Impact Of Accountability On Public Sector Financial Management In Nigeria

Impact Of Accountability On Public Sector Financial Management In Nigeria

Abstract

The importance of fiscal responsibility is central to public financial management. Public financial management cannot be achieved without fiscal responsibility. The study investigated the impact of accountability on public sector financial management in Nigeria (using designated local government areas in Lagos state as a case study). Specifically, the study examined how regulatory laws, compliance reporting, and legislative control affect the financial management of the Nigerian public sector. The survey sampled seven Nigerian government agencies, including NDLEA, NERC, NOA, NDIC, BPE, DMO, and NPC. A questionnaire was used to collect data from respondents, who were accountants and auditors from a variety of organizations. For data analysis, descriptive statistics and multiple regression analysis were utilized. The findings indicate that regulatory laws, compliance reporting, and legislative control have a significant impact on the financial management of designated agencies. The study suggested, among other things, that the government should implement a strategic structure that facilitates the construction of a fiscal accountability framework, enact enabling regulations that safeguard whistleblowers, and create a conducive environment for fiscal accountability in general. These have the potential to improve financial administration in the Nigerian public sector.

First Part

Introduction

1.1 Context Of The Study

Financial management emphasizes on making decisions regarding the use and management of an organization or corporation’s finances. Financial management is a subset of managerial activities that focuses on the planning and control of an organization’s financial resources. In addition to sourcing and maximizing the use of funds for the organization’s efficient operation, financial management also involves acquiring funds. Financial management focuses on the identification of potential strategies for maximizing an organization’s net worth, the allocation of finite productive resources among competing demands, and the implementation of strategies to achieve the stated goals of such organizations. Consequently, public financial management is the process of procuring, controlling, planning, coordinating, organizing, and directing the financial resources of government agencies. This category includes federal ministries, state ministries, local councils, government agencies, and departments.

The local administration is the lowest and most accessible level of government. Current local government evolved from the pre-colonial transitional system of government, which was extremely localized according to state-specific characteristics. Local councils are the fundamental element through which any nation administers its citizens at the local level. The implications of its constitutionally guaranteed governance structure and its proximity to the people necessitate a greater need for accountability in financial management and governance norms at this level (Adiogu, 2013). On the other hand, local administrations in Nigeria are frequently regarded as a breeding ground for blatant corruption and a lack of accountability in public service. Local government councils have gained a reputation for corruption, fiscal irresponsibility, and excessive financial mismanagement, rather than performing their duties as development hubs for the populace at large. Agbo (2012) argued that a lack of integrity, accountability, and transparency in local government is detrimental to the welfare of the people. In Nigerian local administrations, theft, embezzlement, nepotism, misappropriation of public funds, misuse of public assets, and avoidance of financial and non-financial issues have become commonplace.

Accountability to the public is a characteristic of contemporary democratic societies. Governments pay the utmost attention to accountability in the public sector around the world because they control public funds. Those in positions of authority assume a fiduciary status with attendant responsibilities requiring them to account for their stewardship to those who hold the authority in trust (Haruna et al., 2015). Public officers are expected to demonstrate effective use of public assets and funds in the delivery of services and pursuance of government goals.

1.2 Statement Of Problem

The public sector is tasked with the management of public resources, the accumulation of money (revenue), and their expenditure for the benefit of the general public. The accountability principle is founded on the trust, confidence, and resources entrusted to the administration of an organization (private accountability) or government (public accountability). There is a critical need for public officers who are accountable to the public to provide comprehensive, pertinent, and accurate information regarding the management of public funds. Due to a lack of appropriate accountability, the public sector, which is regarded as the manager of public resources, laws, and mechanisms for national development, has lost favor with the populace.

Haruna et al. (2015) alluded to the fact that government ministries, agencies, and departments do not adhere to the principles of accountability. This assertion is consistent with that of Akinbuli (2015), who stated that the duties and trust entrusted to public officials are not carried out effectively and efficiently. In the public sector, accountability has been disregarded. The majority of public parastatals in Nigeria do not maintain accurate accounting records, and they rarely issue annual reports and audited financial statements on time. Scholars have identified financial mismanagement, inefficiency, ineffectiveness, maladministration, and negligence as the defining characteristics of the Nigerian public sector.

