CONTROL MECHANISM AND MANAGEMENT OF LOCAL GOVERNMENT FUNDS IN NIGERIA (A CASE STUDY OF KOGI STATE)
ABSTRACT
With emphasis on control mechanisms and the management of local government funds in Nigeria with Kogi state as a case study. This study was undertaken by making use of research questions and a theoretical framework to explain the ill-management of local government funds in Kogi state, Nigeria.
Data for this study were garnered through related literatures and questionnaires. The study went further to propose two null and alternative hypotheses each, which were reliably tested using chi- square statistical method. The study also made use of simple percentage method in the analysis of data derived from the questionnaire.
After the test of the hypotheses, it was concluded that the non- adherence to established fund control mechanisms by local government officials affects the efficient management of funds in the local government. The study also resolved that the efficient management of local government funds has a positive relationship with the development of local government areas.
The study made some startling revelations which includes that the major problem of local government is not lack of finance as often purported but mismanagement of funds; lack of accountability has become rife in the local government system because of the disregard for internal control mechanism; strict compliance with the internal control mechanism has not only intensified the level of corruption but as importantly led to serious dearth in social infrastructure (e.g. roads, water, electricity, health facilities, schools etc.
In order to ensure strict compliance with the internal control mechanisms, some recommendations were made and they are; adequate monitoring of funds; improved welfare for local government officials; proper documentation of income and expenditures; recruitment of trustworthy and competent officials etc.
TABLE OF CONTENTS
Title page I
Approval Page II
Certification Page III
Dedication IV
Acknowledgement V
Abstract VI
Table of contents VII
CHAPTER ONE
Introduction1
Statement of the Problem3
Objectives of the Study7
Significance of the Study8
Scope of the Study8
Limitations of the Study8
CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL FRAMEWORK
Literature Review10
Meaning of Local Government11
Historical Development of Local Government Administration in Nigeria13
Functions of Local Government23
Sources of Local Government Revenue in Nigeria24
Challenges to Revenue Generation in Local Governments in Nigeria27
Control Mechanisms for Local Government Funds in Nigeria29
The Application of Control Mechanisms in the Local Government System in Kogi State36
Factors that Affect the Effective Application of Local Government Funds Control Mechanism38
Effects of Ineffective Application of Local Government Funds Control Mechanism40
Hypotheses42
Theoretical Framework43
CHAPTER THREE: RESEARCH METHODOLOGY
Location of the Study48
Population of the Study48
Target Population of the Study48
Sampling Technique48
Method of Data Collection49
Method of Data Analysis51
CHAPTER FOUR: DATA PRESENTATION AND DISCUSSION OF FINDINGS
Data Presentation52
Discussion of Findings70
CHAPTER FIVE: SUMMARY, RECOMMENDATIONS AND CONCLUSION
Summary73
Recommendations75
5.3 Conclusion……………………………………………………………..…
BIBLIOGRAPHY APPENDIX
CHAPTER ONE
INTRODUCTION
Local government is a government at the grassroots level. According to Ojofeitimi (2000), the word “local” connotes that councils are meant for small communities and the word “government” means that they have certain attributes of government. Thus, local government can therefore be defined as “… a political sub-division of a nation (or in a federal system, a state) which is constituted by law and has substantial control of local affairs including the power to impose taxes or to demand labour for prescribed purposes. The main responsibilities of local governments in Nigeria as noted by Obinna (1998) include mobilization of local resources, promotion of social and economic improvement and development as well as national unity. They are also expected to carry out regional policies with respect to agriculture and selected industries, thereby helping to ameliorate unemployment. Part of the responsibilities of local governments includes revenue generation, budgeting, development planning, provision of services and community mobilization.
Given these multifarious responsibilities, local governments were equally bestowed with many sources of revenues to cope with these demands. Unfortunately, many local governments in Nigerian have taken this to be a filial responsibility as many local governments lack basic social amenities like pipe borne water, good road, recreational facilities etc.
An incisive look into local government administration in Kogi state is nonetheless different, as development in the rural and urban areas continue to remain a major challenge to the government of the state. Located in the North-central region, Kogi state boast of 21 local governments evenly spread to accelerate socio-economic development within its local jurisdictions. Despite this measure, most of the local government areas are far from the dream land. Faced with many challenges, the major challenge of local government administration in Kogi state and Nigeria at large is finance.
Finance as noted by Amujuri (2004: 109) is the brain as well as the central nervous system of any organization. It is the lubricant that makes administrative machinery especially of formal organizations work. Although, local governments require finance to
perform their statutory duties, the need for efficient management of available funds cannot be overemphasized (Tonwe, 1995).
