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NWOBODO, JOYCE IFEOMA
PG/MBA/06/45933
PG/M. Sc/09/51723
LOCAL GOVERNMENT FINANCIAL MANAGEMENT
A CASE STUDY OF ENUGU STATE
ACCOUNTACY
A THESIS SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCY, FACULTY OF
BUSINESS ADMINISTRATION, UNIVERSITY OF NIGERIA ENUGU CAMPUS
Webmaster
Digitally Signed by Webmaster’s Name
DN : CN = Webmaster’s name O= University of Nigeria, Nsukka
OU = Innovation Centre
OCTOBER, 2008
Title page
LOCAL GOVERNMENT FINANCIAL MANAGEMENT
A CASE STUDY OF ENUGU STATE
By
NWOBODO, JOYCE IFEOMA
PG/MBA/06/45933
A project in partial fulfillment of the requirement for the
award of masters in business administration accountancy.
Department of accountancy
University of Nigeria enugu campus
October 2008
Certification page
The work embodied in this project is original and has not been
submitted in part as in full for any other degree or diploma of
this or any other university.
____________________
nwobodo Joyce Ifeoma
this is to certify that Nwobodo Joyce Ifeoma, MBA student in
the Department of Accountancy with registration number
PG/MBA/06/45933 has satisfactory completed the requirements
for the award of Masters of Business Administration. (MBA) in
Accountancy.
______________ __________________
Dr. Mrs R.G. Okafor Dr. Mrs R.G. Okafor
Supervisor Head of Dept.
Dedication
To God Almighty, my parents and brothers and sisters.
Acknowledgment
My thanks go to the Almighty God who made it possible
for me to carry out this research work.
I passionately express my heart-felt gratitude to all those
who contributed in one way or the other to make this work a
success.
My sincere thanks go to my family members for their
moral and financial support towards my academic pursuit.
I am particularly grateful to my project supervisor Dr.
(Mrs) R.G. Okafor for her assistance and supervisory throughout
the period of the work.
Finally, I thank my entire lecturers in this program.
TABLE OF CONTENT
TITLE PAGE i
APPROVAL PAGE ii
DEDICATION iii
ACKNOWLEDGEMENT iv
TABLE OF CONTENT v
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF PROBLEM 9
1.3 OBJECTIVES OF THE STUDY 10
1.4 SIGNIFICANCE OF THE STUDY 11
1.5 SCOPE AND LIMITATION OF THE STUDY 12
1.6 STATEMENT OF HYPOTHESIS 13
1.7 DEFINITION OF TERMS 15
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION 16
2.2 CONCEPT OF FINANCIAL MANAGEMENT 18
2.3 THE NEED FOR LOCAL GOVERNMENT 19
2.4 SOURCES OF LOCAL GOVERNMENT FINANCE 23
2.5 FINANCIAL MANAGEMENT RESOURCES 26
2.6 RECRUITMENT OF PERSONNEL 29
2.6.1 INTERNAL AUDIT 30
2.6.2 COST CONTROL 32
2.6.3 CASH BUDGET 32
2.7 FUNCTIONS OF THE CHAIRMAN 33
2.8 FUNCTIONS OF THE TREASURER 35
2.9 MANAGEMENT OF THE AVAILABLE FUNDS. 38
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1 RESEARCH DESIGN 40
3.2 AREA OF THE STUDY 40
3.3 POPULATION OF THE STUDY 41
3.4 SAMPLE AND SAMPLING PROCEDURE 41
3.5 ADMINISTRATION AND COLLECTION OF DATA 42
3.6 SOURCES OF DATA 43
3.6.1 PRIMARY SOURCES 43
3.6.2 SECONDARY SOURCES 43
3.7 METHOD OF DATA ANALYSIS 44
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.1 ANALYSIS OF QUESTIONNAIRE OF DATA 48
4.2 TEST OF HYPOTHESIS 69
CHAPTER FIVE
SUMMARY RECOMMENDATION AND CONCLUSION
SUMMARY OF FINDINGS 76
CONCLUSION 78
RECOMMENDATION 79
BIBLIOGRAPHY 82
APPENDIX 84
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Local government is the third tier of government,
exercising authority within a defended area in a state. It is
designed to mobilize the people at the local level and to ensure
popular participation, by bringing the government nearer to the
majority of the population, put simply, it is aimed at bringing
even and rapid development at the grass root level throughout
the country.
The creation of local government is based on the principle
of decentralization the idea being that local governments nearer
to the people, have potential to increase grass roots participation
in the development process.
Before the 1976 local government reforms, local
governments in Nigeria were colonial innovation through which
the natives were involved in modern government in line with the
indirect rule system being practiced by the colonial masters.
Between 1980’s and the 1930’s, the colonial native
authorities were established in their rudimentary forms in the
country. Lord Lugard, the British administrator who became the
governor of amalgamated Nigeria in 1914 used traditional rulers
as natives authority to administer colonial policies especially in
the collection of taxes and rates to maintain the government of
the time.
However, the use of traditional rulers in the administration
of native authorities was possible in the northern part of the
country because of the already existing traditional institution,
Ugwu (1989:49)
Nonetheless, the situation was different in the southern
Nigeria, which introduced the system of chiefs-in-council, and
chiefs and council successively instead of sole native authorities.
By this arrangement, the chiefs and emirs were required at least
in theory to consult with the other members of the council.
The 1950s had also marked the beginning of the
democratization of the local government administration, with
the introduction of non-traditional elected or selected members
who constituted about 75 percent of the council membership.
Generally, between 1964 and 1974, the local government
authorities all over the country lost a number of their major
functions including local government police and prisons,
natives/customary courts in the northern and the then mid-
western and east central states, urban water supply, and in the
then southern states, primary school administration. This
phenomenon was one of the major factor which lowered the
status of local government and created uncertainty in the minds
of qualified or trained staff as to the nature of local government
in the country and hence led to their departure in large numbers
for other areas of the public service or the private sections.
It was because of the depression in the area of local
government and as part of the programmed for the return to civil
rule in 1979, that the then federal military government in
collaboration with the state government embarked on extensive
all purpose, single-tier local government reforms in 1976. This
was the case throughout the nineteen states into which Nigeria
had just been divided. This step is significant in one respect in
that for the first time in a quarter of a century a national rather
than a regional / state approach was adopted towards local
government.
The main features of the 1976 Local Government Reforms
Were:-
1. There should be only a single-ties system of local
Government throughout the country and each is to be
known as the local government authority with a population
range of 150,000 to 180,000. For the first time, in the
history of local government in Nigeria an effort was made
to introduce reforms throughout the country rather than the
state-by-state efforts of the past. What this means in effects
was that the federal government became directly involved
in local government and took the initiative from the state
governments.
2. Each local government should be all purpose in that it will
have full responsibility for all local government functions
(including the treasury) in its areas of authority.
3. The local government council will be large elected, the
elected members being at least 75% of the total
membership. The other members to be appointed by the
state military governor, will be traditional office holders
and persons nominated to represent special interests.
4. State government were made to set up local Government
Service Board /Commission to see to the improvement of
the caliber of personnel of the local governments and
where the right caliber could not be found locally, the state
government service.
5. There were full time chairmen, supervisory councilors and
non supervisory councilors as opposed to the system in the
past when there were only part-time councilors. Each
council was mandated to set up certain key committees,
such as:-
i. Finance and general purpose committee
ii. Health committee and
iii. Works committee Udem (1986:21)
The conditions of services for local government personnel
were made uniform with those of their state and federal
government counterparts.