The problems associated with a lack of accountability in public sector financial management, particularly in local government councils, include employment racketeering, corruption in procurement, siphoning of funds meant for infrastructural development into personal bank accounts, stealing of public assets, illegitimate internal revenue collection, award of contracts to the wrong contractors, friends, and family, payment of salaries and allowances to ghost workers, and lack of documentation. The majority of government agencies are not fully adhering to the principles of accountability. Little wonder Appah (2012) asserted that achieving accountability in the Nigerian public sector is exceedingly challenging.

This study examines the impact of accountability on the financial administration of the public sector in Nigeria through a case study of selected local government areas in Lagos State.

1.3 Objectives of the Research

The primary objective is to investigate the effect of accountability on the financial administration of the public sector in Nigeria.

The study’s specific objectives are:

Examine the impact of regulatory law on public sector financial management in Nigeria.

Assess the impact of legislative control on public sector financial management in Nigeria.

To investigate the impact of compliance reporting on public sector financial management in Nigeria.

1.4 Research topics

The investigation is interested in the following questions:

How has regulatory law affected financial management in the Nigerian public sector?

How has legislative control affected financial management in the Nigerian public sector?

How has compliance reporting affected financial management in the Nigerian public sector?

1.5 Investigational Hypotheses

The research hypotheses that guide this study are as follows:

In Nigeria, regulatory law has no significant impact on public sector financial management.

Legislative control has no significant impact on public sector financial management in Nigeria.

Compliance reporting has no significant impact on public sector financial management in Nigeria.

1.6 Functionalization of Variables

This study investigates the effect of accountability on the financial administration of the Nigerian public sector. In the Nigerian public sector, accountability is represented by regulatory law, legislative control, and compliance reporting. Financial management is the dependent variable, while regulatory law, legislative control, and compliance reporting are the explanatory variables. The model’s functional form can be expressed as:

Y=f(X)………………………… (1.1)

Y=f(X1, X2, X3)…………….. (1.2)

Where:

Y= Financial administration

X = Accountability, as represented by regulatory law (X1), legislative control (X2), and compliance reporting (X3).

First Model: Influence of regulatory law on financial management

Y=f(X1)………………………… (1.3)

Y=β0 + β1X1+ µ……………… (1.4)

Model Two: Legislative Control’s Effects on Financial Management

Y=f(X2)………………………… (1.5)

Y=β0 + β1X2+ µ……………… (1.6)

Model Three: Compliance Reporting’s Influence on Financial Management

Y=f(X3)………………………… (1.7)

Y=β0 + β1X3+ µ……………… (1.8)

1.6 IMPORTANCE OF THE EVALUATION

Through its findings, this study will assist in identifying the potential causes of improper accountability in financial management in the Nigerian public sector. It is also anticipated that the study will provide suggestions that will enhance the Nigerian public sector’s stability, effectiveness, efficiency, and service delivery.

The study will be of great benefit to accounting professionals, as it will assist them in improving their routine work and the financial administration of their respective parastatals. This work is invaluable to financial analysts because it provides a foundation for advising clients on investment decisions.

In addition, this research will encourage the administration of local government councils, state and federal ministries, agencies, and departments to develop policies that will improve their operations’ accountability, transparency, and probity. It will also aid government-established agencies in combating corruption within their parastatals. This study will also serve as a guide for students conducting future research on the subject.

1.7 Scope Of The Study And Its Limitations

This study investigates the effect of accountability on the financial management of the public sector in Nigeria, with a focus on selected government areas of Lagos State. Five local government areas of Lagos State, including Alimosho LGA, Badagry LGA, Kosofe LGA, Eti-Osa LGA, and Lagos Island LGA, were chosen as case studies.

Time constraints, financial constraints, and the unwillingness of respondents to provide the necessary data are the limitations of the study.

Taking into account the researcher’s other academic obligations, the time allocated for this study is relatively brief. Due to a lack of funds, the scope of the survey was restricted to five local government areas of Lagos State. In addition, the respondents, who are account officers in the selected LGAs, were uninterested in participating in the survey. Nonetheless, a thorough and fact-finding investigation is conducted.

1.8 Definition Of Key Terms

The following are the definitions of important terms:

Accountability

This refers to a relationship founded on the obligation to demonstrate and accept responsibility for performance in accordance with predetermined standards.

Financial Management

This involves making judgments regarding the provision and utilization of a company’s finances. It is a managerial activity focused on the planning and management of a company’s financial resources.

Public Service

This refers to the proportion of the economy that the government controls. It also comprises government-established organizations, ministries, departments, parastatals, and agencies.

Local authorities

This is Nigeria’s third level of governance. The local affairs of the people at the grass-roots level are controlled by the government at the lesser level.