ABSTRACTFinancial Matters are so important that they receive constitutional recognition. In reality, internal control forms the bedrock of auditing both from the point of view of the Executive and the Auditor. An effort to deal with any audit related problem, in practice, will involve a critical analysis of controls relating to the matter under consideration. Obviously, financial control is a key element of the system of internal controls, in the Public Sector. The research seeks to evaluate The Role of Internal Auditors and Financial Regulators in the Internal Financial Control of Government MDAs: Lessons from Ministry of Finance (MoF), Enugu (Enugu State). In the research, four (4) hypotheses were formulated and tested; including internal financial control is adequate in Enugu State Ministry of Finance, societal values have a positive impact on Internal Financial Control in Enugu State Ministry of Finance, there is full compliance to the system of Internal Financial Control in Enugu State Ministry of Finance, and the person performing the Internal Financial Control possesses the necessary authority and competence. Also the Policeman Theory, the Contingency Theory, Information Theory, the Reliability Theory and the COSO Framework, was used to guide our research study. The primary data was obtained through the administration of questionnaires, interviews and actual observation. This was supplemented with secondary data, which was purely based on review of related literatures, highlighted in journals, textbooks, working papers, and government manuals. The target population in Ministry of Finance is 62 public officers. I used probabilistic, cluster sampling method to determine my sample size, 10 accountants both in the Payroll Section and in the Finance & Accounts department. An internal control evaluation questionnaire (ICEQ), was developed using the Yes, No & Dont Know scale. This study is a descriptive, ex-post factor research, which employed the quantitative methods of data collection, presentation and analysis (such as cross tabulations, mode, flow charts, and chi-square). The study proved (amongst others), the assertion by Enugu State Government that, where internal control system is successfully implemented in Government MDAs, corruption would reduce, workers would produce more output, and more output would boost internally Generated Revenues (IGRs).

CHAPTER ONEINTRODUCTION1.1Background to the StudyIn Nigeria, financial control is a key element of the system of internal controls, and financial Matters are so important that they receive constitutional recognition. Osita (2008:134) says, However it is almost impossible to study auditing, or to be able to perform any meaningful audit in practice, without having a perfect grasp of the concept of internal control. In reality, internal control forms the bedrock of auditing both from the point of view of the Executive and the Auditor. An effort to deal with any audit related problem, in practice, will involve a critical analysis of controls relating to the matter under consideration. MBEOO3 (2010:7), states that, Internal Financial Control is the first line of defence in safeguarding the assets of the organisation which is largely achieved through prevention and detection of errors and fraud. Osita (2008:137) continues that, Internal control has the primary objective of preventing fraud or errors. This objective may be impossible to achieve since fraud and errors are known to have occurred even in the best system of internal control. However, a good system of internal control ensures that where errors and fraud takes place, they are detected within a very short space of time. It is therefore, expected that the effect of a good system of internal control is to reduce the incidence of fraud or errors. Osita (2008:137) concludes that, the system of internal financial control is intended not only to maintain an adequate method of processing accounting data, but also to safeguard the system from financial losses.Lubin et al (2008:2), says, A well-prepared budget could be undone during its execution if sound internal control and accounting systems are not in place to ensure that the budget is being implemented as planned, and in accordance with prospective cash flows. Financial control exists in every Public Financial Management (PFM) system, in one form or the other, irrespective of its architecture and/or specific inheritance (2008:3). In the absence of a sound PFM system, the management of public finances faces several risks (2008:10). Financial control covers all government expenditure, irrespective of the institution undertaking the expenditure, the nature of the expenditure, or the source of financing (domestic versus foreign). Financial control is applied to budgeted and unforeseen expenditure and more generally to all decisions that have a financial impact on government (2008:12).Lubin et al, continues, financial control is, therefore, a key component of the overall internal control system and can be defined as a set of ex ante verifications undertaken during budget execution to ensure that: (i) public resources are committed and expended in accordance with the budget law, existing financial laws and regulations and government priorities (as set in the budget or the cash plan); and (ii) the principles of economy and consistency are observed in the use of public resources (2008:3-4).Lubin et al, emphasises that, A strong and robust financial control system is necessary for embedding other PFM reforms, and promoting fiscal discipline, good governance, and the confidence of the private sector in transacting with the government. For the financial control reform to be effective and sustainable, it should be cast within a comprehensive and strategic framework of PFM reforms ultimately aimed at reducing manifestations of weak control in the short run and establishing good governance in the management of public finances in the long run (2008:24).Government officials are responsible for safeguarding the assets of the State. They are empowered by the constitution and enabling laws in exercising authority over the assets belonging to the government. Adequate system of internal controls also assists the government in protecting the assets and ensuring that scarce resources available to them are transparently and efficiently deployed in providing social amenities for the citizens. Success of internal control system is measured by the reliability of financial reporting, level of compliance with applicable laws and regulations, and finally the effectiveness and efficiency of its operations. Effective Internal Control System would help government programme managers to achieve desired results through effective stewardship of public resources. Effective Internal Control System should be implemented by Enugu State Government in every sections of the Public Service to safeguard the assets, improve operational efficiency and productivity (MBEOO3, 2010:7).In real practical scenarios, the Auditor will make a preliminary evaluation of the entitys internal controls. If the controls are likely to lead to a true and fair set of financial statements, the auditor will test those controls. If they appear weak, he will not rely on the internal controls, but carry extensive testing of the transactions and balances which appear in the financial statements. If the controls are operating correctly, the auditor can reduce the extensive testing described above and adopt a reliance approach. If not, he will be forced into a substantive approach. Finally, the auditor will review the financial statements as a whole and formulate his audit opinion, whose end result is an audit report. In summary, the Auditors evaluate the system of internal controls, spot the weaknesses in the system, and recommend corrections meant to improve or expand the system (Adeniyi, 2012:15).Kuo-Tay and Ronald explained concisely the role of auditors in internal controls. When conducting an audit, auditors first review the existing or proposed internal accounting control system. Based on this review, they obtain their perceptions of the internal control systems. Auditors would then organize these perceptions and model them through some representation scheme. Thereafter, they would perform reasoning based on this representation to evaluate the control procedures. As a whole, the effectiveness of evaluating internal control systems depends on the performance of reviewing, modelling, and reasoning. In an audit without any external aids, auditors need to rely solely on their own mental capabilities in performing these three tasks. They have to observe the system, construct a mental model of the system, and conduct mental reasoning for the evaluation of the system. Because observing, mental modelling, and mental reasoning require significant cognitive efforts, auditors might commit mistakes due to the limitation of human mental capacity. As a result, several tools have been developed to help auditors mitigate this limitation in modelling and reasoning. Traditionally auditors have used system flowcharts and checklists to help evaluate internal accounting control systems. System flowcharts can help auditors organize their observations, while checklists can enhance auditors' ability in attending to important control issues. Although these two methods are useful, they do not offer a systematic algorithm for system evaluation. Users must rely on their own analytical abilities to evaluate the system. Since humans have only limited analytical capability and research has shown that the evaluation of internal control procedures is a Non-deterministic Polynomial-time (NP) Complete Problem, such unsystematic approaches will very likely result in inaccurate assessment of system reliability or ignorance of crucial control weaknesses. This problem would be even more serious if the system is fairly large or the auditor does not have enough experience. A problem is NP-complete if it admits only exponential-time solutions and it can be solved in a reasonable amount of computing time only when the problem size is small. Therefore, NP complete problems are considered intractable (1992:3-4).In broad sense, a financial regulator may be a public authority, a government agency, or a professional institute, who is responsible for exercising autonomous authority over some area of human activity, in a regulatory or supervisory capacity. Regulatory independence refers to the ability of an agency to have an appropriate degree of autonomy in setting rules and regulations for the sectors under its supervision, within the confines of the law. According to the IOSCO principles, the regulator should be operationally independent from external, political, or commercial interference in the exercise of its functions, and powers, and accountable in the use of its powers and resources. Independence will be enhanced by a stable source of funding for the regulator, according to IOSCO (Arunma, 2015:24-25).Key public financial sector regulators in Nigeria are as follows:1) Central Bank of Nigeria (CBN)2) Nigerian Deposit Insurance Commission (NDIC)3) National Pension Commission (PenCom)4) National Communications Commission (NCC)5) National Insurance Commission (NAICOM)6) Securities and Exchange Commission (SEC)7) Financial Reporting Council (FRC)8) Asset Management Corporation of Nigeria (AMCON)9) Federal Ministry of Finance (FMF)10) Association of National Accountants of Nigeria (ANAN)Financial regulators in Nigeria, establish laws, rules, and standards relating to the preparation of financial statements for external purposes. These financial reporting rules and standards form the basis upon which management specifies suitable objectives for the entity and its subunits. When specifying suitable external reporting objectives relating to the preparation of financial statements, management considers the accounting standards that are applicable to that entity and its subunits. Management also specifies the accounting principles that are appropriate in the circumstances. Regulators usually carry out a series of examinations of records and accounts of organizations within their area of jurisdiction, with a view to ensuring the soundness of the organizations, their level of risk exposure and compliance with laid down procedures. In Enugu State, Central Bank of Nigeria (CBN), Federal Ministry of Finance (FMF), Financial Reporting Council (FRC), Association of National Accountants of Nigeria (ANAN) are the major regulatory players that influence Internal Controls in the MDAs.