Financial management has to do with the efficient use of funds. It is a method of showing and ascertaining the financial position of government or business from time to time (Light, 1974). Buoyed by the need to enthrone development within the local government areas in Nigeria, various financial regulations have been put in place to enhance good governance, accountability and transparency. But sadly enough, these regulations are rarely adhered to, as funds mend for development initiatives, most times end up in private accounts or pockets of principal officers of the local governments through various forms of corruption.
STATEMENT OF THE PROBLEM
Local government as a third tier of government was established with specific functions to assist the federal and state governments in enthroning effective rural development and good governance at the grassroots level (Nwankwo, 2004). However, the local governments system in Nigeria has failed to accelerate socio- economic and human development, mainly because of inadequate
funding. Adebayo et al (1973) argues that inadequate funding has contributed immensely to the failure of local governments to perform their primary functions.
Apart from generating funds through local taxes, the major source of revenue is through statutory allocations from the Federal and state governments. To this effect the federal government is mandated to remit 20% from the Federation Account on a monthly basis to local governments through State Joint Local Government Account while each state is expected to pay 10% of its internally generated revenue to its local government councils (Okafor, 2010). This financial arrangement is often distorted by the lack of genuine autonomy of local governments as their funds are rarely provided state governments. Elekwa (1996), Agbuzu (1985) and Dlakwa (1985) observed that local governments in Nigeria do not have substantial degree of financial autonomy to engage in any meaningful development.
Local governments have over the years suffered from the continued whittling down of their powers as state governments have continued to encroach upon what would normally have been the exclusive preserves of local governments and consequently there
has been a divorce between the people and government at their most basic levels.
Nwakwo (2004) blamed the lack of development in rural areas on poor financial management, which has over time hampered the completion of public projects, especially those that has to do with the provision of social welfare services. Most public projects in Nigeria are abandoned because of corruption. According to Aghayere (1997) corruption has for a long time has rendered local government administration inactive and devoid of concrete development activities. Corruption is predominantly wide spread, undiluted and unambiguous in the local government. It is a statement of fact that in the local government system, corruption has become all pervading, unabashed, uncontrolled and persistent. Corruption within the local government system is mainly perfected through; inflation of prices; ghost workers syndrome; award of contracts and subsequent abandonment; and outright payment of huge sums of money to political godfathers, etc.
In enthroning financial prudence and effective management of local government funds, a financial memoranda was developed. The financial memoranda is an internal control mechanism aimed
at guaranteeing accountability within the local government system. Due to poor supervision, socio-economic factors, biting inflation and sapping conditions etc, most local governments are not financially accountable and do not adhere strictly to the provisions of the financial memoranda (Agu, 2004).
The implications of poor management of local government funds cannot be overemphasized. Presently local government councils exist only in name not in service delivery as many local governments lack basic infrastructure such as; electricity, water, hospitals, roads and schools. Mismanagement of resources in the local government has also heightened; poverty, illiteracy, unemployment, crime etc.
Considering these aforementioned problems, this study poses the following research questions;
1) Are local governments adequately financed to carry out their constitutional responsibilities effectively in Kogi state?
2) Is the internal control mechanism for the management of local government funds being followed thoroughly in Kogi state?
3) What are the challenges to the effective management of funds in the local government system in Kogi state?
4) What are the consequences of poor management of funds in the local government system?
OBJECTIVES OF THE STUDY
The objectives of this study include;
1) to ascertain the financial viability of the local governments in Kogi state.
2) to ascertain the mechanism for effective management of local government funds and the extent to which they are complied with in Kogi state.
3) to determine the factors that impede the effective management of funds at the local government level in Kogi state.
4) to determine the effects of poor fund management on socio- economic and human development in Kogi state.
SINGNIFICANCE OF THE STUDY
Pragmatically, this study will help in recognizing more powerful ways of inculcating effective and efficient methods of control mechanism in the management of funds of local governments in Nigeria.
More so, it is equally hoped that this study will help local government functionaries and other political office holders in the effective management of funds. And it is also hoped that this study will contribute to the body of literatures on this subject.
SCOPE OF THE STUDY
The study focuses on control mechanisms and management of public funds in the local government system in Nigeria, particularly Kogi state.
LIMITATIONS OF THE STUDY
This study was constrained by the inability to get specific requisite reference materials and the unwillingness of most local government operatives to divulge certain information that would have helped the course of this study considerably.
The study was also faced with the overwhelming task of convincing most of the sample population to participate in this study by filling questionnaires distributed.
.