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PUBLIC FINANCE MANAGEMENT: THE ROLE OF THE LEGISLATURE IN THE 2011 FISCAL YEAR.

Henry Ekpe Ushie

3.1 THE ROLE OF THE LEGISLATURE IN PUBLIC FINANCE MANAGEMENT

Legislative oversight under the Fourth Republic has provided an important new element of

transparency in government and restraint on the executive. Members of the Assembly

surveyed about their roles cited oversight functions as their second priority after legislation.

Issues of parliamentary oversight extend broadly to the Presidency and other departments of

government, the judiciary and even the legislature itself.

During the administration of President Obasanjo, tensions between the executive and

legislative branches prompted considerable efforts to assert the oversight functions of the

Assembly. Members confronted with the presidency in 2002 over the Elections Bill, and in the

same year a substantial caucus (including many from the ruling PDP) took serious steps toward

impeaching Obasanjo, citing an imperious leadership style and failure to adequately consult

with Parliament. While legislators relented on impeachment after the president sought

accommodation, the next Assembly blocked a 2006 bid for an extension of presidential tenure,

which would have allowed Obasanjo to seek a third term in office. In addition, legislators have

regularly contended with the executive over fiscal issues, resulting in repeated delays in the

approval of the annual budget.

The Assembly has often turned its attention inward, prompting a number of leadership

changes and inquiries into the conduct of prominent Members. At least five Senate Presidents

or House Speakers have been impeached or compelled to resign under scrutiny from the

Assembly. Others, including the head of a major committee investigation into the electricity

sector, and a former Speaker of the House, have been investigated for corruption or abuse of

office. The recent one is the honorable Farouk Lawal corruption saga. While misconduct is

widespread, there have also been substantial efforts at internal oversight and monitoring.

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The investigative role of the committee system has expanded markedly with improved

staffing, facilities, resources and experience. The introduction in 2006 of “due process” reviews

of public expenditures has encouraged inquiries across many areas of procurement and

spending. In recent years a number of probes have been followed in the national media. The

most prominent inquiry covered the alleged misuse of more than $16 billion allocated by the

Obasanjo administration for rehabilitation of the country’s troubled electricity system. Other

probes have considered safety funds in aviation; projects in transportation and public works;

fertilizer distribution under the Agriculture Ministry; land and housing sales in the Federal

Capital Territory; spending and projects under the Nigeria Delta Development Commission; the

funding of prominent teaching hospitals; the use of constituency project funds by legislators

and governors; the fuel subsidy probe; the near collapse of the capital market; and the farouk

Lawal vs Otedola’s on going bribery scandal.

In recent years the legislature has expanded the number and scope of committees, which

grew to number 84 in the House of Representatives and 54 in the Senate. Committee activity

has been spurred partly by political ambition, but also by reaction to misconduct in numerous

departments of government. The most capable are those focused on public finance and

legislative affairs, including committees on the budget, fiscal affairs, external debt, and

assembly rules and procedures. A few committees for such issues as HIV/AIDS, women’s affairs,

and the Millennium Development Goals have also been quite active with concerted assistance

from donors. Another set of committees periodically initiate inquiries or legislation regarding

elections, the electricity system, transportation and health. A number of committees are

dormant or unproductive.

The proliferating committee system, while an important source of information and pressure,

has been an uncertain mechanism of accountability, possessing limited enforcement capacities.

This aspect of legislative activity also proved a drain on energies, as many members served on

multiple panels. Few legislators in the first two terms had participated in more than two

committees, but in the Third Assembly some members were involved in as many as a dozen

committees. Although investigative activities have been revealing, there is a growing sense of

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ambivalence among many citizens who have been saturated with revelations, and skeptical

about political grandstanding. Nonetheless, committee activities revealed a growing willingness

and capacity to exercise legislative oversight of the presidency along with a degree of self-

regulation.

In the Drafting of the Budget the legislature has minimal if any influence. In theory if those

that are on the portfolio committees are working closely with their programs / departments

they should be vetting and giving input into these budget submissions as well as audited

reports of pervious budgets which are utilized in the drafting of new budgets. However this

seems to remain theoretical and not practical. The budget drafting is spearheaded by the

executive, lead by the minister of finance. He consults various committees such as the Budget

Council, Budget Forum, and Minister’s Committee on the Budget. Again, one could argue that

select members of the legislature are part of these committees but as a whole the legislature

does not interact at this point with the drafting of the budget.

Once the budget is tabled before the legislature, due to the passing of the Money Bills

Amendment and Procedure Related Matters Act, the legislature is legally allowed to engage

with the ability to interrogate and adjust the budget. This is largely coordinated through the

Standing and Select Committees for Finance and Appropriations who interact with the program

/ department committees who interrogate their own votes (areas of the budget which directly

pertain to their portfolio). In theory the committees are able to shift and change their own

votes as well as suggest amendments to the national budget tabled before them.