Following the federal governments decision to create local
government based on Federal House of Representatives
Constituencies the number of local governments was increased
from 141 to 442 in 1988.
In response to further agitation by various communities in
the country, the number was increased again to 454 in 1989 and
589 in 1991, the latter figure excluding that of the FCT Abuja,
which has not assumed the majority status. Orewa (1966:113).
Although both federal and the state government assisted
these local governments, the amount given to them then as
grants was usually not enough to cope with the challenges,
especially in their educational, health and other social needs.
For example, with effect from April, 1977, the Federal
Government give a grant to 10 percent of its’ retained revenue to
all the local government in the country, while each state
government was required to give a grant of 10 percent of its’
total recurrent revenue to its’ local governments, using a criteria
of 75 percent population and 25 percent equality in sharing both
grants.
Both the federal and state grants were to be paid into the
state joints local government fund from where they would be
distributed to the various local governments. Bases upon the
reports of the Aboyade Technical committee, the 1979
constitution made provision for local governments to have direct
assets to nationally generated revenue. Thus the Okigbo
Commission recommended and the federal government accepted
(though the revenue Allocation Act No. 1 of 1981). That local
government is entitled to ten percent of the federation account
to be distributed among the states on the criteria of 50 percent
population, 40 percent equally and 10 percent land mass. The
state was required to add 10 percent of its’ total internal revenue
to the fund, so that the total receipts from both sources would be
shared to the local governments in the state using the criteria
approved by the state House of Assembly.
The shares of local governments in the federation
account were increased to 15 percent in 1990 at the expense of
that of the federal government whose share was reduced to 50
percent. This move was aimed at enabling the local governments
cope with the challenges posed by the 1989 constitution, which
made the payment of the emolument of the primary schools;
teaching and non teaching staff their exclusive responsibility.
By 1991, the revenue allocation of local government
was again reviewed upwards to twenty percent. Yet the local
government were still agitating for additional allocations to
enable them meet their increased responsibilities.
We can see that at the present the sources of revenue
to local government in the federation can be classified as
external and internal.
External sources include government grants, and
levies in business enterprises while internal sources include
rates, tickets, sales from agricultural farms produces,
commercial services, such as hire of council’s plants and
equipment, and money realized from mass transit buses.
The management of such funds is the exclusive
responsibility of the local government chairmen or sole
administrators and as such should be held responsible and
accountable for such funds. (Aboyemi et al 1991:54)
1.2 STATEMENT OF PROBLEMS
For some years now, there has been persistent out cry from
the chairmen, and Heads of Personnel and Management (HPM)
of our local government areas in the various states of the
federation as to the inadequacy of funds for use in running of
their administration. We hear all these over the radio and
television and read them in national and local daily newspapers.
Most of the chairmen have claimed that poor funding is
hindering them from embarking on some worthwhile
developmental projects. It is because of these continuous
complaints and outcry that we would like to ask as follows:-
a. How do these local government authorities obtain their
funds?
b. How these funds are prudently managed?
c. Are there any other sources of funds apart from federal
and state government grants available to these local
governments for generating revenue?
d. What efforts are being made to secure and tap such
sources of funds?
1.3 OBJECTIVES OF STUDY:
With regards to the problems mentioned above, it is
our intention to carry out research and find out among other
things the followings:-
1. The various sources of funds in local government areas
and particularly in Nkanu East local government and
Igboeze North local government areas and Nsukka local
government.
2. How prudent, efficient and effective are all those who
are entrusted with the task of managing these funds are
carried out.
3. How are the various funds generated by the Nsukka,
Nkanu East and Igboeze North local government area in
Enugu State used in day-to-day administration of the
council and suggestion of other avenue through which
local government can generate more funds in future.
4. What are the feeling of the junior workers under them
as regards with utilization of the available funds and
how their feelings affecting their performance and
productivity.
5. To text the hypothesis formulated in the next chapter.
By so doing, we shall be contributing to academic
knowledge and at the same time assisting the local
government in Nigeria to live up to expectation as it
regards to financial management.
1.4 SIGNIFICANCE OF THE STUDY
This study is necessary because of the claim that
local governments are not adequately funded. It will be recalled
that the federal government is laying much emphasis on the
development of rural areas using local governments as
springboard.
This study intends to achieve the following:-
1. This study will be beneficial to local governments in
Nigeria as it would help policy makers to take action that
would lead to solving problems of financial management
in the local government councils.
2. By providing and understanding of the financial
management of local government, this study will be of use
in correcting the wideffened ignorance of and
misunderstanding of local government.
3. This study intends to give some useful solutions towards
effective financial management in the local government
system so as to achieve the purpose for which the local
government, the third timer of government has created.
1.5 SCOPES AND LIMITATION OF THE STUDY
As a result, a student with limited resources, it is not
easy to go beyond the scope of this study. This fact necessitated
by limiting my area of research work to Nkanu East, Nsukka
local government and Igbo-eze North local government council.
It is my desire to collect all data, samples and related
information from the council’s office.
Some of the problems as long as the council local
government is concerned are an availing to the researcher
classified information belonging to it. Most of the staff of the
local government council is not willing to understand the
relevance of the research as they bluntly refuse to disclose vital
information to the researcher.
In view of the hard time, coupled with the rising cost
of goods and services everyday, the researcher’s analysis,
findings and conclusion will be based on the data collected form
the local government office.
1.6 STATEMENT OF HYPOTHESIS:
For the following purpose of this work we made these
assumptions;
1. HO: The Federal grants, state subventions and local rates
constitutes the major source of generating revenue
for the local government.
H1: The Federal grants, state subventions and local Rates
does not constitute the major sources of generating
revenue to the local government
2. HO: Nkanu East, Nsukka and Igbo-eze North local
government authority make proper use of the
approved yearly estimate/budget.
H1: Nkanu East, Nsukka and Igbo-eze North local
Government authority do not make proper use of the
approved yearly estimate/budget.
3. HO: The staff strength of the local Government is
sufficient
To generate enough revenue for the local
government.
H1: The staff strength of the local government is not
sufficient to generate enough revenue for the local
government.
1.7 DEFINITION OF TERMS
a. Financial management: This is the act of raising of funds
whenever needed, for the right length of time, at the right
proportion and it’s effective and efficient utilization.
b. Misappropriation:- The use of public money for purposes
other than that provided by financial instruction and the
appropriate law.
c. FAAC:- Federal Account Allocation Committee:- A
Committee, charged with the responsibility of disbursing
funds to the state and local government.
d. Budget: This is the estimate of future income and expenditure
over a year made by government, a business company or a
private person.
e. Budgetary control:- Is the use of budget for assigning
responsibilities, planning and controlling performance and
guiding the management and other activities towards the
achievement of the organization’s objectives or goals.
f. Market toll: Is a type of revenue collected from store owners
in all the markets within the local government authority.
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION:
Any organization be it local, state, national or
international organization needs finance to stand sound footed.
And for the fact that the activities of any organization have to be
expressed in monetary terms, it follows that every type of
management decision has to be seen in the context of finance. It
is the amount of money in hand that determines that level of
investment determined by the state of the economy at any point
in time. Inflow of capital both domestic and foreign can help to
renew productive capacity and fuel growth.
Finance is a determinant for proper functioning of any
organization. And adequate or inadequate financing of any
organization can give rise to either instant development or a
poor one. While most experts believe that finance is the main
factor that militates against the employment of good materials or
competent staff and provision of effective services, others are
more interested in knowing how these finances are managed to
utilize their activities.
