FINANCIAL CONTROL IN PUBLIC SECTOR AS A MEASURE FOR PREVENTING FRAUD AND FUND MISUSE (A Case Study of Federal Inland Revenue Service Ilorin)
TABLE OF CONTENTS
Table of contents vi
1.1 Introduction 1
1.2 Statement of the Research problem 5
1.3 Objective of the study 5
1.4 Significant of the study 5
1.5 Research Question 6
1.6 Scope of the study 7
1.7 Limitation of the study 8
1.8 Study plan 8
1.9 Definition of key terms 9
2.1 The public Sector 11
2.2 Difference between Public and
Private Sector Accounting 14
2.3Accountancy and Financial report16
2.4 Frauds and fund misuse 17
2.5 Causes of Frauds and fund misuse 19
2.6 Types of Frauds 21
2.7 Detection and Prevention of Frauds 23
2.8 The internal control system 24
2.9 Internal and External audit 28
2.10 Scope and Internal Audit 31
3.1 Definition 34
3.2 Method of data collection 34
3.3 Population and sample size 37
3.4 Sampling Techniques 37
3.5 Method of Data Analysis 37
ANALYSIS OF PRESENTATION OF DATA
4.1 Introduction 39
4.2 Data Collection 39
4.3 Data Analysis 40
4.4 Analysis of fraud and fund misuse data question 44
SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary 51
5.2 Conclusion 56
5.3 Recommendation 56
Public sector could be described as the government arm of a country. The three tiers of government in relation to Nigeria include the federal government, the state government and the local government.
Fraud and fund misuse over the year has been a threat to Nigeria economy. The need to prevent it gave birth to financial control system.
Fraud as a conscious premeditated action of a person or group of people with the intention of uttering the truth or fact for selfish personal and monetary gain”
Fraud involves the use of decent and trick and some times highly intelligent cunning and know-how.
The action takes the form of forgery, falsification of documents forging and uttering of signatures and out right.
Fund misuse on its own, occurs in most cases intentionally and it is thus a method of fraud perpetration in most pubic sector establishment.
The need for fraud and fund misuse prevention could be derived from a report fact contained in an extract from the human development report 1994 prepared by the united nations development programme (UNDP) stating that “Developing countries of the world save on estimated $125billion between 1987 and 1994 from reduced military spending but those funds cannot be linked with any development project that can improve the standard of living of their national” what were the fund used for?
1.2 STATEMENT OF THE RESEARCH PROBLEM
In Nigerian today, it’s a fact that accountability in its entire ramification has been unfamiliar to out public sector. This pathetic situation is assumed to be the cumulative effect of various problems confronting “financial control”. In Nigeria Public sector establishment. As a result, this research is being conducted to highlight the problem of frauds and misuses of funds in public sector and the need and significant importance of financial control system in the public sector.
Some of the major problems inhibiting financial control in public sector are as follows: Poor enforcement, procedures, late finalization of accounts, poor enforcement of laid down procedures or financial control, insufficient financial regulations and poor internal control system in various departments.
There is poor number of qualified accountants and professional in other management field to institute sound financial control system and this may be attributed to poor condition of services obtained in the public sector compared with that of private sectors. It is important to note, there is inadequate attention to revenue collection and expenditures resulting in under utilization, incremental budgetary system which encourage accounting officers and other privilege employees to misuse funds and perpetrate funds. There is also the problem of daily up-rise of financial requirements without constant review of a control procedures and existence of antiquated accounting and financial rules procedures development in accounting technology and government spending. The misuse of poor remuneration to public servant compared with other sector encourages inefficiency and fraudulent practices in public sector and poor services to the populace in turn encourage the third parties to perpetrate frauds in public sector.
There factors are problems inhibiting the effective application of both internal and external financial control system in public sector.
1.3 OBJECTIVE OF THE STUDY
The objective of the study are as follows:
⦁ To confirm the existence of financial control system in public sector.
⦁ To explain the role of internal control system
⦁ Detection and prevention of errors, frauds and misuse of public fund are indicated.
⦁ To explain the effect of tax office at improving tax collection procedures.
⦁ The relevance of auditing for effective control in public sector is explained.
⦁ To discuss the importance of auditing in the tax office.
1.4 SIGNIFICANCE OF THE STUDY
This study has much relevance and implication to the case study, all government ministries and parastatals, private sectors and Nigerian economy as a whole. the terrible affect of funds and misuse of public fund in government treasury leads to a basic set back paramount in public sector today. The set up of Nigeria and other developing countries of the world today is characterized with embezzlement, corruption and gross indiscipline and it’s the concern of every government of developing countries and even develop, countries to institute sound financial control strategy to save their respective economy from imminent collapse. This therefore calls for a study in this area.