In practice this is made difficult for a number of reasons: 1. The budget has already been

part of a three year rolling budget cycle due to the medium term framework / medium term

budget policy statement (MTBPS) – there is scope to make minor adjustments and react to

emergencies – but given the short timeframe and that technically 2. The budget it rolled out

before officially approved in its entirety at the start of the new financial year, the practical

ability of the legislature to make real adjustments and give practical input into the annual

national budget is minimal, especially when one takes into account the three tiers of

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government and each of their financial years. If the legislature where to actively engage in the

outer years of the MTBPS then practically they would be able to be more part of the budget

drafting and interrogation process – however this is yet to happen. Thus while the committees

of the legislature do officially approve the budget there is cause to pause and ask how much of

this is a rubber stamp approval and how much is an interrogated bonafideapproval.

The implementation of the budget does not directly involve the legislature so much as the

departments and programs within the three tiers of government – national, provincial and

local. However portfolio committees on which members of the legislature are party to are

theoretically required overseeing the running of departments and programs thereby actively

engaging in the monitoring and implementation of the budget throughout government entities.

There is much speculation as to the scope of this ability as well as the ability of the committees

to really direct and oversee the budget’s implementation. Another factor which seems to come

into play is that often the active engagement of the committee in their vote / portion of the

budget is dependent on the interest, knowledge and ability of the committee members as well

as specifically the committee’s chairs willingness to engage.

The officially auditing and evaluation within the budget process is carried out by the Auditor

General. According to the Public Finance Management Act of 1999, the time frame for the

legislature receiving monthly audited reports is ten days post-end of the month. And the time

frame for receiving of the annual audited reports is within 6 months of the close of a financial

year. How much the legislature actively engages with these reports is questionable at this stage

3.2 LEGISLATIVE / FISCAL ANALYSIS OF THE 2011 BUDGETORY ALLOCATION, MONITORING

AND IMPLEMENTATION VIS-AVIS ITS STAGES; PREPARATION, AUTHORIZATION, EXECUTION

AND AUDIT.

By virtue of sections 80 and 81 of the 1999 Constitution it is the National Assembly that

gives authorization to the President and the executive for all expenditures from the

consolidated Revenue Fund. Similarly, sections 120 and 121 vest power and control over public

funds of the States in the House of Assembly of a State. Constitutionally, the “Appropriation

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Bill” is the basis of the Executive’s plans for running of government within the relevant fiscal

year. The Legislature must consider the executive’s budget and the appropriation bill passed

before any money can be withdrawn from the constitutionally established funds and accounts

to run government. How can the National Assembly or State House of Assembly exercise its

oversight power over appropriation in a way that will not interfere with the powers of the

executive in establishing budgetary policies?

Though the legislature makes its presence felt on occasions, however, it seldom gets high

marks for budget review, which is generally regarded as the crucial test of surveillance. Clearly,

the National Assembly’s handling of the budgets during the period under study (2011 fiscal

year) has clearly demonstrated astute interest and resilience in the execution of the said

budget. This they did by listening to public opinion and inviting the minister of finance and

coordinating team of the economy Dr. Ngozi Okonjo Iweala to the house for questioning on the

implementation of the 2011 budget and also charging the house committee on budget

implementation to go to work. The legislatures were keen to know why the budget has not

been implemented to above 50% since the year has deepen into its third quarter, however the

minister was able to clear the doubts of the house saying efforts are been made not to waste

public finance but to implement it as budgeted.

Let me be quick to mention here that a budget is a financial statement containing

expenditure, revenue and deficit/surplus estimates which indicate how an organization, a

household or government plans to use its expected resources to meet its goal for a given period

usually one year. (IDASA: Introduction to budget analysis-trainer manual 2004). According to

Aaron Wildavsky budget translates financial resources into human purposes. The budget

governs the allocation of scarce resources; it reflects or should reflect the priorities of a

community or nation.

Certain classifications however is pertinent to bring to fore thus; surplus budget, deficit

budget and balanced budget, that is when expenditure is greater than income, when income is

greater than expenditure and balanced budget when income is equal to expenditure.

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Furthermore, there are various tools used in ascertaining the importance of budget in any

nation viz;

1. Social tool; here it serves as a tool to satisfy the needs/welfare of the people such as

health, education, transport etc.

2. Planning tool; it helps us to lay out what activities and programs we intend to undertake

within a specific time.

3. Political instrument; spells out policies, intentions and priorities of either government or

an institution. It involves competing interest, attempting to use the public money

(budget) for their interest and purposes.

4. Economic interest; it uses the budget to promote or discourage the growth of certain

section of the economy. The budget serves as a guide for the production, distribution

and delivery of goods and services.

