1.1 BACKGROUND
Even though a country may be naturally
endowed with diverse kinds of resources, the gestures of such country
lies in her ability to manage her resources properly. Public sector, in
a nutshell, is the sector that manages the resources of the government
in other to ensure effective and efficient allocation of these resources
for satisfaction of the citizenry concerned. The sector is used in
implementing government policies. It is the tool for accelerating
development in the entire economy. For instance, it accounts for
approximately two-third of gross national products (GNPs) in Nigeria.
Pubic sector includes all government ministries and departments,
extra-ministerial department, parastatals agencies, commissions and
public enterprises. Being a service-oriented sector, it is usually
budget financed.
Essentially, funds, in the public
sector, refers to the sum of money or other resources segregated for the
purpose of carrying out specific activities in accordance with special
regulations, restrictions and limitations. According to Vatter,
(1947:3), public sector fund accounting is the demonstration of
fiduciary stewardship; to show that resources (funds) have been dealt
with in a proper way.
The management and control of funds in
the public sector revolves around towards: responsibility and
accountability. This has to do with the honest application of funds and
in compliance with proper procedures, ensuring that these funds are
spent on properly approved items and within the budgeted level.
Inspite of its paramount importance in
the economy, this complex sector has failed to live up to the
expectations of bringing the policies and programmes of the government
fruition. Cases of financial indiscipline like embezzlement of public
funds by public office holders are very rampant nowadays. Depletion of
public pulse is no longer a new scenario. Most public office holders
venture into this sector and come out unprecedently rich. Astonishing,
is the way these undesirable elements embezzle these funds and go scoot
free.
That Nigeria is known as the third most
corrupt nation in the work is not an overstatement. This is largely as a
result of financial improperly that is ravaging the public sector.
When it comes to public funds, people seems to put aside their moral
values. Financial integrity is hardly seen in the public sector. Worst
still, is the effrontery being exhibited by these perpetrators even
when caught red-handed. The president, Obasanjo, in decrying the high
incidence of financial impropriety, said in the daily guardian newspaper
on March 25, 2005 that “it is only in Nigeria that you will catch a
thief and he takes you to court”.
Unfinished projects, non-payment of
salaries and pension, and so on, were as a result of misappropriation of
public funds in the public sector. No single day will pass without a
report on misappropriation of funds in the public sector. This entails
the diversion or misuse of funds earmarked for specified project or
programme for another unconstitutional selfish purpose. The magnitude
is unbearable. One may rightly ask “is the financial statute vis-à-vis
public sector not explicit on the way and manner these funds should be
utilized? Or is it a resolution among pubic accounting officers to tow
the part of financial in discipline?
Financial profligacy is another
phenomenon that is wrecking serious havoc in the public sector. There
is an accentuated, unbridled and unnecessary squandering of funds in the
public sector. About ninety five percent of Nigerians see the public
funds as a “NATIONAL CAKE” that fall from heaven. This attitudinal
imbalance had led many of these public officer holder to be improvident.
The ripples of this overspending are felt all over the economy.
Government has continued to run budget deficit, which has had adverse
effect on diminishing our gross national products, thus putting the
living standard of the citizenry on the decline. This equally has
rendered most public sector organizations moribund. No wonder the
government is calling for privatization of most of these public sector
organizations. Non performance of these sectors as a result of
misappropriation of fund meant for their operation must not be far from
what informed government decision to privatize them.
The questions many people are asking
are: is the financial regulations, as enshrined in finance (management
and control) Act 1958 so weak in combating this menace? Are no
procedures for managing and controlling of funds in the public sector?
If we have are they weak or do public offices neglect them? Is there
no innovation that could be plugged into funds management and control
system of this public sector or enable it live up to the expectation?
Hence my interest to embark on this project.
Federal mortgage bank of Nigeria is an
apex mortgage institution established by the federal government of
Nigeria in the year 1977 as a successor to Nigerian Building society
established in the year 1956. This apex institution is charged with the
responsibility of administering loan at an affordable rate of interest
to citizens, for building and buying houses and for renovating their own
house through a government approved housing policy known as NATIONAL
HOUSING FUND (NHF) scheme.
National Housing Fund scheme,. Being the
main focus of Federal Mortgage Bank of Nigeria, was established by
decree No 3 of 1992 (now an acts), primarily to address the constraints
to the mobilization of long term funds of housing development and to
ensure that every Nigeria has access to housing loan at affordable rates
of interest. It provides an enduring pool of funds for lending to
contributors to enable them build, buy and renovate their own houses.
This scheme clearly redefined the activities of federal mortgage bank of
Nigeria.
The objectives of federal mortgage bank of Nigeria through the National housing fund scheme includes;
- To facilitate the provision of houses for Nigeria at affordable prices.
- To ensure the constant supply of loan to build, buy or improve their
residential houses and also to provide policy over the allocation of
resources and fund between the housing sector and other sector of the
economy.
- To provide long term loan to mortgage institutions.
The resources of fund as stipulated in the decrees (now an act) includes;
- A mandatory contribution of 2.5% of basic income of every Nigerian
both the public and private sectors of the economy (including
self-employed) earning an income of N3000 and above per annum.
- A mandatory deposit into the fund by every commercial and merchant
banks, of a sum not less than 50% of their non life and life funds
through federal mortgage bank of Nigeria.