1.2Statement of the ProblemAdeniyi (2012:194), said, No internal control system is foolproof. In fact, the Auditing Practices Committee (APC) guidelines specifically made out this point: No internal systems, however elaborate can by itself guarantee effective administration, and the completeness and accuracy of the records, nor can it be proof against fraudulent collusion, especially on the part of those holding positions of authority or trust. From public opinion in Enugu, there have been some loopholes in the internal financial control of Ministries, Departments & Agencies (MDAs), which consequently results to fraud, and other economic or financial crimes.GAO (1985:1-3), asserts in its report that, Widespread and often long-standing weaknesses and breakdowns in agency internal controls continue to result in wasteful spending, poor management, and losses involving billions of dollars of state funds. The weaknesses have also made outright fraud more feasible, erode public confidence, and undermine the state governments ability to operate effectively; thus have a profound effect across the spectrum of government programs and operations. However, those weaknesses, which oftentimes involve the failure to comply with established agency policies and procedures, collectively are important and could have led to government fraud, waste, and abuse. Inadequate agency accounting systems and financial reports have also contributed to the government's dilemma. While agencies of governments continue to make a concerted effort to strengthen their internal control and accounting systems, the major problems so far remain unchanged.ISP014 (2009:4) states that, The accounting function is at the heart of the PFM system implementation. It generates and records data, as well as ensures the integrity of the PFM system. The accounting system should be such that ensures accurate and timely information for the management of the state finances. The situation in Enugu State Government indicates that basic account keeping is weak; and cash planning is not effective as MDAs are not informed of the cash availability to enable them make expenditure commitments as envisaged in the budget. Besides, Government does not receive details of, or account for revenues of Autonomous Government Agencies (AGAs) i.e. parastatals and public enterprises. And final accounts are late; consisted only of schedules and statements, without explanatory notes, statement of accounting policies, and accounting standards. And the accounts did not consolidate state, local governments and parastatals accounts.Also from ISP014(2009:9), Internal controls consists of systems, procedures, processes, and structures put in place to promote checks and balances, prevent fraud and ensure overall system integrity. In Enugu State Government, it has been shown that whilst existing Financial Instructions, controls and rules contain generally clear rules for commitment control, there is a widespread failure to comply with such control. Statistics from MBEOO3 (2010:7), do also show that, infraction of the control would most likely attract sanctions, and employees are usually compelled to comply, in order to avoid being victims, but rather public officers in Government MDAs have smarter and untraceable ways, to override such controls. ISP014 (2009:24) states that, The internal audit function is meant to assist the chief executive or chief accounting officer of the MDA to maintain compliance of the internal control, and laid down accounting procedures for the MDA. The internal auditors though staff of the Accountant General are in an awkward position as they are meant to be responsible to the chief accounting officer of the MDA they work in. More often than not the internal auditors are incapable of standing up to the chief accounting officer on issues that contravene proper procedures because they are usually junior officers. Sometimes, political heads or heads of MDAs ignore reports that are critical of them. It has been seen that the internal audit function has broken down over the years.ISP014 (2009:16) states that, Procurement, which is a major means of implementing the capital budget, has been the subject of executive abuse and avenue for fraud, and mismanagement of public funds. It should form a critical plank of the Enugu State Government Public Financial Management (PFM) reform plan. An institutional structure (the Budget Monitoring and Due Process Unit BMDPU) has been established by the ENSG since 2006, but this is yet to be fully functional since there is no enabling legislation, adequate staffing, equipment, logistic and funding. In addition, Oyewobi et al (2011), argues that, the regulatory oversight has not kept pace with internal control developments in the Nigerian public sector, despite the enactment of Public Procurement Act, No. 14, 2007, Laws of the Federation of Nigeria.Eze and Ofoegbu (2014:19), posits that, Public audit seeks inter alia to ensure that laws, policies and established processes have been followed; monies misappropriated or stolen recovered and clear rules of fiscal and other conduct established. Eze (2015:28) says that, Auditing is part of the cycle and chain of public expenditure management which in Nigeria has been undergoing policy and legislative reforms since the return to civil rule. The missing link in all these reforms is the auditing and evaluation function which is virtually the last part of the budgeting process. It is impossible for these public expenditure management reforms to succeed if a critical component of the chain (auditing) is very weak. However, there is a clear failure of audit goals in the state, as the treasury keeps incurring losses; the value for money for state expenditure is absent; and public resources are constantly mismanaged.Government officials are responsible for safeguarding the assets of the State. They are empowered by the Constitution and enabling laws in exercising authority over the assets belonging to the government. The Public Financial Management (PFM) internal control measure is maintained by the Accountant General who has the responsibility of managing the finances and financial system of the State; and for providing adequate accounting systems and controls in Enugu State Ministries, Commissions and Extra-Ministerial Departments. It is worthwhile to know; that I am not investigating why/how corruption exists, but to reveal real practical solutions to the peculiar internal control problems in Government MDAs. In keeping good internal controls, or having good audits in the MDAs, how can the Accounting Officers and the Accountant General ensure the quality of financial reporting and catch any fraud before it becomes a problem? What can Internal Financial Control do, in preventing fraud, and financial losses, across the spectrum of government programs and operations? What roles or jurisdictions have the internal auditors, and the financial regulators staged in internal financial control of Enugu State MDAs? How can we determine the operating effectiveness of the Internal Financial Control (IFC) system in Enugu State MDAs?