5. Legal tool; it allows the government powers to raise and spend money.

6. Administrative tool; it funds the activities of government and its agencies.

3.2.1 BUDGET PROCESS STAGES

Many Nigerians perceive the budget as the document the president presents to the national

assembly once every year or as the announcement made by the governor to the state

Assembly regarding the same. Yet by the time these documents are presented a whole

array of activities, actors and maneuvers may have taken place whose effects is to reduce

the chance for including perspectives of non-state actors into the document. it is not just

some document or paper presentation, but a financial presentation involving certain

processes viz;

i. Budget formulation (preparatory) stage:

This stage involves identifying priorities, targets on which experts and government

develop actual estimates of income and allocate expenditures to various budget units and

purposes. At the federal level the following steps and activities are undertaken at the

preparatory stage of the budget process. First the federal ministry of finance,

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representative of the ministries, national planning commission, central bank of Nigeria etc,

meet to discuss macroeconomic parameters, draw up revenues estimate parameters: oil

revenues, non-oil revenues independent revenue. Secondly, same group of people as in

above meet to discuss medium term expenditure framework: aggregate spending, spending

by major ministries, departments, and agencies, debt transfer and deficit. Thirdly,

stakeholder i.e. budget office of the ministry of finance, organized private sector, civil

society organization and the national assembly make consultations. Then the budget office

of the ministry of finance sets perspective MDA Envelops. Budget office, other ministries

and agencies formulate medium term strategies. Then the ministry of finance, ministries

departments, and agencies (MDA) Envelops fixed.

Further, ministry of finance and other stakeholders make presentation of fiscal strategy

paper on revenue framework, priority focus, MDA envelops. Ministry of finance also issue

call circular on: revenue estimate for MDA and expenditure estimates for MDAs, ministries:

departments; agencies (MDAs) submission of call circular. Then the budget office embarks

on evaluation and consolidation of submissions of call circulars of MDAs. The minister

embarks on a presidential briefing on the budget outline and recommendations to be made.

The ministry of finance lastly finalizes the budget estimates and forward same to the federal

executive council for consideration and adoption, finally the federal executive council

adopts the budget estimate.

a. Budget enactment (Approval) stage: this is the stage where budget pass through the

required legal process to become a legal document binding on the local, state and

federal government. At the federal level the budget process pass through the national

assembly; at the state level it passes through the state house of assembly; while at the

local government level it is approved by the local government council.

b. Budget execution (implementation) stage: this is the stage where money allocated in

the budget is used to implement the plans and priorities identified in the budget.

c. Budget monitoring and evaluation stage: this is the stage where government and

interested parties try to follow up to ascertain whether money allocated has been used

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in the manner proposed in the budget and whether they have achieved the target or

promises made by the government.

3.2.2 PRINCIPLES OF OPEN BUDGET PROCESS:

Transparency – the principle of transparency is crucial to the budget process,

requiring that relevant information for decision making in the budget process must be

made accurate, readily available and accessible for use by all stakeholders; the

information must be made open for public scrutiny, easily understood, and clearly

presented.

Participation – the principle of participation demands that all stake holders be

genuinely involved in decision making throughout the budget process. However, the

constructive engagement will require relevant and timely information that is accessible

and available to all. Funds can be channeled to implementing activities that meets the

need of the people, if they are aware, involved and have adequate, accurate and timely

information to contribute to prioritizing activities and building consensus among

stakeholders. Moreover, people can monitor the use of public funds and call the

government to give account of their management of the fund, thus, reinforcing

accountability.

Accountability – government manages public funds generated from oil, taxes,

grants, etc. the funds are not their personal money; it belongs to the people who

entrust it to them to manage. Thus the government is obliged to regularly report back to

the people on how they are managing the funds. However, the absence of transparency

in a budget process will limit the ability of stakeholders to hold government officials

responsible. Moreover, the absence of people’s involvement will limit their ability to

discuss budget issues, constructively engage government officials on policies, and hold

government officials to account to the people their decisions and actions. Transparency

and accountability are principles that promote compliance, but compliance is effective if

participation of stakeholders is encouraged.

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3.2.3 BUDGETING AND BUDGET MANAGEMENT REFORMS

BUDGET REFORM OBJECTIVES

The role of budget in an economy cannot be overemphasized. A budget is an important

instrument of national resource mobilization, allocation and economic management. It is an

economic instrument for facilitating and realizing the vision of the government in a given fiscal

year. If a national budget is to serve as an effective instrument for promoting growth and

development of a country, there should be proper linkage and management of all the stages of

budgeting. A budget has to be well-designed, effectively and efficiently implemented,

adequately monitored and its performance well evaluated. With regard to Nigeria’s budgets

over the years particularly in 2011, there is a sharp contrast as expected, between budgeting

under military regimes and budgeting under civilian administration. Whereas the former was ad

hoc and beclouded with arbitrariness, the latter is often subjected to scrutiny at various stages

by the executive and legislative arms of government before the budget is finally approved.

In Nigeria, the reform of the budget process was a major plank of the Public Service Reform

(PSR) embarked upon since the inception of civilian administration in 1999, and sustained in the

2011 fiscal year. Prior to this time the country was under military rule during which the budget

process was thrown into total disarray with some noticeable defects. Thus, the objectives of the

budgetary reforms were to ;( 1). Reduce the excessive share of the budget being allocated to

the public service by way of personnel and overhead costs (estimated at over 60%) (2) Reduce

the cost of governance in general. (3) Improve resource management by curtailing wasteful

expenditure and increasing the level of productivity and efficiency, and (4) Ensure budget

discipline (adherence to limits).