The task of grass-root economic growth and development
can hardly be achieved without involvement and support of the
local government. The operational activities of local government
have more direct bearing on the living conditions and welfare of
the individual than those of higher levels of government. It
could indeed be argued that whereas an effective local
government could make up for the neglect or ineptitude of
higher levels of government in grass-root development, the
reverse is hardly ever the case. In other words, no amount of
assistance by higher levels of government can ever compensate
fully for the ineptitude of the local government. Every
individual therefore has a primary stake on how well his local
government is run.
If local governments are to serve as key motivators and
promoters of grass-roots developments, they must be
sufficiently empowered with appropriate authority. They must
also be well funded to discharge such functions.
Many local governments have not performed very well in
the past. The ready and handy excuse offered is lack of funds.
Available evidence indicates however that available funds are
often not effectively managed (Olaliku 1989).
2:2 CONCEPT OF FINANCIAL MANAGEMENT
In the context of the local government, the financial
management function is the responsibility of the treasury and
audit staff. The concept of financial management is to identify
what tasks or functions are performed in the discharge of that
function.
They key tasks of that function include:-
i. Effective management of financial resources by ensuring
effective utilization of funds to generate income.
ii. Mobilization of sufficient financial resources to finance the
operating and capital needs of the local government.
iii. Effective budgeting to ascertain the financial needs of the
local government for a defined period.
iv. Control of expenditure to minimize cost and prevent
unauthorized use of resources.
v. Proper financial record keeping and prompt financial
reporting to promote transparency. (Oshisami and Dean
1984).
The task of financial management makes it of focal issues in
the administration of the local government or any other form of
organization for that matter.
2.3 THE NEED FOR LOCAL GOVERNMENT
Local government are expected to cooperate with national
government in contributing to the maximization of general
welfare by providing the foundations for basic functions of
government; thereby acting as an engine of social and economic
betterment.
Obinna (1983pg3) a society may resort to local
government for leveling out excessive inequalities in the
distribution of wealth, for checking out inflationary profiteering
and for promoting economic and political stability generally
because of highly centralized government is not likely to be
sensitive to differences in local preference, the need arises for
some measures of decentralization which would respect local
variations and be more efficient in dealing with local matters on
the spot.
According to Eze (1989:10pg 100) local government are
created mainly because of the following reasons:
a. There are amenities and services, which can best be
provided on a local basis. In such cases, local initiatives
and efforts are required in order to provide the money,
materials and areas have different traditions and
sometimes manpower.
b. Different towns and areas have different traditions and
customs which are before preserved under local
government.
c. There is a greater commitment by the people to solving
purely local problems and people are more willing to
pay in certain situation, revenue are more easily
generated by system with strong central government.
d. The state and federal government are remote from the
people and often cannot appreciate the problems of the
locality.
The political economy of local government has two major
inter-related dimensions namely, the mandate of local
governments i.e. their functions and responsibilities and the
resources base of local governments. Both of them are basically
constitutional issues. Thus the functions and responsibilities are
clearly spelt out in the fourth schedule of the 1999 constitution
while the resources base is covered, at least in part, by section
162 of the same constitution.
FUNCTIONS AND RESPONSIBILITIES
The mandate of local governments fall into two broad
categories first functions within the exclusive list or jurisdiction
of local governments and secondary functions even which local
governments share concurrent jurisdiction with state
governments.
Among the functions in the exclusive list are:-
i. Formulation and execution of economic plans and
development schemes for the local government areas.
ii. Provision and maintenance of basic socio-economci
infrastructural facilities.
iii. Establishment, maintenance and regulation of markets,
shopping centers, motor parks and slaughter houses.
iv. Licensing of bicycles, trucks, wheelbarrows and carts.
v. Control and regulation of outdoor advertising, shops
and kiosks, restaurants, bakeries and laundries.
vi. Registration of births, marriages and death and the
maintenance of such vital statistics.
The major functions in the concurrent legislative list, on the
other hand include:
i. Provisions and management of primary, adult and
vocational education.
ii. Development of agriculture.
iii. Promotion of cottage and small scale industries.
iv. Provisions and maintenance of health centers, funeral
homes and cottage hospitals.
v. Control of erosion and other forms of environmental
degradation.
A local government with the right leadership foresight and
management ability will find ample room, within the
constitution, to make the mark in various facets of the socio-
economic life of the community. A progressive local
government would endeavour to promote socio-economic
projects that generate employment opportunities and increase
the income level of community.
2.4 SOURCES OF LOCAL GOVERNMENT FINANCE
in order to carry out its functions the local government
must have assured finances. Local government finances may be
internally or externally saved. Two major sources of revenue are
open to local governments in Nigeria, namely, statutory
allocation (STA) and internally generated revenue (IGR).
A statutory allocation refers to revenue due and payable to
local governments from the federal government (Federal
Account) as well as from the collectible revenue of the relevant
state government. These allocations are provided for and
governed by the Nigerian constitution. The amount accruable
from this source depends first on the revenue sharing formula
applicable at the time and secondly on the amount of revenue
collected by the higher levels of government for the period.
Thus section 162(3) of the 1999 constitution provides that
the federal collectible revenue be distributed among the federal,
state and local governments on such terms and in such manner
as may be prescribed by the National Assembly. But currently,
local governments are entitled to 20% of the amount accruing to
the federal distributable pool account. The allocation is now to
be disbursed direct to local governments.
As equally important external source of finance is the
grant received from the central government. Grant in aid may be
defined as sources of money remitted by the national
government from the central fund for use by the lower layers of
government such as states and local governments in provisions
of public goods and services. Grant may be conditional or
unconditional. Conditionally, if they are payable for provision of
specific services and unconditional if they can be used by the
recipient government for any legal purpose.
General, central governments grants to local governments
are made to serve four principal functions.
1. To augment the resources of local government.
2. To meet the exceptional needs or the limited means of
particular area.
3. To assist central control over particular services.
4. To influence aggregate local government expenditure, as
part of the process of controlling the nature economy.
Egonnwan classified grants into specific grants which are
grants made to meet the cost of particular services, like
education and health and block grants which are designed to aid
local government expenditure generally most of the time; a
specific grant is also a percentage grant, based on the actual
expenditure incurred by the local authorities in the production
of a particular services; in order to raise the standard of a
service and encourage its production by the council. Some other
times, specific grants are made on a unit basis related to the
actual number of people served or units of service rendered to
the community.
On the other hand, internally generated revenue is revenue,
which a local government could raise from sources other than its
statutory allocation. The bulk of such revenue is generated in the
course of discharging the mandate of local government.
Currently, local governments are entitled to 10 percent of the
internally generated revenue of each state.
The main sources of internal revenue for local
governments include the following:-
i. Tenement rates of various types.
ii. Licensing fees on various items such as bicycles, radio,
television, trucks, canoes, wheelbarrows and carts.
iii. Revenue from miscellaneous sources such as donations,
investment income.
iv. Fees from motor parks, market stalls, slaughterhouses,
slaughter slabs and public conveniences.
v. Charges for refuse disposal, registration of birth,
marriages and deaths. Etc.
2.5 FINANCIAL MANAGEMENT RESOURCES
We have been reviewing the different ways of financing
our local governments without looking at how such funds could
be managed. One thing is to obtain finance while another is
how. It will be utilized to achieve the desire objectives.
Therefore the importance of good management and planning
cannot be over emphasized.
Emekekwe P. (2002:1), Defines financial management as
an amalgam of planning, organizing and control of the resources
available to an organization in order to meet the demands of the
various claimants of the company. These resources are identified
as human and material resources. Again, management can be
seen as a process by which a co-operative group directs the
actions of others towards a common goal or objectives.