1.3Research Questions1) To what extent is the Internal Financial Control in Enugu State Ministry of Finance weak or inadequate?2) Do societal values have impact on Internal Financial Control in Enugu State Ministry of Finance?3) Is there full compliance to the system of Internal Financial Control being designed?4) Does the person performing the Internal Financial Control possess the necessary authority and competence to perform effectively?

1.4Objectives of the StudyThe main objective of this study is to assess the Role of Internal Auditors and Financial Regulators in the Internal Financial Control of Government MDAs in Enugu State. Secondary objectives are as follows:1) To determine whether Internal Financial Control is weak or inadequate in Enugu State Ministry of Finance.2) To identify the impact of societal values on Internal Financial Control in Enugu State Ministry of Finance.3) To know whether there is full compliance to the system of Internal Financial Control in Enugu State Ministry of Finance.4) To know whether the person performing the Internal Financial Control possess the necessary authority and competence to perform effectively.

1.5Hypothesis of the StudyA. H.0: Internal Financial Control is not adequate in Enugu State Ministry of Finance.B. H.0: Societal values have no positive impact on Internal Financial Control in Enugu State Ministry of Finance.C. H.0: There is no full compliance to the system of Internal Financial Control in Enugu State Ministry of Finance.D. H.0: The person performing the Internal Financial Control does not possess the necessary authority and competence.1.6Significance of the ResearchTo the Policy Makers, this research would provide some exposure opinions that they might consider in decision making. No Governance, No Politics! No Politics, No Policy! No Policy, No Production!! No Production, No Output!! No Output, No Service Delivery!!!To Heads of MDAs, this research would help them in analyzing checks and balances in Internal Financial Control (IFC), so that deviations would be corrected. It would guide them in ensuring better productivity in the Public and Civil Service.To the General Public, this research would describe the meaning, process and significance of internal financial controls in Government MDAs. It would also highlight its role in promoting better output and better service delivery to the people.To the Researcher, this research would give him an added advantage in professional experience, and in the award of the B.Sc. degree in Accountancy. It would also give him an opportunity to know how Internal Financial Controls works in the real system of good governance of Enugu State.There is a dearth of empirical studies on Internal Financial Control, as it influences all spectrums of government programs and public financial management in Nigeria. This research is the first of its kind, to concentrate on Internal Financial Control in Government MDAs, thereby filling that research gap in the Nigerian Public Sector.All other researchers rather conduct studies on Internal Control in a Company (Aigbokhaevbolo, 2013; Chukwu, 2012; & Zhijun et al, 2014); in Non-For-Profit Organisations (Christine et al, 2009; Mohamad et al, 2014; & Stewardship, 2013) and in Local Banks (Mrs. C.T. et al, 2014; Jat R.B., 1992; Oyeyiola, 1996; Nwaze C., 2011).