3.2.4 REFORM STRATEGIES AND IMPLEMENTATION PROCEDURE

The budgetary reforms which commenced in 2000 have five major planks. They are; (1)

administrative procedures, (2) budget preparation, (3) management of government spending,

(4) budget implementation as well as monitoring and (5) evaluation. The management of

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government spending is achieved through limits imposed by established fiscal rule. The fiscal

rule is a statement of limits on disposable revenue projections and fiscal deficit over a budget

period. In the case of the Federal Government, it is oil price based using projections of oil prices

that are lower than the expected international price of oil over the budget period. It also

focuses on savings from the Federal Government debt deals. The oil price-based fiscal rule de-

links government expenditure from the price of oil by budgeting at a conservative oil price. For

instance, in 2004, the government budgeted at a price of US$25, US$30 in 2005, US$35 in 2006

and US$40 per barrel of oil in 2007 and US$72 in 2011 till date. This has enabled government to

save every dollar above the budgeted price and there is a mechanism in place to ensure

judicious use of the savings. The oil price-based fiscal rule and Medium-Term Expenditure

Framework (MTEF) in budgeting have significantly enhanced public expenditure management

and macro-economic stability.

As part of the budgetary reform measures, steps were taken in 2005 to develop a medium-

term expenditure framework which places emphasis on multi-year (three years) budgeting. The

revenue estimates were also based on a Medium Term Revenue Framework (MTRF). In Nigeria,

the MTEF seeks to improve macro-economic balance by developing a consistent and realistic

resource framework; improve the allocation of resources to strategic priorities among and

within sectors; increase the commitment to predictability of both policy and funding for better

planning by MDAs and increased programme sustainability; and provide MDAs with a hard

budget constraint and increased incentives for efficient and effective use of funds.

In Nigeria, the adoption of the MTEF at the federal level derives from the need to achieve

the right balance between economic development and macro-economic stability direct the bulk

of federal spending towards capital spending on the nation’s priorities and ensure that budget

holders are accountable for the funds allocated to them and improve the value of federal

spending by adding activity and output based budgeting. That is, agreeing in advance the

activity to be performed and the expected output and then comparing this with actual output

and explaining the variances.

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As part of the reform, ministries, departments and agencies (MDAs) of government were

given “expenditure envelopes” from which they were to meet all their needs and deliver public

goods and services. The allocation of such envelopes was done by the Budget Office of the

Federation, working with the Minister of Finance and with the approval of the President

following consultations with relevant stakeholders (the National Assembly, Organized Private

Sector, Civil Society, the Public Sector and the Political Class). In allocating the envelopes, the

major criteria were the size of each MDA’s payroll and priority level accorded to the services to

be delivered by each MDA against the background of the priorities of the Federal Government

as documented in NEEDS, the MDGs, Vision 20:2020 and stakeholders’ inputs.

The sectoral component of the medium term expenditure budgeting was the medium-term

sector strategy (MTSS) process. Starting from 2005 to the present, MDAs were requested to

develop and articulate Medium-Term Sector Strategies consistent with NEEDS and the MDGs.

The process involved clear articulation of goals and objectives by MDAs against the background

of the overall goals of NEEDS, Vision 20:2020 and the attainment of the MDGs, identification

and articulation of key projects and programmes necessary for the achievement of their goals

and objectives bearing in mind their expenditure envelope, costing of the identified key

initiatives in a clear and transparent manner, phasing of the implementation of the initiatives

over the medium-term (three years), defining the expected outcomes in clear measurable

terms and proper linkage of expected outcomes to their objectives and goals. The MTSS

became a major policy document against which budget proposals of MDAs were evaluated.

It should be noted that the implementations of all the above mentioned reform strategies is

a continuous process and still ongoing. The Budget Office of the Federation is at the stage of

adopting a Performance Based Budgeting System where resources will be allocated to MDAs

based on their ability to utilize and deliver the promised deliverables to the Nigerian people.

Key Budgetary Reform Strategies in Nigeria in 2011

MAIN ASPECTS OF BUDGETARY

REFORM

KEY REFORM STRATEGIES

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1 Administrative Procedures -Establishment of the Budget Office of the

Federation headed by a Director-General who

also doubled as Special

Adviser to the President on Budget matters

2 Budget Preparation -Medium-Term Revenue Framework

-Medium-Term Expenditure Framework

-Fiscal Strategy Paper

- Medium-Term Sector Strategies

-Interactive Sessions

-Annual budgets with projects and programmes

linked to medium-term plans

3 Management of Government

spending

-Oil-price-based fiscal rule,

-Debt/GDP limit,

-Aggregate expenditure limit,

-Limits by major expenditure heads, MDA limits

(envelopes).

4 Budget Implementation -Use of Cash Management Committee to better

manage the release of funds

-MDA now granted flexibility to manage the

release of their capital budgets subject to set

limits

Timely and predictable release of capital

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budget

-Introduction of electronic payment process for

payroll

-Publication of releases on BOF website

5 Monitoring and Evaluation -Timely monthly returns to OAGF by MDA

-Publication of budget performance report

-OPEN initiative led by OSSAP-MDGs

-Involvement of Civil Society in budget

monitoring and evaluation

Source: government integrated financial management information system (GIFMIS)

3.2.5 CASH MANAGEMENT REFORMS AND TREASURY SINGLE ACCOUNT

Cash Management reforms are aimed at establishing efficient and effective Government

cash management system that will enhance service delivery in a transparent manner. This

system is defined in the newly developed cash management policy which provides strategies

that will ensure that scarce cash resources are well controlled and managed such that the right

amount of cash is available at any point in time to meet obligations as and when due, minimize

cash holding and associated costs and invest funds not immediately required.