Furthermore, it can still be defined as a process that is as a series
of actions, activities or operations, which lead to some end. The
study of financial management must take into account all
aspects including the flow of funds between various sectors of
the overall economy.
He further identifies three tasks facing a financial manager as:-
1. Strategic planning
2. Financial management control or organizing
3. Operational control.
STRATEGIC PLANNING:
This is a process where financial manager has to plan for
the future financial requirements of the organization. Since this
cannot take place in a vacuum, good planning must consider the
nature of the future environment in which the planning decision
will be executed. Planning involves selection from alternatives
hence to plan effectively, the future must be anticipated. It is
deciding in audience what to do, how to do it, when to do it and
who is to do it. Planning thus bridges the gap from where we are
to wherever we are to go.
FINANCIAL MANAGEMENT CONTROL OR ORGANIZING.
Financial manager has to organize how the firm can
obtain more resources while at the same maximizing the use of
it exists resources. It is not first enough for the firm to continue
procuring funds without marking judicious use of the existing
resources. At this junction, the financial manager would match
the inflow of cash balances to ensure effective and efficient
accomplishment of the organizational objectives.
OPERATIONAL CONTROL
Financial manager has to decide how the procured founds
will be utilized. To do this, he has to establish utilization
standards to compliance with desired targets. Control implies
measurement of accomplishment of events, against standard of
plans, and the correction of deviations to assure attainment of
objectives according to plan.
2.6 RECRUITMENT OF PERSONNEL
The objective of the local government council as contained
in the 1979 constitution fourth schedule include:-
1. Construction and maintenance of roads, streets, drain parks
and other public facilities prescribed by the legislature.
2. Provisions and maintenance of public conveniences and
facilities for refuse disposal.
3. Establishment and maintenance of markets, car parks and
public conveniences.
Based on the above objectives, the goal of the entire local
government are clearly stated and defined in the constitution and
what is required the right caliber of personnel to carry them out.
This is an important area where good management comes into
play. The much, which the government is able, the amount the
council is able to generate internally need prudent management
hence the need for sound accounting and control system of our
local government.
2.6.1 INTERNAL AUDIT
The implementation guidelines on the application of civil
service reforms in the local government service 1988 created
the office of the director of local government Audit in the state
and the establishment in each local government and internal
audit. The internal auditor is directly responsible to the
accounting officer (the chairman). He shall be responsible to
provide a complete and continuous audit of the accounts and
records; of revenue, expenditure, plant allocated and unallocated
in the stores where applicable to the accounting offices as well
as the director of local government audit.
In a like manner, Pemy et al (1985:151) were of the view
that internal audit department of any organization plays the
following roles:-
1. Ensuring adherence to the accounting policies and
procedures promulgated by the management.
2. Providing assurance that adequate controls are being
followed at all times so as to prevent similar
irregularities.
3. Conducting operational review with a view to
improving the organization’s profitability.
4. Preparation of standing orders and instruction in the
signing of cheque issued.
5. Centralization of all payments to and out of the council.
Prior to the implementation guidelines of 1988, local
government authority’s accounts were being audited from time
to time, often by non-professional and with regard to legality but
not to the value of money. More often than not audits were
conducted too late.
2:6:2 COST CONTROLS:
According to Nweze A. (2003:19) Cost is a
measurement in monetary terms of resources used for some
purposes. Also to help in proper financial management for
effective cost control unit which is to be headed by a qualified
cost accountant. Cost control is further divided into two aspect
parts, operational control and accounting control.
Operational control has to do with cost control through
observation and supervision waste, idleness, inefficiency and
other cost leak under check. That is to say that proper
functioning of government.
2:6:3 CASH BUDGET
Another point to be looked into in financial
management is cash budget disbursement during a specified
period. Its purpose includes revealing to the financial controller
the firming and magnitude of expected cash inflows over the
budget period. It highlights the cash implications of the planned
production and incorporates other expenditures and revenue
expected within the budget period.
J.Wald (1978:119) said that the most carefully prepared
plans are incapable of fulfillment of adequate cash, is not
available at the right time. The preparation of cash budget or
forecast is therefore of the utmost importance both in the short
term budget period and especially in a longer period.
When one takes a look at what is obtained in practice most
of this local government does not adhere strictly to the cash
budget. The amount spent on certain items in the estimate is
often twice as much as what was stipulated in the approved
budget. To them, budget is just a mere paper work, which they
usually prepare, based on the recommendation of the state
government.
2:7 FUNCTIONS OF THE CHAIRMAN
according to the handbook in local government
administration (1992:52). “The chairman of each local
government shall be the direct accounting and executive officer
of the local government provided his role as accounting officer
shall exclude signing vouchers and cheques”. Ugwu F.N.
(2003:112) chipped in his owns views by saying that the
chairman is the accounting officers of the local government and
performs all function expected of an accounting officer and also
Head of the executive arm of the local government. For the
avoidance of doubt, vouchers and cheques shall be signed by the
Head of Personnel Management Department and Treasurer of
the local government.
The local government officials i.e. (chairman) are
pressuring the federal government to increase the federal grants
from twenty percent to twenty-five percent because the said
grant is not enough especially to the local government offices,
located in the rural areas which have little or no other internal or
external sources of raising revenue to carry out effectively the
above mentioned programmes, moreover, when about five
percent of the grant usually deducted at source and paid into the
account of the National Primary Education Commission
(NPEC). This is a commission set up by the federal government
to take charge of primary education in the country.
2:8 FUNCTIONS OF THE TREASURER:
While the Head of Personnel Management to the local
government has the taste of signing cheques and other duties
assigned to him by the chairman, the treasurer and other top
civil servant are playing an important role here. Ugwu F.N.
(2003:112) described him (the treasurer) as the enquire without
whom the train cannot move. According to him the following
are his functions:-
1. Receiving and disbursing money
2. Keeping proper accounting records of money received
and spent.
3. Seeing that financial instructions are observed
4. Ensuring that all revenue belonging to the council is
collected.
5. Seeing that policies and expenditures are carried out
without due regard to the economy and value of money.
6. Making necessary returns to the state government.
7. Informing the council regularly of the state of its
finances.
8. Giving financial advice to the council.
9. Maintaining efficiently run and satisfied financial
operations.
Because of the importance of the treasurer and the general
lack of well-qualified junior financial or accounting staff, it is
important that a suitable qualified, experienced and energetic
persons fill this post, Rowland maintains that the tendency for
the treasurer to fulfill only a name range of, his functions
examples those pertaining to disbursement and book keeping is
a significant barriers to good financial management. He
proposed training as a solution.
However, the objectives of the training programmes are:-
1. To provides in service training for serving staff of the
local government and to equip them with knowledge
and skills by modern local governments.
2. To equip the local government personnel with sufficient
knowledge of the political process and institutions of
Nigeria.
3. To enable them to acquire reasonable knowledge of the
role of local government and its various branches in the
national development and governmental process and a
similar grasp of the principles of local government.
4. To provide middle and high level public management
training of the development of senior executives for the
civil services and parastatals of federal state and local
levels of government.
5. To undertake, organize and facilitate, study courses,
conference, workshops, lectures and seminars in which
scholars and administrators can harmonize theory and
practice.
The federal government decided to finance co-ordinated and
comprehensive local government training in Public
Administration and financial management. The decision was
influenced by the result of the nation-wide manpower survey of
local government 1977/78 which revealed a serious shortage of
trained manpower in the administrative, financial professional
and technical areas of local administrative. In order to tackle the
problem the federal government created three local government
training zone and assigned each of them to three universities
based on department of Public Administration. The universities
are Ahmed Bello University to serve the northern zone,
University of Ife to take charge of the Western zone and the
University of Nigeria Nsukka to take charge of the eastern
states.