1.7Scope of the ResearchThe focus of this research is on the Role of Internal Auditors and Financial Regulators in the Internal Financial Control of Government MDAs: Lessons from Ministry of Finance (MoF), Enugu (Enugu State). Practically, doing a reach on internal financial control in the public sector is a great niche in the field of accounting, financial reporting, and public management.For the role of auditors, we shall streamline our opinions to Internal Auditors, in the Internal Audit Unit (Ministry of Finance & Economic Development), and in the Office of the Accountant General (State Treasury House). They assure the government or its ministries that public funds are received and spent in compliance with appropriations and other relevant laws, and that government use of funds, fairly and accurately represents its financial position.For the role of regulators, we shall streamline our opinions to Public Financial Sector Regulators in Nigeria and abroad. Regulators establish the criteria for evaluating the severity and corresponding classification, and reporting of deficiencies relating to external reporting, operations, and compliance objectives. For internal controls, we shall strictly focus on financial controls in the entire sections of the Ministry of Finance and Economic Development (MoFED), Enugu. Controls regarding management information systems and decision making in the public sector (called internal administrative controls), was excluded in this research. I discovered that review of literature from series of research projects did not analysis critically internal financial controls, in the Public Sector.Since the research topic is directly related to Internal Auditing, we are of the opinion that Internal Controls is usually handled within the jurisdictions of Compliance and Financial Audit. It is one of the principal concerns of an internal audit, to ensure that internal controls are working properly, so that external auditors (like the Auditor General of the State), can have faith in the accounts produced by the organisation.Since the Ministry of Finance and Economic Development (MoFED) is the heart of Government, I didnt need to conduct this research, on the entire Ministries, Departments, and Agencies (MDAs) in Enugu State. So if the MoF succeeds, the government shares from that success. And if MoF fails, (particularly in the economy or the management of the states finances), then the government has failed. Thus, focusing on the MoF, will there serve as a blueprint for internal financial controls, which other MDAs in Enugu State, will follow.

1.8Limitation of the Research1.) Low Network Coverage: In Renaissance University, where I am currently searching for relevant data particularly online journals, we have challenge of low network coverage. Therefore I had to make use of the limited resources in the Digital Library, and outsourced my research data, since the research topic is contemporary, practical and vast-in-scope.2.) Confidentiality of Government Accounting Information: We are quite aware that government accounting information is secret, very valuable and always kept in the safest control environments. Thus getting the necessary accounting data for the research was a hard nut to crack. It took me series of collaborations and understanding with Senior Public Servants, to successfully accomplish the objectives of this research study. 3.) Financing of the Project: The geographical location of my employment is different from that of my education, and the per capita income of every middle-class citizen has been dwindling recently in the Nigerian economy. Therefore the regular inflow of funds was streamlined, and a research study over the spectrum of all MDAs in Enugu State was not possible (or realistic). This made me to concentrate particularly on Enugu State Ministry of Finance and Economic Development.4.) Time Constraints: I had lots of time constraints during this research study. First, we had less than five months to complete our project. Second, we were not given adequate time, during the week, by the Department; so often times we had to miss lectures, in order to get out there and get project results. However, within this limited time, I was able to achieve efficiency, i.e., less time, less costs, and greater results, which are quite commendable.

1.9Operational Definition of TermsAuditor This is the person who conducts independent examination of the financial statements of an organization with a view of expressing an opinion, as to whether these statements are prepared (in all material respects), give a true and fair view, and comply with the relevant statute or statutory obligation or financial reporting framework.Internal Audit Internal audit is an independent appraisal function established by the management of an entity, for the review of the internal control system, of all accounting information, and all transaction entries, as a service to that entity. The person responsible for internal audit is called the internal auditor.External Audit External audit is a periodic examination of the books of account and records of an entity, carried out by the auditor, to ensure that they have been properly maintained, are accurate and comply with established concepts, principles accounting standards, legal requirements and give a true and fair view of the financial state of the entity. The person responsible is an independent third party, called the external auditor.Financial Regulator This may be a public authority, a government agency, or a professional institute, who is responsible for exercising autonomous authority over some area of human activity in a regulatory or supervisory capacity.Internal Financial Control This is an a type of internal control that aims to give reasonable assurance that transactions comply with the principles of sound financial management, transparency, efficiency, effectiveness, and economy, as well as with relevant legislation and budget descriptions.Ministry of Finance This is a ministry enabling the management of the nations expenditure and revenues in an open, transparent, accountable, and efficient manner that delivers on the countrys development priorities.Compliance This is an action in conformity with agreed procedures, regulations, laws, or the terms of contract. Compliance is central to auditing, in relation to both external control and internal control. So compliance costs are the cost of maintaining compliance procedures.Operating Design This exists when (a) a control necessary to meet the control objective is present, (b) the existing control was properly designed, (c) if the control operates as designed, the control objective would be met.Operating Effectiveness This exists when (a) properly designed control is operating as designed, (b) the person performing the control possesses the necessary authority or competence to perform the control effectively, (c) the person performing the control properly understands the nature and objectives of the control, (d) there are no errors in operation of the designed control.Societal Values This encompasses integrity, transparency and accountability. Integrity means steadfast adherence to a strict moral or ethical code; wholesome or complete in its design; and unaltered or not overridden by unauthorised users or functions. Transparency means clear and public; easily identified or understood; and detected or not hidden. Accountability means being held answerable for, liable for or responsible a position of trust, so that proper account would be rendered to the stakeholders.