The need for policy in this area arose from the observed deficiency in the present cash

management system characterized by: multiple bank accounts with idle funds, poor cash

planning resulting in low draw-down of funds which invariably affect budget implementation,

funds releases are not tied to the needs and priority of Ministries, Departments and Agencies

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(MDAs), uncoordinated borrowing, etc.

In order to strengthen the system such that funds would always be available as and when

needed and that there is adequate plan to meet any resource gap while investing surplus funds,

policy is imperative to guide operations of all MDAs. To achieve this objective, the Treasury is

expected to manage the cash planning of government with inputs from MDAs. Consequently,

the following have been considered and approved:

The Treasury shall take responsibility for the effective and efficient management of all public

funds. A Treasury Single Account (TSA) shall be maintained at Central Bank of Nigeria with each

MDA responsible for the management of its allocations but effecting payment through the TSA.

Government cash balances at any point in time shall be obtained the TSA for effective planning

and decision making. A General Ledger System shall be set up along TSA for posting of

payments and commitments to facilitate timely financial reporting.

Medium Term Expenditure Framework shall guide the preparation of budget proposals. The

proposals shall adopt performance based budgeting and estimates are to be based on a sound

and comprehensive revenue forecast that is realizable; MDAs shall prepare annual cash plan

showing their monthly cash requirements in line with the appropriation, needs and priority for

consolidation into Federal Government annual cash plan. A Critical Path Analysis shall be

prepared in respect of planned projects, activities to be carried out, timing and cost

implications to support the cash plan. Cash flow projection shall be prepared by the

Accountant-General of the Federation based on the appropriation, approved cash plan and

priority of the Federal Government.

There shall be a Ministerial Cash Management Committee chaired by the Minister of Finance

to approve cash allocations to MDAs based on cash plan and cash flow projection upon which

warrant releases are to be issued. Budget performance reports shall be taken into

consideration in subsequent cash allocations and warrant releases to MDAs. Each MDA shall

have its own Cash Management Committee headed by the Minister of that Ministry to consider

and approve the utilization of allocated cash.

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Debt management shall be integrated into the cash management system such that

borrowing by the Debt Management Office is geared towards meeting the financing gap stated

in the cash flow projection.

Budget proposal by the Executive shall be submitted to the National Assembly not later than

90 days to the end of the current fiscal year to enable its passage before the New Year.

The Executive Arm of Government shall ensure full implementation of the Appropriation Act.

Incentives in form publicity and commendation shall be provided for MDAs with good

performance while poor budget execution shall attract sanctions.

E-Payment system shall be adopted for settlement of all government transactions, supplies,

salaries and entitlements of employees, contracts, etc;

Donor funds and internally generated revenues of MDAs shall be factored into MDAs’ budget

as financing items for completeness, accountability and proper management of resources;

All government suppliers shall register with the Bureau of Public Procurement (BPP) to

provide Government suppliers’ data base. The BPP shall provide average price lists of items

commonly consumed by government agencies as a guide to public procurement;

There shall be mandatory Tax Identification Number (TIN) for government suppliers to

improve revenue generation and collection;

All uncompleted projects or other obligations of MDAs at the end of Fiscal Year shall be

rolled-over and included in the following year appropriation;

All unspent balances of cash allocated to MDAs after commitments entered into the TSA for

both recurrent and capital expenditure shall lapse automatically and the balances returned to

the Consolidated Revenue Fund Account for appropriation by the National Assembly.

Investment of Government Funds shall be centrally coordinated by the Office of the

Accountant-General of the Federation in liaison with the Central Bank of Nigeria. Any amounts

held in the TSA not immediately needed shall be invested in interest yielding instruments.

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The approval of the cash management policy document by the Federal Executive Council for

implementation will strengthen Federal Government cash management for better budget

implementation and service delivery.

3.2.6 NEW CLASSIFICATION SYSTEM AND PUBLIC FINANCE MANAGEMENT ACCOUNTABILITY

In preparation for the introduction of GIFMIS, a new multi-dimensional Chart of Accounts

(COA) has been designed. Implementation of the new COA commenced with the 2011 budget

and a Treasury Circular has been issued directing Ministries, Departments and Agencies (MDAs)

of government to adopt it in execution of the budget.

The new classification system is made up of 6 segments, namely: (1) Administrative, (2)

Economic, (3) Functional, (4) Fund, (5) Program and (6) Geographic segments. The COA provides

a robust mechanism for the classification of public resources under the budget as well as

tracking receipts and payments during budget execution. In particular, the new classification

system seeks to support one of the key deliverables of the government’s Economic Reform and

Governance Project (ERGP) which is the “adoption of more transparent and modern economic

and financial management systems and processes that are less prone to corruption”.