Today, the local government can boost of graduates who
heads at least the different department in the local government.
2:9 MANAGEMENT OF THE AVAILABLE FUNDS.
From all indications, the local government in Nigeria does
not adhere strictly in the management of their funds. Reports
from Enugu North, Enugu South and Nkanu East local
government, which visited, showed that expenses as contained
in the books of accounts are not used in the proper way. The
approved estimate is just a mere paper work and to fulfill the
requirements of the local government commission. Some of the
local governments do not even have a clear record of the
expenditure extracts. For example in the 2004 approved estimate
of Nkanu East local government council, a total of N1, 750,000
was spent on stationery and printing services as against the
approved estimate of N450,000. The same with utility services
in which N1, 900,000 was spent as against N1,494.057 were
spent on overhead cost nothing like new recruitment.
The example is endless and the enquires shows that it is
not peculiar to the three local government mentioned earlier.
CHAPTER THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
In the chapter the following issues are described namely,
the research design, area of study, population of the study,
sample and sampling procedure, sources of data and method of
data analysis.
3.1 RESEARCH DESIGN
the design of this study is descriptive and exploratory in
nature. It has combined and made use of preliminary study,
personal observation, oral interviews and use of questionnaire.
The questionnaire developed for the study was mainly
designed for all categories of staff in Nsukka, nkanu east and
Igbo eze north local government council that is for cadre of
staff.
3.2 AREA OF STUDY
The Nsukka, Igbo-eze North and Nkanu East local
government council headquarter were made for the study. It
covers all categories of staff of the local government including
their field revenue collectors.
3.3 POPULATION OF THE STUDY
In the opinion of Emma E. O. (2002:98) population in
research refers to animate and inanimate things of which the
study is focused. Population of this study includes Nsukka,
Igbo-eze North and Nkanu East local government headquarters
in Enugu state.
3.4 SAMPLE AND SAMPLING PROCEDURE
in consideration of limited financial disposition of
researcher, however a sample size determination is imperative
sequel to Onwe (1998:21) the Taro Yemeni’s formulae of
determining sample size was used to determine statistically the
appropriate sample as:-
Y = n N
I+N(e)2
Where n = desired sample size
N = population size
e = maximum acceptable error of 5%
i = is a theoretical constant.
In Nkanu East local government, a sample size of 140
employees, 135 in Nsukka and 125 employees in Igbo-eze North
local government were drawn from the entire population.
Solution:-
N = 400
1+400(0.05)2
= 400
1+400(0.0025)
= 400
1+1.0
= 400
2.0
= 200 employees.
But for conveniences and easy calculations, 200
employees of the three local governments are to be used as our
sample size. This means that 200 questionnaires are to be
produced.
3.5 ADMINISTRATION AND COLLECTION OF DATA
The questionnaire was distributed and the researcher
herself did collection of the responses. Out of the 200
questionnaires distributed 192 or 96.75% was returned
remaining a balance of 8 or 3.25% questionnaires unreturned. It
is possible that the unreturned questionnaires may have got lost
or that the respondents have refused to return them.
However, it is accepted since the unreturned
questionnaires are not more than 5% of the expected error in our
research.
3.6 SOURCES OF DATA
The data used in this work was collected from both
primary and secondary sources.
3.6.1 PRIMARY DATA SOURCES
Under the primary sources, information was collected
through the use of structured questionnaires. And also through
face of face interview.
3.6.2 SECONDARY DATA SOURCES
It is essentially to state here that this study started with the
review of relevant literatures. Also external information is
obtained from textbooks, business journals, and magazines.
It is also pertinent to point out that some ideas were
borrowed from works carried out by other students especially in
similar works and colleagues in the department.
3.7 METHODS OF DATA ANALYSIS
chi- square formula is going to be used in testing the
hypothesis of the study.
Chi-square formula
= F0 = n2 (oi-ei)
2
i=1 ei
where = oi = observed frequency
ei = expected frequency
2
F0 = Calculated chi-square
2
Fe = expected Chi-square of 5% level of confidence.
CHAPTER FOUR
4.0 PRESENTATION AND ANALYSIS OF DATA
In this chapter, the researcher is going to present and
analyze the data collected in the course of the research. This is
to enable me have an insight into the response of the
respondents and other information connected with the subject
matter. The analysis and interpretation of the data will be in
simple percentage.
The information presented here are the answers given by
respondents on the financial management in the local
government system in Enugu State and the personal interview
conducted by the researcher.
The presentation of facts and data are carried out based on
the proposition formulated for the purpose of this study. These
include:-
2. The various sources of funds available in the local
Government with regard to Enugu state.
3. How are the various funds generated by the council used
in its’ administration.
4. How prudent efficient and effective are officers’
entrusted with the local government funds.
5. Misplacement of priority has hampered the growth of
local
6. Why there are cases of funds in the local government
system.
QUESTION 1:
This was designed to determine the number of male and
female respondents to the questionnaire.
TABLE 4:1:1
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Male 58 32 38 128 67
Female 24 18 22 64 33
Total 82 50 60 192 100
The above table shows that there are 128 male respondents
or 67% while there are 64 females representing 33% of the
sample size.
QUESTION 2:
Salary per Annum:
The purpose of this question is to determine the annual
salaries of he respondents. This is tabulated as follows:-
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Below
5,000
- - - - -
6,000 –
1000
21 15 17 53 27.6
11,000 –
15,000
36 20 26 82 42.7
16,000
and above
25 15 17 57 29.7
Total 82 50 60 192 100
ANALYSIS AND INTERPRETATIONS: -
The group of officers whose salary is between 6, 000 to
10,000 constitutes 27.6% of the respondents while on 11,000
and 15,000 constitutes 42.7%. Also in the respondents are
officers whose salary is between 16,000 and above and it
constitutes 29.7% of the respondents.
QUESTION 3:
For how long have you been in the local government system?
This question is intended to be used to obtain the number
of years the respondents have served in the local government
system and to know whether his/her response is reliable or not.
TABLE 4:1:3
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Below
5yrs
8 4 6 18 9.4
Between
6 to 10
years
17 10 13 40 20.8
Between
11
to 15
years
39 24 17 80 41.7
Between
16 and
above
28 12 14 54 28.1
Total 82 50 60 192 100
ANALYSIS AND INTERPRETATION:
Based on the above tabulation over 69% of the
respondents have been in the local government for not less than
eleven years. This means that they must have gathered enough
experience in the system.
QUESTION 4:
Do you have enough staff in the local government?
This is used to know whether there is enough staff in the
local government Area to generate revenue to the council.
TABLE 4:1:4
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Yes 74 46 58 178 92.7
No 8 4 2 14 7.3
Total 82 50 60 192 100
ANALYSIS AND INTERPRETATION:
From the above respondents, the local government has got
enough manpower to generate revenue to the council.
QUESTION 6:
What are the major sources of revenue available to the local
government in the state?
This question is intended to be used to ascertain the major
sources of revenue available to the local government in the state.
TABLE 4:1:6
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Dev. Rate 9 3 10 22 11.5
Slaughter
fee
5 2 3 10 5.2
Govt.
grant
62 40 43 145 75.5
Mkt. &
Motor
park fees
6 5 4 15 7.8
Total 82 50 60 192 100
ANALYSIS AND INTERPRETATION
Revenue to our local government authorities is from two
main sources, namely internal and external sources. Grants from
the federal and state government constitute the major sources of
revenue to the councils. Over 75% of the respondents
maintained the development rate; slaughter fees and market and
motor park fees are the major sources of revenue.