1.10Organizational Profile of Enugu State Ministry of Finance & Economic Development (MoFED)Enugu State was created from the old Anambra and its name comes from two Igbo words, Enu and Ugwu, meaning the top of the hill. Enugu State Ministry of Finance & Economic Development is located in Old Eastern Nigerian Parliamentary Building, inside the State Secretariat or Former Court of Appeal, Secretariat Road, Enugu.VisionThe Ministry sees a future where it can help and build a state that can independently source enough funds for its development programme.MissionThe Ministry strives to provide standard financial services to customers, and also enhance socio-economic development of the State.According to IGS001 (2012:9-10), the establishing laws are:1) Section 16 of the Finance Law; CAP 77, Laws of Enugu State 2004.2) Gaming Law; CAP 86, 1991.3) Ministry of Finance Incorporation Law No 115 of 1991.According to IGS001 (2012:9-10), the departments of MoF are:1) Administration and Supplies.2) Finance and Accounts.3) Planning, Research and Statistics (PRS).4) Debt Management Office (DMO).5) Office of Accountant General (OAG).Mr. G.O. Nwachukwu is the Director, Finance and Accounts, Ministry of Finance.Mr. Ani Ifeanyi Chris is the Director, Administration and Supplies, Ministry of FinanceAccording to IGS001 (2012:9-10), the Agencies & Parastatals of MoF are:1) State Board of Internal Revenue (SBIR)2) State Gaming Commission Orientation Insurance Company3) Ministry of Finance Incorporation

Office of the Accountant General (OAG)The Office of the Accountant General (OAG) is located in State Treasury House (Ministry of Finance), Secretariat Road, Enugu. According to IGS001 (2012:10), the departments include:1) Treasury Department2) Inspectorate Department3) Headquarters Operation.4) Revenue Monitoring and Inspectorate5) Main Accounts Production6) Pensions (Security Schedule)7) Public Financial Management Unit

Auditor General of the State (AGS)The Auditor General of the State (AGS) is located in Enugu State Audit, Opposite Union Bank, Opara Avenue, Enugu. According to IGS001 (2012:18-19), the departments include:1. Administration and Supplies2. Finance and Accounts3. Planning Research and Statistics4. Govt. Treasury & Ministerial Accounts5. Companies and Corps6. Post-Primary & Tertiary Institutes7. Project Monitoring and EvaluationCommissioner for Finance

Permanent Secretary

DirectorDirectorFinance and AccountsPersonnel (Administration)

Accountant GeneralDirectorState Treasury HousePlanning, Research and Statistics (PRS)

Director Director Director DirectorMinistry ofDebt Treasury Treasury Finance ManagementOperations InspectorateIncorporationUnit (MOFI)

Fig. 1, Ministry of Finance and Economic Development (MoFED), Enugu State

ReferencesAdeniyi, Adeniji (2012). Auditing and Assurance Services, 2nd Edition. Lagos: Value Analysis Consult (Publishers).Aigbokhaevbolo, Ozeigbe (2013). Adequate Internal Control System in Nigerian Business Organisations: The Sabenes Oxley (SOX) Act Approach. Certified National Accountant, Bi-monthly Journal, Vol. 21 (4), September October 2013, pg. 33-35.Arunma, Oteh (2015). Independence of Auditors and Regulators: Effects on the Economy. Certified National Accountant, Bi-monthly Journal, Vol. 23 (2), March April 2015, pg. 23-26.Christine Petrovits, Catherine Shakespare, and Aimee Shih (2009). The Causes and Consequences of Internal Control Problems in Non-profit Organisations.Chukwu, Prisca Amaka (2012). The Impact of Internal Control System on the Financial Management of an Organisation (A Case Study of the Nigeria Bottling Company Plc, ENUGU). Amorji-Nike, Enugu: Department of Accountancy, Caritas University.Eze Onyekpere, Esq and Ofoegbu Donald Ikenna (2014). Cost Of Governance And Leakages In The System (A Handbook on Reducing The Cost Of Governance And Leakages In The Fiscal System). Centre for Social Justice (CSJ, Mainstreaming Social Justice in Public Life). Eze Onyekpere, Esq (2015). Auditing for Accountability. Use of Accountability Mechanisms. Centre for Social Justice (CSJ, Mainstreaming Social Justice in Public Life). GAO (1985). Financial Integrity Act Government Faces Serious Internal Control and Accounting Systems Problems. Being United States General Accounting Office Report to the Congress, GAO/AFMD-86-14.Hornby, A.S (2010). Oxford Advanced Learners Dictionary, New 8th Edition, International Edition. United Kingdom: Oxford University Press.IGS001 (2012). 3.2.1 Enugu State Government Mandate, Structure, Organisation, and Function of the Public Service. Forward by Martin Ilo, Secretary to State Government, May 2011. Enugu State Government: Nigeria.ISP014 (2009). 3.1.14 The Public Financial Management (PFM) Change Plan for Enugu, Version 1.0. Compiled by SPARC for all Enugu State MDAs. Nigeria: Enugu State Government.Jat, R. B. (1992). Internal Control and Fraud Prevention in Commercial Banks. An Unpublished MBA Thesis. Enugu: University of Nigeria, Nsukka.Lubin Doe and Sailendra Pattanayak (2008). Public Financial Management (PFM) Technical Guidelines Note No. 5, Financial Control in African Countries. United States: International Monetary Fund (IMF).MBEOO3 (2010). 2.2.3 Internal Control Manual for Enugu State Government (ENSG). Compiled by SPARC for all Enugu State MDAs, June 2010. Enugu State Government: Nigeria.Mohamad N.M., Intan S.M., Norzaidi M.D., Roshayani A., & Normah O. (2014). Internal Financial Control Practices of District Mosques in Central Region of Malaysia. International Journal of Trade, Economics and Finance, Vol. 5(3).Mrs. C.T. Gamage, Prof. K.L. Lock, & Dr. A.A.J. Fernando (2014). A Proposed Research Framework: Effectiveness of Internal Control System in State Commercial Banks in Sri Lanka. International Journal of Scientific Research and Innovative Technology, Vol. 1(5); December 2014.Nwaze, C. (2011). Quality and Internal Control in Banks: Inadequate Institutional Support. Zenith Economic Quarterly Vol. 7(3), pp. 46-51. Nigeria: Zenith Bank Plc.Osita, Agaolu (2008). Fundamentals of Auditing, third edition. Nigeria: Institute for Development Studies, University of Nigeria (Enugu Campus).Oyewobi, L.O.; Ganiyu, B.O.; Oke, A.A.; Olaawo W.; and Shittu, A.A. (2011). Determinants of Unethical Performance in Nigerian Construction Industry. Journal of Sustainable Development, 4 (4), pp. 175-182.Oyeyiola, O. (1996). Internal Control and Management of Frauds in the Banking Industry. A paper presented in ICAN Mandatory Continuing Professional Education Programme (MPCE) seminar.Stewardship (2013). Financial Controls in Churches and Small Charities. Stewardship Briefing Paper, Published June 2009 (reviewed September 2013). England: Stewardship Services (UKET) Limited.Zhijun Lin, Byron Y. Song and Zhimin Tian BNU-HKBU (2014). Reputable Inside Directors and Internal Control Effectiveness.