1.5 RESEARCH QUESTIONS
1. Does financial control has been a major exercise in the public sector
2. Does fraud involves the use of decent and trick and some terms highly intelligent cunning.
3. Does adjustment for debtors and creditor are made at the end of the year in order to correct expenses or revenue into account in private sector.
4. Does public sector provide information necessary for faithful efficient, effective and economical management of a operation of and the entrusted to it.
1.6 SCOPE OF THE STUDY
The study has been majorly carried in Ilorin areas office of federal Inland Revenue Service. The system of financial control of the organization as a whole follows the same pattern with other areas and zonal offices. Reasonable exposures have been made of external and internal control devices applicable in the area office or efficient operation and other relevant financial control system operative in the organization as a whole as far as possible.
1.7 LIMITATION OF THE STUDY
Many problems were encountered during the course of this research work but in which I tried my best in order for the problems not to hinder the effectiveness of this research work.
1. FINANCIAL PROBLEMS: But in which I have to sources for more fund from my sponsors.
2. TIME CONSTRAINTS: In which I rescheduled my program so as to give enough time for the research work.
1.8 PLAN OF THE STUDY
This study is plan into five chapter, chapter one will consist of introduction and chapter two will cover there view of selected literature, research methodology in chapter three and analysis will be presented in chapter four, the last chapter which is chapter five will contain summary, conclusion and recommendation.
1.9 DEFINITION OF KEY TERMS
THE PUBLIC SECTOR: could be described as the government arm of a country. The three tiers of government in relation to Nigeria includes the federal government, the state government and the local government each tier of government lies its own role, power, responsibility, as described by the constitution and relevant decree.
FUND MISUSE: This is the most susceptible factor which fraudster usually relies upon when for instance, a figure is not properly written, it can easily be manipulated by fraudsters.
INTERNAL CONTROL SYSTEM: The meaning attached to the term “internal control” American institute of certified public accountants is a follows. It is the whole system of controls financial and otherwise adopted within a business to safeguard its assets.
INTERNAL AUDIT: means an independent appraised function established within an organization to examine and evaluate its activities as a services to the organization.
AUDITING: can be defined as an independent examination of the expression of an opinion on the financial statement of an enterprise by an appointed auditor in accordance with the term of his engagement in the compliance with relevant obligations and profession requirement.
EXTERNAL AUDIT: is an independent observation. The function of and external auditor is to examine the financial statement prepared by the management with a view to express opinion on the truth and fairness of the accounts.
ADVANCE FEES FRAUDS (419): This is a situation whereby a person promises another person of a contract already awarded and ask him to pay on advance fee to formalize the contract, thereafter the person disappears.
2.1 THE PUBLIC SECTOR
According to K. Oshisami and P. N. Dean (1992) “defined public sector as the government arm of a country”. The three tiers of government in relation to Nigeria includes the federal government, the state government and the local government. Each tier of government has its own role, power and responsibility as described by the constitution and relevant decree. Promulgated by the military government is the most superior of the tiers. It exercise specific power and control on the state government and local government affairs as well.
The state government similarly exercise control in relevant areas on local government especially in areas relating to finance and well being of the rural masses.
Government functions are divided into three arms namely: legislative, executive and judiciary. The above three arms exercise relevant, checks and balance on each other including area of financial control.
The executive arm and the legislative are however prominent in area of financial controls as public sectors organization in Nigerian are budget financial.
At periods when the military government is in existence as it can be seen to be the persistently occurring in Nigerian, the highest military ruling body as prescribed by such government performs the legislative task.
The executive comprises the president and is cabinet members who are charged with the various responsibility of the administration of the country politically. Economically and socially, all managers politically or economically taken by the government/president are subject to the approval of the legislature or the elected highest military ruling body. Hence, in accordance with section (75) of the constitution which say that “the president shall cause National Assembly at anytime in the financial year estimates for the next financial year.
The legislature: By tradition, the legislature or the highest military ruling body e.g. AFRC is the supreme authority in matters of National interest and finance.
The legislatures which consist of electorate representative consider and approve the estimate submitted by the presidency.
The following should be noted as some of the common feature on the public section.
⦁ Profit making not interest in their operations
⦁ It’s owned collectively by their constituencies
⦁ Those attributing financial resource to the organization do not necessary received a direct proportionate share of goods and services.