QUESTION 7
Apart from the federal grant, state subvention and local
rates, is there any other means of generating revenue for the
council?
This question is designed to verify whether there are other
sources of revenue to the council.
TABLE 4:1:7
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Yes 76 47 56 180 93.75
No 6 3 4 12 6.25
Total 82 50 60 192 100
ANALYSIS AND INTERPRETATION
The above tables shows that about 94% of respondents attested
to the fact that there are other means of generating revenue apart
from federal grant, state subvention and local rates.
QUESTION 8
If yes, what are those sources?
The purpose of this particular is designed to elicit from the
respondents whether there are other sources at generating
revenue to the local government apart from federal grants, state
subventions and local rates.
TABLE 4:1:8
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Mkt. &
motor park
fees
52 28 40 120 62.5
Bicycle
license fees
11 8 10 29 15.1
Registration
of birth &
death
10 5 7 22 11.5
Hawkers
permit
9 9 3 21 10.8
Total 82 50 60 192 100
ANALYSIS AND INTERPRETATION
Based on the above data, we now believe that apart from
federal grant and state subvention that 62% of the internally
generated revenues comes from motor parks and market fees.
However, other sources like bicycle license fees, registration of
birth and death, hawkers permit constitutes the remaining 38%.
QUESTION 9
Apart from the above mentioned sources, what other
investments / Revenue yielding ventures do the local
government engages on?
This question is to enable us verify whether the local
government engages on any other revenue yielding ventures
apart from the ones mentioned above.
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Poultry
farming
7 3 4 14 7.3
Mass
transit
68 40 47 155 80.7
Palm
plantation
5 6 8 19 9.9
Prod. of
home made
goods
2 1 1 4 2.1
Total 82 50 60 192 100
Based on this, we can conclude that mass transit
constitutes one of the major sources of revenue generation to
the local government. This statement is true based on the fact
that most of the local government areas in the state and beyond
have their own mass transit system.
QUESTION 10
Who are the officials that constitute the finance and general
purpose (F & G) committee of the council?
The purpose of this question is to enable us know the
officers that constitutes the finance and general purpose (F&G)
committee since this committee is responsible for the product
management of the local government finances. Since the
answers to this questions (a) the chairman and his vice.
(b) the supervisory councilors for Agriculture, Works, Education
and Health including Supervisor for finance, H.P.M. Treasurer
and Secretary of the local government area and more than three
quarter of the respondents get it right, we therefore conclude that
the answer from the respondents are correct.
QUESTION 11
What are the functions of the finance and general-purpose
committee?
The question is designed to find out the reasons for setting
up this committee and their functions. Because the above
question is an open ended one and it is obvious that the answers
from the respondents must not be exactly the same. However,
the answers are not far from the ones listed hereunder.
a. The finance and general-purpose committee (F&G) is
responsible for formulating policies that concerns finance
disbursement in the local government.
b. They negotiates and endorses projects before they are
being executed.
c. The finance and general purpose committee are
responsible for awarding contracts.
d. The finance and general purpose committee ensures that
funds are used judiciously as targeted.
Based on this, we can conclude that the finance and
general-purpose committee is an important committee in the
local government system.
QUESTION 12
Who are the local government financial basic trustees?
The purpose is to client from the respondents the
financial/Bank trustees in the local government system.
TABLE 4:1:10
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Cashier 6 4 5 15 7.8
H.P.M 30 20 25 75 39.1
Head of
Dept
3 2 2 7 3.6
Treasurer 41 23 27 91 47.4
Inter
Auditor
2 1 1 4 2.0
Total 82 50 60 192 100
Based on the above respondents, we can conclude that the
head of Personnel Management (HPM) and the Treasurer are the
local government bank trustees. However, the chairman of each
local government remains the accounting officers of the local
government, but the chairman is not one of the signatories and
does not sign cheques and vouchers used for payment.
The chairman is performing his duty as the accounting
officer observes and compiles fully with the checks and balances
spelt out in the existing guidelines and financial regulation
governing receipts and disbursement of public funds and other
assets entrusted to his care and shall be reliable for any breach
thereof.
In other words, the signatories to the account cannot
withdraw any money without the knowledge of the chairman.
QUESTION 13
What is the system in use for auditing the accounts of the local
government?
The purpose is to enable us ascertain the type of auditing
system that is applied in the council whether external auditing
only or internal auditing only or any other type of auditing.
TABLE 4:1:11
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Int.
Auditing
40 25 30 95 49.4
Ext.
Auditing
40 24 27 91 47.3
No auditing 2 1 1 4 2.0
Others 1 - 1 2 1.0
Total 82 50 60 192 100
Based on this we can conclude that although local
government council have an audit unit in its system, sometimes
they are being audited by the state auditors or the money
monitoring team from the local government department
government house.
QUESTION 14
Do you think the local government authorities make proper use
of the approved yearly budget/estimate in the way expenditures
are authorized?
This question is designed to elicit from the respondents
whether the yearly budget is properly adhered to
TABLE 4:1:12
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Yes 66 34 40 140 72.9
No 16 16 20 52 27.1
Total 82 50 60 192 100
The above table shows that about 140 respondents or 73%
of the respondents agreed that the budgets are not strictly
followed.
QUESTION 15
If No to question 14 why?
This question is designed to ascertain from the respondents
the reason why the budget has not been followed strictly.
TABLE 4:1:13
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Reckless
spending
28 16 23 67 34.8
Misplacement
of priority
41 20 22 83 43.2
Spending
outside
budget
amount
13 14 15 42 22
Total 82 50 60 192 100
From this, we can conclude that since the budget is not
tenaciously followed, the funds are sometimes recklessly spent,
employed in projects that can never be realized or spent the
funds on some items that are not budgeted for.
QUESTION 16
By your own assessment can you conclude that the local
government fund/finance is thus:-
This question is designed to elicit from the respondents
own view, whether the money generated is properly managed,
fairly managed or not properly managed.
TABLE 4:1:14
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Properly 7 4 6 17 9
Fairly
managed
20 10 13 43 22.3
Not
properly
managed
53 35 39 127 66.1
More of the
above
2 1 2 5 2.6
Total 82 50 60 192 100
Based on the above illustration, we can conclude that
about 66% of the respondents say that
QUESTION 17
Have there been any cases or cases of fraud/mismanagement of
funds in the local government?
This question is designed to enable us ascertain whether
there has been frauds in the system.
TABLE 4:1:15
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Yes 39 23 31 93 48.4
No 43 27 29 99 51.6
Total 82 50 60 192 100
The analysis of the above data shows that about 48.8%
says that there have been frauds in the system while the
remaining 57.6% says no to the above assertion.
We can therefore conclude that there has never been any
frauds in the local government council in Enugu but states that
little frauds may have been committed but because the society is
corrupt and the auditor both internal and external have not been
doing their work properly such frauds can never be discovered.
QUESTION 18
If yes, who are the personnels involved?
This question is designed to enable us ascertain the people
that are involved in the fraud if there has been any fraud.
Table 4:1:16
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Chairman 25 17 20 62 32
Treasurer 30 15 20 65 34
Cashier 25 17 20 62 32
Others 2 1 - 3 2
Total 82 50 60 192 100
The above analysis shows that the respondents are varied
in their opinion. Since there has never been any established
fraud in the local government, we can conclude that their views
are mere sentiments.
QUESTION 19
Why have there been cases of fraud in the collections of
Revenue in the local government?
This question is designed to elicit from the respondents the
reason why revenue collectors are often involved in fraud.