CHAPTER 2REVIEW OF RELATED LITERATURE2.0IntroductionThe term public refers either to the people affected by some property or activity or to government property and activities. The public sector is the government sphere of an economy. Economists classify four basic functions of the public sector: the provision of collective goods & services, the redistribution of income & wealth, the promotion of stabilisation & growth, and the prevention of social costs & market failures from crime, pollution, congestion, and monopoly (Fred, 2008: 621).Government is as old as human beings themselves. All human societies are governed by rulers, no matter their titles and characteristics may be. The word, government has a Greek origin, kyvernites, which means governor, or rudder. Government is a body or organisation that has the power to make and enforce laws and regulations for a certain territory. Government refers to the art of governing, meaning exercising authority over a community or a country (Abdel Fattah, 2008: 357).An auditor is one who does the independent examination of the financial statements of an organization with a view of expressing an opinion, as to whether these statements are prepared (in all material respects), give a true and fair view, and comply with the relevant statute or statutory obligation or financial reporting framework. According to Adeniyi (2012:419), the Auditor-General of the Federation, the Auditor General of the State and the Auditor General for Local Government serve as the external auditors to the three tiers of government in Nigeria. Their approach and techniques follow the same pattern with those of the various firms of Chartered Accountants, however, their methods of appointment is quite different from those of firms of Chartered Accountants. The external auditor has independence, from parties that have an interest, in the results published in financial statements.According to Arunma (2015:23), there are three main ways, in which auditor's independence can manifest itself:1.)Programming Independence: This protects the auditor's ability to select the most appropriate strategy, when conducting an audit. Auditors must be free to approach a piece of work, in whatever manner they consider best.2.)Investigative Independence: This protects the auditor's ability to implement the strategies in whatever manner they consider necessary. Auditors must have unlimited access to all government accounting information.3.)Reporting Independence: This protects the auditor's ability to choose to reveal to the public any information they believe should be disclosed. The auditors independence must not be compromised, where such reporting is in the best interest of the public or the government.Internal Control is the measures, an organisation employs to ensure that opportunities for fraud and misfeasance are minimised. It is one of the principal concerns of an internal audit, to ensure that internal controls are working properly, so that external auditors can have faith in the accounts produced by the organisation (Gary et al, 2005:220).According to Weygrandt, Kimmel and Kieso, Internal Control consists of all the related methods and measures adopted within an organisation to safeguard its assets from employees' theft, robbery and unauthorised use; and enhance the accuracy and reliability of its accounting records. This is done by reducing the risk of errors (unintentional mistakes) and the irregularities (intentional mistakes and misrepresentations) in the accounting process (Aigbokhaevbolo, 2013:33).The Auditing Practices Committee (APC) defines internal control system, in their Guidelines as, "the whole system of control, financial or otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management's policies, safeguard the asset and secure as far as possible the completeness and accuracy of the records. The individual components of an internal control system are known as 'controls' or 'internal controls'." (Adeniyi, 2012:190-191)According to the International Standards on Auditing (ISA) 400, the term "Internal Control System" means "all the policies and procedures (internal controls) adopted by the management of an entity to assist in achieving management's objective of ensuring as far as practicable, the orderly and efficient conduct of its business, including adherence to management policies, the safeguarding of assets, the prevention and detection of fraud and error, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information" (Adeniyi, 2012:191).As evident in (Adeniyi, 2012:192-194), the guideline on internal control stipulated by Auditing Practices Committee (APC) puts forwards eight features of systems on which an auditor may rely upon:1.) Segregations2.) Physical Control3.) Authorisation and Approval4.) Management Control5.) Supervisory Control6.) Organisation Control7.) Arithmetical & Accounting Control8.) Personnel Control