The new classification system supports all extant reporting and disclosure requirements

under the Nigerian Public Finance Management (PFM) legal framework. In addition, it has been

designed to facilitate compliance with major international public sector accounting and

reporting standards.

It is generally accepted that the ongoing PFM reform initiatives must, amongst others,

provide an appropriate mechanism for a more transparent and accountable PFM system. In this

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regard therefore, the COA has been structured to provide a strong foundation for a complete,

accurate and detailed classification of all governments receipts and payments in such a manner

that will make for easy adoption of all mandatory IPSAS cash basis reporting and disclosure

requirements such as External Assistance, Foreign Exchange transactions, consolidation of

accounts of controlled entities, full disclosure of cash holdings, etc.

Furthermore, the COA is fully compatible with the Government Finance Statistics Manual,

(GFS) and has adopted in full the United Nations COFOG system.

A sound PFM system also requires that government meets key PEFA indicators. In this

regard, the COA has provided a solid basis for meeting three PEFA indicators:

PI – 5: Classification of the budget using GFS standards i.e. Administrative, Economic and

Functional classification or comparable classification

PI – 6: Summarized budget data for both revenue and expenditure according to the main heads

of the classifications used (ref. PI-5), including data for the current and previous year.

The introduction of Program segment is also aimed at meeting PEFA indicator 12 on policy

based budgeting.

3.2.7 ADOPTION OF INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARDS

A decision was taken to adopt IPSAS for financial reporting for the federal government of

Nigeria. As a first step, a gap analysis was undertaken. The objectives in conducting of the IPSAS

gap analysis is with a view of enhancing the quality and transparency of public sector Financial

Reporting and strengthening public confidence in Public sector Financial Management. The

adoption of IPSAS by Governments will also improve the quality and comparability of financial

information reported by Public sector entities around the world

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The conduct of the gap analysis considerably helped in improving our Financial Reporting

System, which helped in identifying the existing gaps between our existing Financial Reporting

System and the international Standard. Hence facilitating our efforts to bridge the identified

gaps, accordingly.

The gap analysis study that was undertaken by the Federal Government of Nigeria is an

attempt to benchmark Government Accounting in Nigeria with Cash IPSAS to identify the gaps.

It is intended to identify the specific departure of Government Accounting system from cash

basis IPSAS and chart a transition path for adoption of Accrual based IPSAS.

The study attempted to assess whether the country should adopt a limited version of the

standards, as the processes of developing the standards have already considered any

acceptable options that can be incorporated into the text of the standards.

The office of the Accountant-General of the Federation of Nigeria (OAGF) has worked out an

itemized action plan on various items as the identified gaps. The most significant issues are

entity consolidation and timeliness of Account submission.

The Federal Government would need to consolidate the cash flows of all entities that it

controls (including GBEs) with its financial statements. For practical convenience the

consolidation of GBEs will be taken up in the long run while consolidation of all other entities is

being immediately embarked upon.

For improving the timeliness, the time taken in Ministries, Departments and Agencies of

Government including at the office of the Accountant-General of the Federation of Nigeria for

finalization of financial statements has been be crashed significantly. This is being facilitated

through the use of Information Technology, Accounting Packages like the ATRRS and the Excel

template initiatives.

3.2.8 MODERNIZATION AND THE INTERNAL AUDIT

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As an integral component of the Government’s financial management and control

framework, an effective internal audit helps to: -

a) Improve control over public expenditure management.

b) Ensures compliance with government’s policies and laid down procedures.

c) Assist to secure accountability and transparency in government financial activities.

In the light of the above the Accountant-General of the Federation and the Government of

Nigeria have recognized that the internal audit function is using out-of date audit

methodologies and is in need of modernization.

The main objective of the modernization plan is to suggest measures to bring up the level of

public sector internal audit with a view to ensuring that the government internal audit function

adds value to government’s operations, thereby contributing to the success of the Economic

Reform and Governance Project (ERGP).

In view of the above a Consultant was hired by the Federal Government to deliver on

following urgent modernization activities outlined below: -

1. Rollout new audit methodologies and audit manual via the training courses prepared by the

Consultant.

2. Add performance audits and financial audits to the planned audit activities

3.Establish separate internal audit professional cadre within the FGN.

4. Promote professionalism among the internal auditors.

5. Develop separate human resources strategic plan for the internal audit function.

6. Develop written job descriptions for all categories of internal audit position.

7. Develop and implement annual individual training plans for all internal auditors.

8. Implement and enforce use of new internal audit manual across the FGN.

9. Develop and promote a separate code of ethics for internal auditors.

10. Develop and implement a communication plan.

11. Provide internal audit with legal access to all assets, books and records of all arms of

government.

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12. Provide for the functional independence of internal audit units in MDAs/FPO/PPOs.

13. Restructure the Audit Monitoring Department.

14. Amend the Financial Regulations/Financial Act.

15. Establish independent Government Audit Committee.

16. Promote use of office efficiency tools such as Word and Excel.

1.7 Provide internal auditors with access to ATRRS, GIFMIS and IPPIS.

A key element of the modernization strategy for the Federal Government of Nigeria (FGN)

internal audit function is the design and delivery of the following training courses for all the

internal auditors in the service.