TABLE 4:1:17
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Lack of
supervision
73 35 45 153 79.7
Non-
prompt
Attention to
the
Revenue
clerks
6 10 15 31 16.1
Others 3 5 - 8 4.2
Total 82 50 60 192 100
This shows that it is because of lack of supervision on area
revenue collectors or clerks that causes them to be involved in
fraud. This is true or correct because there have been cases of
some revenue collectors who ran away with their own receipt
and issue them to the unsuspected public.
QUESTION 20
To what extent can the Head of Department approve personal
claims / allowances?
The reason for posing this question is to ascertain the
amount, which the heads of department are, authorized to
approve for their subordinates.
The response to the question by the respondents will help
us determine the actual amount authorized to be approved by the
Head of department.
TABLE 4:1:18
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Below 26 19 20 65 33.8
2,000
N3,000 –
5,000
46 20 27 93 48.4
N6,000 –
8,000
6 7 9 22 11.5
Above
N8,000
4 4 4 12 6.3
Total 82 50 60 192 100
This shows that about 93 respondents or 48.4% agreed that
the Head of Department approves claims or allowances between
N3, 000 – N5,000 to the officers under him. Any amount above
this range must be channeled through the head of personnel
management.
Although all the application and necessary receipts has to
go through the head of department for his recommendations for
approval.
TEST OF HYPOTHESIS
We are going to present the test of hypothesis stated in
chapter one of this research study. The analysis will be shown
using the chi-square on the relevant questions in the
questionnaire.
NULL HYPOTHESIS (HO)- The Federal grants, state
subventions and local rates constitute the major sources of
generating revenue to the local government.
ALTERNATIVE HYPOTHESIS (HI) – The federal grants,
state subventions and local rates does not constitute the major
sources of generating revenue to the local government.
In testing this hypothesis, data illustrated in table 4:1:7 can
be used for the Chi-square method of hypothesis testing.
TABLE 4:1:7
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Yes 76 47 56 180 93.75
No 6 3 4 12 6.25
Total 82 50 60 192 100
Chi-square formula for testing hypothesis.
X2 = (oi-ei)2
ei
Where oi – observed frequency
ei – expected frequency
X2 – calculated Chi-square value
Xe2 – chi-square value from chi-square distribution table.
& - Level of significance 5%
D.F – Degree of freedom
- n-1 = 2-1
D.F. = 1
Chi-square calculation Table 4:2:1
Response oi ei oi-ei (oi-ei)2 (oi-ei)
2
ei
True 0.937 0.5 0.437 0.1909 0.3819
False 0.063 0.5 -0.437 0.1910 0.3819
1.000 1.0 0.000 0.3819 0.7628
The above table 4:2:1 can as well be worked by using chi-
square formula as demonstrated below:
X2 = (oi-ei)
2
Ei
(0.937-0.5)2 + (0.063-0.5)
2
0.5 0.5
0.3819 + 0.3819 = 0.7628
We can see that Xo2 = 0.7628 and with degree of freedom
(D.F.) as 2.0.7628 < Xe2 that is because the above calculated
chi-square value or (0.7628) is less than the critical value Xe2 or
(3.841), we therefore accept the full hypothesis.
(HO) and reject the alternative hypothesis.
(HI) Based on the above calculation, we conclude that federal
grants, state subventions and local rates constitute the major
sources of revenue to the local government.
HYPOTHESIS II
NULL HYPOTHESIS (HO): Enugu state local government
authority do not make proper use of the approved yearly
estimate or budget.
ALTERNATIVE HYPOTHESIS (HI) The local government
makes proper use of the approved yearly estimate or budget.
Table 4:1:12 will be used in testing this hypothesis.
TABLE 4:1:12
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
False 66 34 40 140 72.9
True 16 16 20 52 27.1
Total 82 50 60 192 100
Chi-Square formula
X2 = (oi-ei)
2
Ei
TABLE 4:2:2
Response Nkanu Igboeze Nsukka Total Percentage
East North
False 0.729 0.5 0.229 0.0524 0.1048
True 0.271 0.5 -0.229 0.0524 0.1048
Total 1.000 1.0 0.000 0.1048 0.2096
It can be calculated using Chi-square formula in the above
table.
X2 = (oi-ei)2
Ei
= (0.729-0.5)2 +(0.27-0.5)
2
0.5 0.5
0.1048 + 0.1048
= 0.2096
This shows that Xo2 or 0.2096 is less than the critical value
Xe2 or 0.3841 at 5% level of significance.
For the fact that 0.2096<3.841, we therefore accept the
null hypothesis and reject the alternative hypothesis. This goes
to confirm that the local governments do not make proper use of
her budget.
HYPOTHESIS III
NULL HYPOTHESIS (HO)
The staff strength in the local government is sufficient to
generate enough revenue for the council.
ALTERNATIVE HYPOTHESIS (HI)
The staff strength in the local government is not sufficient to
generate enough revenue for the council. Data in table 4:1:4 will
be used in testing this hypothesis and the chi-square method of
hypothesis testing.
TABLE 4:1:4
Response Nkanu
East
Igboeze
North
Nsukka Total Percentage
Yes 74 46 58 178 92.7
No 8 4 2 14 7.3
Total 82 50 60 192 100
Chi-square calculated
TABLE 4:2:3
Response oi ei oi-ei (oi-ei)2 (oi-ei)
2
Ei
True 0.927 0.5 0.427 0.1823 0.365
False 0.073 0.5 -0.427 0.1823 0.365
Total 1.000 1.0 0.000 0.3646 0.730
Chi-square formula:
X2 = (0.927-0.5)2 + (0.073-0.5)2
0.5 0.5
0.365 + 0.365 = 0.730
CHAPTER FIVE
5.0 SUMMARY RECOMMENDATION AND CONCLUSION
The researcher observed that the local government has got
all calibers of staff that can help generate enough revenue for the
local government. For example graduates of at least HND in
accounting or finance are heading all the sections in finance and
supplies department revenue, internal audit payroll and main
account.
It was also found that external sources of revenue
(Government Grants) have continued to play a leading role in
the sources of revenue to the local governments. Other sources
like motor park fees, market fees, and development rate are just
mere pittance since the sum from all these sources cannot pay
her staff salary for one month.
The researcher discovered that though there is an internal
audit section headed by qualified personnel (B.Sc. Accounting),
such auditors are not given the chance to operate. Both past and
present chairman / sole administrators in the local government
are all out to make wealth through fair or foul means. Any
attempt to stand on their way in the name of proper and
thorough auditing is often rebutted by all means.
Again, the external auditors, which sometimes visit the
local governments, are always bequeathed with their own of this
duty. Their audit reports can be imagined than described.
Revenue agents and Area clerks are not adequately
supervised. This has caused the local government to loose some
of the little revenue, which would have been generated
internally.
Again, the researcher discovered that most of the local
government does not make proper use of their yearly approved
budget/estimates. The importance of approved budget, estimate
in the proper management of the finance of our local
government cannot be over emphasized.
It was also discovered that misplacement of priority is one
of the bane of our local government since any chairman or sole
administrator can embark on any problem that can help them
achieve their aims. The researcher also found on local
government invested in the mass transit operation.
CONCLUSION
The researcher made an attempt to find out the
various sources of finance as it affects the various local
governments and how these finance could be managed.
The result of the entire study shows that the main
sources of revenue available to our local government are
through external sources. For instance, government grants forms
over 85% of their total revenue as at date, internal sources like
motor park fees, market fees, development rates, maternity fees
etc. forms the remaining 15%. And because of the face that
some of these sources have not been fully tapped, most of the
local governments rely heavily on government grants.