2.1Conceptual Framework2.1.1Internal Financial Control in GovernmentJack (2012:4) states that, the audit function has always been viewed as an integral part of the government financial management, and increasingly as an instrument for improving the performance of the government sector. Auditing covers a broad range of activities, which have different objectives. Traditionally, it has been a mechanism for assuring the government or its ministries (internal audit), and the legislature (external audit) that public funds are received and spent in compliance with appropriations and other relevant laws (compliance audit), and that government use of funds, fairly and accurately represents its financial position (financial audit).In the PIFC Brochure by European Commission, The concept of Public Internal Financial Control (PIFC) has been developed, in order to provide a structured and operational model to assist national governments in re-engineering their internal control environment and in particular to upgrade their public sector control systems in line with international standards and EU best practice (2006:1). PIFC represents a structured model for guiding national governments in establishing a state-of-the-art control environment in their income and spending centres (2006:3). It aims to give reasonable assurance that transactions comply with the principles of sound financial management, transparency, efficiency, effectiveness and economy, as well as with relevant legislation and budget descriptions (2006:3).A strong commitment from a central authority is the most important condition for managing the PIFC change project. In nearly all cases, this central authority has been the Ministry of Finance (2006:3). Central to PIFC are the concepts of managerial accountability, and functionally or independent decentralized internal audit (2006:5). PIFC does not focus on the techniques of budgeting or accounting (although internal control may well recommend improvements in these systems), nor does it include inspection tasks such as investigation & punishment of individual cases of fraud or serious irregularities (2006:5). Public internal control is preventive in nature and aims to ensure that adequate systems are in place to thwart as much as possible the occurrence of corruption and fraud (2006:5). Ministries do not have boards of directors. Government-wide laws and regulations regulate their business affairs. Certain assets such as buildings and infrastructure may be outside the control of those who occupy them. Moreover government entities rarely if ever collapse due to internal control failures and do not need to report to shareholders. So what does internal control mean in a government context? The average ministry has a number of responsibilities (committing funds, recruiting staff, contracting for supplies and services, approving actions, registering transactions & events, deploying resources & controlling, supervising & reporting on implementation of policies). If these responsibilities are fulfilled properly, the result will be effective control over resources, decisions and activities and the achievement of ministry objectives. If not, abuses will proliferate and efficiency decline. (World Bank, 1992)Some ministries are well-controlled; others are not. Major factors in the health of internal controls are the quality of managers, their familiarity with internal control systems and their preparedness to distinguish between "complying with regulations" and "managing the entity". Government regulations do not provide a complete set of controls for each entity and compliance with regulations is not an absolute standard. The extent and quality of compliance varies from entity to entity. It is therefore logical to expect ministries and other government agencies to have their own internal control systems and to treat them as an important means of achieving their management objectives. (World Bank, 1992)One way of understanding the need for government systems of internal control, is to think of government entities as corporate bodies and to ask how systems of control used in large private sector entities are relevant to management improvements. The parallel between government and big business is not always perfect and business may also be able to learn a great deal from government. Nevertheless there are valuable insights from this type of approach. On internal control, the World Bank paper suggests two principles. First, governing bodies of public sector entities need to ensure that a framework of control is established and operates in practice and that a statement on its effectiveness is included in the entity's annual report. Second, governing bodies of public sector entities need to ensure that effective systems of risk management are established as part of the framework of internal control. Risk management is about the assessment of relative risk and ensuring that controls are present and effective where risks are at their highest. (World Bank, 1992)According to ISP014 (2009: 9-10), The PFM Change Plan for Enugu was a working plan, to implement a comprehensive program of financial management reform in the state. From the Enugu State Government perspective, the Public Expenditure and Financial Analysis (PEFA) tool was used to evaluate and document the status of the PFM in the state. The PEFA tool has 10 dimensions, each dimension representing a core component of PFM. Internal controls consist of systems, procedures, processes, and structures put in place to promote checks and balances, prevent fraud and ensure overall system integrity. The system of internal controls is to be reviewed and strengthened, and regularly checked for compliance. It should form part of the strengthened accounting system proposed for the state. The targets set under the 4th Dimension of this PFM Plan are:a.) Internal control system is strengthened.b.) All MDAs maintain cash books in compliance with Financial Instructions (FI).c.) Banks accounts maintained by MDAs and the treasury are reviewed, and number streamlined.d.) All creditors payments greater than (an established state ceiling) are made directly by electronic transfer into the creditor's bank account.The responsible agency responsible for these targets is the Accountant General's Office working with the MDAs.MBEOO3 (2010:7), opines that, Government officials are responsible for safeguarding the assets of the State. They are empowered by the Constitution and enabling laws in exercising authority over the assets belonging to the government. Adequate system of internal controls also assists the government in protecting the assets and ensuring that scarce resources available to them are transparently and effectively deployed in providing social amenities for the citizens. Internal Controls provide reasonable assurances that the objectives of the Enugu State Ministry of Finance are being achieved through:a.) Effectiveness and efficiency of operations through the use of the organisation'sresources.b.) Reliability of financial reporting including reports on budget execution,financial statements, and other reports for internal and external uses.c.) Compliance with applicable laws and regulations.d.) Prevention or prompt detection of unauthorised acquisitions, uses or disposals of the MDAs assets.