Risk-based auditing, which will include sub-modules in;

Financial audit

Performance audit

Compliance audit

Value for Money audit, etc.

Government recognizes that building capacity of human resources is imperative for effective

delivery of services and to support various public financial management reforms. As part of the

Economic Reforms and Governance Project (ERGP), human resources development is a focus of

the modernization of the Federal treasury Academy.

The responsibilities of the office of the Accountant-General of the Federation and the office

of the Auditor-General of the Federation include ensuring that adequate standards of

accounting and auditing and professionally qualified personnel are maintained. This is done

through systems of appropriate training and capacity building which should be carried out

largely by the FTA. In the light of the needs to adhere to global standards and the reform

strategy of Government, the FTA requires restructuring to prepare it for the role that it will play

in achieving sound financial practices in the future. The restructuring is supported by the World

Bank under the Economic Reform and Governance Programme (ERGP) which acknowledges the

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importance of training public financial management practitioners. The modernization of the

FTA includes development of a new curriculum and twining it with another PFM Institute.

In furtherance of the objective of modernizing the FTA, it was decided that there should be a

twining arrangement between the FTA and the CIPFA and ICAN for the purpose of agreeing a

Qualification Framework and syllabus that would allow reciprocal acceptance with CIPFA either

by levels or by subjects, quality assurance arrangement for the examinations of the FTA and

advice on development strategy and administrative structure for the FTA. This identifies with

the SCDI philosophy for a Qualification Framework (QF) for the public sector tailored to the

circumstances of Nigeria.

3.3 CHALLENGES OF THE LEGISLATURE IN PUBLIC FINANCE PROCESS (BUDGET PROCESS)

There are various factors that contribute to diminish the legislature’s concern and

capacity to engage in steady and resourceful oversight of public finance/budget process in

Nigeria particularly in the 2011 fiscal year. Cardinal of these pitfalls among others include thus;

Constitutional History

The Nigerian constitution falls short of the provisions to absolutely check the activities

of the central bank as the custodian of public finance as it expend public monies. This has been

demonstrated in the recent 5000 naira note saga embarked and approved by the CBN Governor

Lamido Sanusi Lamido and the President Goodluck Jonathan against the wishes of the majority

of Nigerians and the National Assembly, this is part of the reason the national assembly is

currently working on laws that will empower them to strictly oversee the activities of the

central bank of Nigeria on budget and expenditure matters. More so, the Nigerian constitution

is very silent as to the specifics of the oversight functions the legislature should play in the

implementation of the budget except in the approval and monitoring stages.

Also Nigerian’s constitutional history has shown that the representative legislature

(both its structures and personnel) is usually abolished by successful Military coupist, whenever

they subsequently establish their Military regimes. Whilst the executive and administrative

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structure of the military government get more entrenched and expanded in the absence of any

legislative body, to oversight and check the exercise of the powers of the military

administrations. Peculiarly, in Nigeria, these past military leaders dominate the political parties

during transitions to democracies after periods of military rule.

The senate president David Mark will understandably be less tolerant of a legislature/a senate

that is perceived as being an interfering and blundering body irrespective of their constitutional

powers and role, he himself having been a Governor in Nigeria under a previous military

regime, which exercised absolute governmental powers without any form of legislative

oversight or “interference”.

The other side of the coin is the confusion of the powers and role of the Military senate

president, which a former Governor like David Mark had exercised in the past, with that of a

Constitutional Chief Executive, which he must now exercise, with constitutionally imposed

restraint of legislative oversight, amongst others.

Amateur Legislators and dearth of Staff Aides

The presence of amateur legislators in great number, and the shortage of staff aides due

to the lack of continuity in legislative membership, accounts for the lapses of the legislature in

the discharge of its oversight functions with regard to public finance. Most legislatures have

little or no knowledge of the workings of the budget, hence overseeing it is a serious concern so

that the executive and its ministers implement the budget without much supervision by the

legislature. Most times when they invite members of the executive council to their chambers,

the legislatures lack the ability to ask accurate technical questions that will improve on the

budget and invariably the economy.

Public finance being a very technical and specialized aspect of the economy requires

people of high know how in micro and macro economics in other to oversee it successfully.

Politics however is different from prudent budget monitoring and oversight, these the

legislature lack in all ramification, hence poses a great challenge before the legislature in her

bid to ensure a stable economy via a vibrant budget / public finance process. Little wonder it

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took the national assembly sometimes to appreciate its powers and roles. The longer the

duration of our democracy the better equipped will be our legislature and staffs aides, and the

deeper will be the entrenchment of democratic values, practices and public finance process will

come to overcome most of the challenges it encounters at the moment.