- A mandatory contribution from federal government of Nigeria.
These funds are managed and administered
by the federal mortgage bank of Nigeria in accordance with section
seven of the decree (Now an act).
There apex mortgage institution has its
head office, presently, at Abuja (the capital of Nigeria) and also it
has offices through out the entire thirty six states of the federation
and six zonal offices of the six geo-political zones in Nigeria. In
Enugu state, for example, the state office has the head as the state
controller and the zonal office as the zonal co-ordinator.
1.2 STATEMENT OF PROBLEM
Why is the level of embezzlement of
funds escalating in the public sector? What are the root cause of this
financial impropriety as observed in the public sector what impact has
this on our economy? What have so warped the mind and values of many
public officers that they wallow in the act of misappropriating and
squandering of public funds without fear, shame of qualm? Could lack of
proper orientation and training, in any way, be responsible of this
menace?
How can we introduce an innovation that
will bring about effective and efficient funds management and control in
the public sector? There are the thought provoking questions which
this project tends to answer.
1.3 OBJECTIVES OF RESEARCH
The objectives of this research work are:
- To ascertain the damage which this escalating level of embezzlements of funds has done in the public sector.
- To find out the extent this financial impropriety affects our economy as seen in the public sector.
- To ascertain the extent to which disorientation and lack of proper
training in the public sector results in misappropriation and
unnecessary squandering of public funds.
- To determine to what extent application of in effective and
inefficient funds management and control n the public sector has ravaged
our economy.
1.4 SCOPE AND DELIMITATION
The scope of this project boarders on
mismanagement of public funds (misappropriation, embezzlement, financial
profligacy and improperly and also management and control measures in
the public sector with particular reference to Federal Mortgage Bank of
Nigeria.
1.5 RESEARCH QUESTIONS
a. To what extent have the escalating level of embezzlement of funds in the public sector affects development in Nigeria?
b. To what extent does financial impropriety as observed in the public sector affects the economy?
c. To what extent does
misappropriation and squandering of public funds as occasioned by
disorientation and lack of proper training in the public sector hinder
our economic development?
d. To what extent does inefficient
and ineffective procedures applied in funds management and control in
the public sector affects our economy?
1.6 SIGNIFICANCE OF STUDY
The significance of the study are as follows:
a. It will help to assist
policy-makers in improving and adopting strategies to reduce funds
mismanagement in the public sector.
b. It will provide useful
suggestions to avert high incidence of embezzlement and financial
impropriety in the public sector.
c. Provide basic information on the causes of various forms of funds mismanagement in the public sector.
d. It will be very useful to
policy makers, financial experts, graduates of accountancy, and
professionals in understanding and appreciating the pivotal role of
funds management and control in any organization.
1.7 DEFINITION OF TERMS
1. PUBLIC SECTOR –
This comprises of all government ministries and departments,
extra-ministerial departments, parastatals, agencies commissions and
public enterprises that implement government policies.
2. GROSS NATIONAL PRODUCTS – This is the gross domestic product plus the income accruing to domestic residents arising from overseas.
3. POLICIES – This connotes plan of action, statement of aim and ideas especially one made by government.
4. PROGRAMMES – These are integrated series of development projects
5. FUND – This is
a self-contained accounting entity with its own asset, liability,
revenue expenditure or expenses, other equity accounts and with its own
ledger(s).
6. FUND ACCOUNTING
– is an entity with a self balancing set of accounts that records cash
and other financial resources together with all related liabilities and
residual equities set aside for the purpose of carrying on specific
activities in accordance with special regulations.
7. FINANCIAL IMPROPERITY – This means financial dishonesty or wrong doing.
8. FINANCIAL POFLIGACY – This s the act of squandering or unnecessary spending of funds, i.e. extravagant spending.
9. MISAPPROPRIATION OF FUNDS
– This means intentional or unintentional diverting the funds earmarked
for a project or expenditure to another unconstitutional purpose,
usually, for selfish benefit.
10. EMBEZZLEMENT OF FUNDS – This means a deliberate theft of funds that is placed in ones custody.
11. MORIBUND – This means the inability to function effectively and about to come to an end completely.
12. CONTROL – Facility or power to make events to conform to plan.
13. MANAGEMENT –
This refers to harnessing all resources (funds) at the disposal of any
organization in such a way as to enable it achieve the overall goal.
14. PARASTATAL –
This is agency of government that renders various services and does not
rely on government for monthly subventions but basically is under the
supervisory role of ministry. For examples, Nigerian Port Authority,
Hotel Presidential, Nike Lake Hotels, Federal Mortgage Bank of Nigeria
etc.
15. MINISTRIES –
These are core government departments that execute various government
policies, and rely solely on government subvention for payment of staff
salaries. For examples, Ministry Finance, Ministry of Housing and Urban
Development, Ministry of Health etc.
16. EXTRA-MISTRIAL DEPARTMENT
– These are extension from government ministries. They also depend on
government for monthly subventions for payment of salaries. For
examples, civil service commission, judicial service commission.
17. BUDGET – An estimate of future operations which is usually measured in monetary terms but can also be measured in terms of quantities.
18. PUBLIC ENTERPRISES
– Institutions or public corporations created by government to carry
out in the public interest different kinds of operations or render
various type of services. They function outside the civil service.