorded and reported but that the will be analyzed in a manner which would aid decision making by both they executive and legislature.

5.3 Recommendation

In realization of the in estimate value of the improper finance/management system of local governments in Nigeria. I hereby offer the following recommendations.

Efforts should be intensified in the collection of revenue and continuously seek new avenues for local taxation especially federal and state cannot provide sufficient finance for the needs of the local government given the rising cost and expansion in the activities of this level of government.
The local government to return to the use of its traditional revenue sources such as properly rates or tenements rates, pool tax, licences etc.
Loan financing should be applied to capital projects.
The Internal finding of the local government could also be improved by its engaging more than ever in commercial ventures. Such ventures apart from their being self-sustaining financially would yield reasonable returns to the local government manually. Thus it can do by opening local raft centres cinema hoses, community viewing centres, building of perks, public toilets civic or other recreational centers, building of markets, low cost houses for commercial purpose, special nursery schools moss transit services etc.
Emphasis should be placed on the recruitment of qualified experienced, property selected and well trained personnel for the assessment, collection and general administration of local taxes and rates.
The Local government on also improve the planning and control of available fund by designing a sound system of budgetary control installation of a system of internal audit exit to check the excesses of revenue collected officers responsible for expenditure authorization and incurrence of behalf of the local government.
There should be projects eve lection and implementation in order to avoid waste, out before any capital expenditure in embarked upon.

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