Based on these therefore, the local government
councils in Enugu State and indeed Nigeria should formulate a
clear and lasting consistent policy for funding our local
government offices throughout Nigeria.
This could be done by reversing to their traditional
sources of Internal revenue and explore new ones. We think
that if this is tackled effectively that the future of local
governments in Nigeria will look bright.
RECOMMENDATION
To avoid a situation whereby local government depends on
government grants, most of the local government robust revenue
sources, which was taken over by the state and federal
government, should be given back to them. Similarly, efficient
revenue collection machinery should be set in motion.
The internal auditors should be protected adequately to
enable them performed their duties. The chairman or sole
administrator should be made to answer some queries should
anything happens to any internal audit in cause of discharging
his legitimate duty.
Also, good recommendations and prizes should be given to
offices that perform creditably well.
The revenue officer should pay from time to time surprise
visits to the revenue agents and area clerks in their area of
assignment. He should sometimes summon the community
through their receipts and rates tickets are at par with those
materials given to them (the area clerks and revenue agents) by
the local government councils.
The mass transit, which is the only investment by the local
government council, should be made financial and self-
accounting. The revenue realizes from its operation should be
enough to maintain its fleet of vehicle, pay the staff redeployed
there and pay the surplus to the councils.
As much as possible effort should be made to adhere
strictly to the yearly budget/estimate since the importance of
budget implementation in proper financial management cannot
be over emphasized.
Expenditure should as far as possible be based on priority.
The chairman / sole administrator should ascertain the most
pressing problems of the rural dwellers and there should be
continuity in the execution of project.
Moreover, the government should honor their financial
obligation to the local government by prompt and regular
disbursement of grants to them.
The hanky panky and shabby treatment often visited on
the local governments have immensely contributed to their
abysmal performance, financial recklessness and acts of
indiscipline.
Also, local government should be allowed to contract
external loans within a stipulated amount and provided that such
loans are self liquidating, self sustaining and confers benefits to
the people.
A local government cannot make meaningful impact by
merely meeting its routine expenses. To make a mark, efforts
should be geared towards increasing the internal revenue effort
in order to generate revenue surpluses for capital investment.
Steps should be taken to maximize the revenue yield from the
existing sources. Efforts should also be made to identify and
exploit new sources of revenue.
Again, local government should exploit the opportunity
to raise capital market funds through the issue and sale of local
government bonds. But to succeed in such venture, a local
government must have a well-articulated and commercially
viable project to which the bond issue would be tied.
BIBLIOGRAPHY
1. Egonwan, J.A. (1984): Principles and Practices of Local
Government in Nigeria. S.M.C. aka and Brothers Press
Benibn Encyclopedia Britinnia (1970): U.S.A.
2. Ejiofor, P. (1989): Management in Nigeria Theories and
Issues. Africa FEP Publishing Ltd.
3. Emekekwe, P. (2002): Corporate, Financial Management
African Bureau of Educational Services, Kinshasha.
4. Obinna, O.E. (1984): Local Government Financing, Lagos.
Pacific / Publishers.
5. Okafor, R.G. Issues in Public Sector Financial Management.
B. & F Publications UNEC
6. Onwe, O.J. (1998): Element of Project and Dissertion
Writing. Lagos Impressed Publishers.
7. Orewa, G.O. et al (1979): Local Government Administration
in Nigeria. Benin Ethipe Publishers.
8. Nweze, A. (2003): Quantitative Approach to Management
Accounting. Computer Edge Publishers.
9. Udem, K. Officer of the Presidency. Hand Book on Local
Government Administration, 1986 Vol. 6 No 5
10. Ugwu. F.N. (2003): Public Sector Accounting and
Finance. Summer Educational Publishes Ltd. Onitsha.
11. Ugwu, I (1989): Contemporary Issues in Local
Government and Democracy in Nigeria Enugu. ACEN
Publishers.
12. Ukwu, I. (1984): Managing Government Business.
Anambra State Nigeria Public Service Lectures series No.1
13. Wald, J. (1998): Cost and Management Accounting Evans
Publishers, London.
Department of Accountancy
School of Postgraduate Studies
University of Nigeria,
Enugu Campus.
Enugu.
15th
April, 2008.
Dear Sir/Madam,
I am a student of the above institution currently carrying
out a research study on Local Government Financial
Management and with your local government as a reference
point.
The enclosed questionnaire is to be completed by giving
your candid and independent opinion to the statements or
questions on the questionnaire. The information collected are to
be used solely for the purpose of this research and would be
treated and utmost confidence.
Thanks for your anticipated co-operation.
Yours faithfully,
Nwobodo Joyce Ifeoma
SPECIMEN Q``````````````````````UESTIONNAIRE
Please tick ( ) in the appropriate spaces provided and give
further explanation where necessary in the space provided.
1. Sex: Male Female
2. Salary Per Annum:
(a) Below N5,000 (c) N11,000 – N15,000
(b) N6,000 – N10,000 (d) N16,000 and above
3. For how long have you been in the local government
system?
(a) Below 5 years (c) Between 11-15 years
(b) Between 6-10 years (d) 16 years and above
4. Do you have the enough staff in the local government?
(a) Yes (b) No
5. If yes, is the staff strength sufficient to generate adequate
Revenue for the local government?
(a) Yes (b) No
6. What are the major sources of revenue available to the
local government council?
(a) Development rates (c) government grants
(b) Slaughter fees (d) Market & Motor Park fees
7. Apart from the federal, state grants and local rates, is there
any other means of generating revenue for the government?
(a) Yes (b) No
8. If yes, what are those sources?
(a) …………………………….. (c)…………………….
(b)…………………………….. (d) ……………………
9. Apart from the above mentioned sources what other
Investment/revenue yielding ventures does the local
governments engage on?
(a) Poultry farming (c) Production of home made
good
(b) Mass transit (d) Palm plantation
10. What are the officers that constitutes the finance and
general purpose (F&G) committee?
(a) …………………… (c)…………………………
(b) ………………….. (d)………………………..
11. What are the functions of the finance and general purpose
(F&G) Committee.
(a) ……………………… (c) ………………………
(b) …………………….. (d)……………………….
12. What is the system in use for auditing accounts of the local
government?
(a) The Cashiers (c) The Heads of Department
(b) The HPM (d) The Treasurer
13. What is the system in use for auditing accounts of the local
government?
(a) Internal auditing (c) No auditing
(b) External auditing (d) others (Please specify)
14. Do you think the local government authority make proper
use of the approved yearly estimate budget in the way
expenditures are authorized?
(a) Yes (b) No
15. If No to question 14 why?
(a) Reckless spending
(b) Misplacement of priority
(c) Spending outside what is budgeted
16. By your assessment can you conclude that the local
government fund/finance is thus:
(a) Properly managed (c) Not properly managed
(b) Fairly managed (d) none of the above
17. Have there been any case of fraud/mismanagement of fund
in the local government?
(a) Yes (b) No
18. If yes, who are the personnel involved?
(a) The Chairman (c) The Cashier
(b) Treasurer (d) others (Please indicate)
19. Why have there been cases of fraud in the collection of
revenue in the local government?
(a) Lack of supervision
(b) Non-prompt attention to the revenue clerks
(c) Others (indicate please)
20. To what extent can the Head of Department approves
personal claims / allowances.
(a) Below N2, 000
(b) N3, 000 – N5,000
(c) N6, 000 – N8, 000
(d) Above N8,000
Local government financial management
A case study of enugu state.
By
Nwobodo Joyce Ifeoma
Pg/Mba/06/45933
Department of accountancy
University of Nigeria
Enugu Campus
October 2008