Absence of well established Political Parties and Political Process

The existing political parties, the Peoples Democratic Party (PDP), All Nigeria Peoples

Party (ANPP) (formerly APP), Alliance for Democracy (AD) and the newly registered political

parties totaling 50 parties (including Alliance Congress (AC), Labour Party (LP), and Peoples’

Progressive Alliance (PPA) among others), are lacking in strong ideological foundations and

structures to enable them contribute effectively to the political process, hence we witness a

porous public finance process. Since all members of the National Assembly must belong to a

political party, it stands to reason that they should be subject to the discipline and guidance of

the political parties, so when the legislatures are meant to put aside political part affiliation for

common public finance process activities that is when you see party affiliations raising its ugly

head thereby sabotaging common oversight functions. However, this is ugly, as the parties do

not exert strong disciplinary and supervisory control over its elected members.

Personal ambition, interest and agenda of Legislators

Some legislatures on winning their sits to the house abandons their constitutional

responsibilities of which oversight in public finance process is paramount and cleave to their

personal ambitions, conniving with finance ministry and other federal financial houses in

truncating public finance process. Most of these legislators are only interested in the

allowances and salaries instead of legislative assignments. Other law makers look away from

every other thing holding unto only ethnic agenda in the misuse of oversight functions and

powers, thereby compromising the constitutional role of the National Assembly in public

finance process.

Corruption

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Corruption is the bane of the Nigerian society, and the passing of the Independent

Corrupt Practices and Other Related Offences Commission (ICPC) Act 2000 was seen as a

positive step by the legislature in curbing the menace.

The National Assembly was plagued with allegations of corruption when the Farouk Lawal and

Mr. Femi Otedola public finance bribery scandal surfaced. Though Mr. Otedola claimed it was a

sting operation of the legislator the security officers have not come out to assert that fact.

However, public finance process can not be carried out by members of the national assembly in

such corrupt environment where even the legislators that are entrusted with the mantle to

steer the ship to the promise land are themselves corrupt.

However, the Economic and Financial Crimes Commission (EFCC) Act which was enacted

in 2002 was re-enacted in 2004, creating a commission with the power of coordinating and

enforcing varied but related economic and financial crimes laws. The efforts of EFCC that

initially appeared to have brought corruption into the open and under check appears to have

been compromised by the seeming selective enforcement and partisanship of the EFCC, and

used by the executive as a tool of political brinkmanship.

Adverse Legislative Environment

The large number of legislators in the House of Representatives or the State Houses of

Assembly tends to induce the members into compromising stands in order to be noticed or to

get the projects for their constituency noticed by the public. Moreover, the party agenda foist

upon the legislators a less critical stance in pursuing ideas and ideals which fosters smooth

public finance process. Added to these, is the obvious lack of parliamentary infrastructure that

will aid the legislators in the effective discharge of their oversight functions with particular

reference to public finance process in Nigeria.

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3.4 REFERENCES

[1] Anyanwu, J. C. (1997) Nigeria Public Finance, Journal Education Publishing Ltd

[2] Anyafor, A. M. O. (1996) Public Finance in Developing Economies – The Nigerian Case, B &F

Publications UNEC.

[3] Aladectan, C. A & Ozokhome E (2006) “Why are Nigerians Still Poor” Broad Street Journal

Ed 39 (14 – 17)

[4] Aigbkham, B. C. (1997) “Fiscal Decentralization, Wagner Law and Investment Size; the

Nigerian experience” Journal of Economic Management Vol. 4 No. 2 June.

[5] Amsden A. (1998) Asia’s Next Grant: South and late industrialization New York Oxford

University Press.

[6] Alt. J. and Chrystal K. A. (1979) ‘Public Sector Behaviozus; the Status of the Political Business

Cycle’ University of Essex Discussion Paper No. 108.

[7] Barneth S. (2000) “Evidence on the Fiscal and Macro-economic Impact of Privatization”: IMF

Working Paper (WP) 1001, 130 Washington DC.

8. National assembly federal republic of Nigeria joint session votes and proceedings, 15

December, 2010

9. Parliamentary strengthening professional development program for parliamentarian and

parliamentary staff

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10. Nigerian public service and the Udoji Reform: A review

Written by Tunji Olaopa 10 April 2012

11. Public finance analysis (PFA) MANUAL, participatory toolkit on public finance analysis for

communities and civil society organizations.

12.Onuchukwu, O. (2011) “An Econometric Analysis of Government Expenditure Behaviour in

Nigeria. Journal of Industrial Business and Economic Research Vol. 5, No. 2

13. Offurum, C. O. 2010 Impact of Public Expenditure on Economic Growth of Selected

Countries. An Unpublished Ph.D Thesis Federal University of Technology, Owerri – Nigeria.

14. OJI, I.O. (2011) Public Sector Financial Management in Developing Economies. Phd thesis

Federal University of Technology Owerri – Nigeria.

15. Stevens, L.O.,AND L .M.Freikmann (2008) “Stocktaking the Reforms in Public Financial

Management” World Bank Report 2008 UNDP Report (1997) Poverty in Sub Saharan Africa.

16. World Bank (2009) Global development Finance 1999 Washington D.C.

17. World Bank (2011) “National Public Expenditure Management” Washington D.C. Draft.

18. World Bank (2011)”National Public Expenditure Management” Report No 9865 UN

Washington D.C.

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