2.1.2Framework of Internal Control in the Accounting ProfessionThe Framework of Internal Control defines the minimum standard acceptable in the public and private sectors and provides the basis for evaluating such controls. It applies to all aspects of the MDA's operations such as: programmatic, financial, compliance and reporting. The top Executives of any MDA are responsible for developing the detailed, procedures and practices to suit their operations and set up the machinery for monitoring the control to ensure compliance (MBEOO3, 2010:8). An assessment of Institution's internal financial controls should be based on a suitable, recognised control framework established by a body or group that has followed due process procedures, including the broad distribution of the framework for public comments. In the world today, regulators on internal financial control including, the Treadway Commissions Committee of Sponsoring Organizations (COSO), Public Company Accounting Oversight Board (PCAOB), International Organisation of Supreme Audit Institutions (INTOSAI), The United States Government Accountability Office (GAO), the Institute of Chartered Accountants of England and Wales (ICAEW), the Canadian Institute of Chartered Accountants (CICA) , International Auditing Practices Committee (IAPC) and International Auditing and Assurance Standards Board (ISAASB) have established generally acceptable auditing standards that constitute the framework of Internal Controls.Committee of Sponsoring Organizations (COSO) of the Treadway CommissionCOSO is a private sector organization sponsored by the American Institute of Certified Public Accountants, the American Accounting Association, the Institute of Internal Auditors, the Institute of Management Accountants & the Financial Executives Institute. In 2013, COSO released an update to its Internal ControlIntegrated Framework. The original framework, which was released in 1992, has gained broad acceptance and is widely used around the world. It is recognized as a leading framework for designing, implementing, and conducting internal control and for establishing requirements for an effective system of internal control.COSOs Internal ControlIntegrated Framework enables organizations to effectively and efficiently develop systems of internal control that adapt to changing business and operating environments, mitigate risks to acceptable levels, and support sound decision making and governance of the organization. COSO (2013:3), defines internal control as a process, effected by an entitys board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives, in the categories of:1) Effectiveness and efficiency of operations,2) Reliability of financial reporting, and3) Compliance with applicable laws and regulations. The International Organization of Supreme Audit Institutions (INTOSAI)The International Standards of Supreme Audit Institutions (ISSAI) are issued by the INTOSAI. In 2001, the 17th INTOSAI (Seoul) recognized a strong need for updating the 1992 guidelines and in 2004, the 18th INTOSAI (Budapest), approved the 2004 guidelines. The goal of the SAIs Internal Control Standards Committee is to develop guidance for establishing and maintaining effective internal control in the public sector. Government management is therefore an important addressee of the guidelines, which could be a basis for the implementation and execution of internal control in their organisations. Since evaluating internal control is a generally accepted field standard in government auditing, auditors can use the guidelines as an audit tool. The guidelines for internal control standards comprising the COSO model can therefore be used both by government management as an example of a solid internal control framework for their organisation, and by auditors as a tool to assess internal control. However, the guidelines are not intended as a substitute for INTOSAI Auditing Standards or other relevant auditing standards. The Guidelines defines a recommended framework for internal control in the public sector and provides a basis against which internal control can be evaluated. The approach applies to all aspects of an organisations operation; however, it is not intended to limit or interfere with duly granted authority related to developing legislation, rule-making, or other discretionary policy making in an organisation. (INTOSAI, 2004:1-5)INTOSAI defines Internal control, as, "an integral process that is effected by an entitys management and personnel and is designed to address risks and to provide reasonable assurance that in pursuit of the entitys mission, the following general objectives are being achieved; executing orderly, ethical, economical, efficient and effective operations; fulfilling accountability obligations; complying with applicable laws and regulations; and safeguarding resources against loss, misuse and damage." Internal control consists of five interrelated components such as control environment, risk assessment, control activities, information & communication, and monitoring. Internal control is designed to provide reasonable assurance that the entitys general objectives are being achieved. Therefore clear objectives are a prerequisite for an effective internal control process. (INTOSAI, 2004:6)Public Company Accounting Oversight Board (PCAOB)PCAOB is a private sector, non-profit corporation created by the Sarbenes-Oxley Act of 2002, to oversee accounting professionals who provide independent audit reports for publicly traded companies. It is located in Washington, DC (District of Colombia). The Sarbenes-Oxley Act has been amended by the Dodd-Frank Act (generally called the Wall Street Reform and Consumer Protection Act). In PCAOB Rulemaking Docket Matter No. 021, (PCAOB, 2007:5), The auditor is required to provide an independent opinion on the effectiveness of the company's internal control over financial reporting. The auditor does not have the familiarity with the company's controls that management has and does not interact with or observe these controls with the same frequency as management. Therefore, the auditor cannot obtain sufficient evidence to support an opinion on the effectiveness of internal control based solely on observation of or interaction with the company's controls. Rather, the auditor needs to perform procedures such as inquiry, observation, and inspection of documents, or walkthroughs, which consist of a combination of those procedures, in order to fully understand and identify the likely sources of potential misstatements, while management might be aware of those risk areas on an on-going basis.In PCAOB Rulemaking Docket Matter No. 021, (PCAOB, 2007:41-43), the auditor should test the design effectiveness of controls by determining whether the company's controls, if they are operated as prescribed by persons possessing the necessary authority and competence to perform the control effectively, satisfy the companys control objectives and can effectively prevent or detect errors or fraud that could result in material misstatements in the financial statements. Procedures the auditor performs to test design effectiveness include a mix of inquiry of appropriate personnel, observation of the company's operations, and inspection of relevant documentation. Walkthroughs that include these procedures ordinarily are sufficient to evaluate design effectiveness. Also the auditor should test the operating effectiveness of a control by determining whether the control is operating as designed and whether the person performing the control possesses the necessary authority and competence to perform the control effectively. Procedures the auditor performs to test operating effectiveness include a mix of inquiry of appropriate personnel, observation of the company's operations, inspection of relevant documentation, and re-performance of the control.The United States Government Accountability Office (GAO)Government Accountability Office (GAO) issues standards for internal control in the federal government as required by 31 U.S.C. 3512(c), commonly referred to as the Federal Managers' Financial Integrity Act of 1982. GAO first issued the standards in 1983. They became widely known throughout the government as the Green Book. Since then, changes in information technology, emerging issues involving human capital management, and requirements of recent financial management-related legislation have prompted renewed focus on internal control. Consequently, GAO revised the standards and reissued them as Standards for Internal Control in the Federal Government (GAO/AIMD-00-21.3.1, November 1999). These standards provide the overall framework for establishing and maintaining internal control and for identifying and addressing major performance challenges and areas at greatest risk for fraud, waste, abuse, and mismanagement. (GAO, 1999)GAO (1999), states that, internal control represents an organizations plans, methods, and procedures used to meet its missions, goals, and objectives and serves as the first line of defence in safeguarding assets and preventing and detecting errors, fraud, waste, abuse, and mismanagement. Internal control provides reasonable assurance that organizations objectives are achieved through:1) Effective and efficient operations,2) Reliable financial reporting, and3) Compliance with laws and regulations. As federal managers strive to achieve their agency's missions and goals and provide accountability for their operations, they need to continually assess and evaluate their internal control structure to assure that it is well designed and operated, appropriately updated to meet changing conditions, and provides reasonable assurance that the objectives of the agency are being achieved. Specifically, managers need to examine internal control to determine how well it is performing, how it may be improved, and the degree to which it helps identify and address major risks for fraud, waste, abuse, and mismanagement. (GAO, 1999)Criteria of Control Board Guidance on Control (CoCo)The CoCo (Criteria of Control) framework was first published by the Canadian Institute of Chartered Accountants (CICA) in 1995. This guidance builds on COSO and is thought by some to be more concrete and user friendly. This guidance is intended to be useful in making judgments about designing, assessing and reporting on control. However it is not intended as prescriptive minimum requirements.CoCo describes internal control as actions that foster the best result for an organization. These actions contribute to the achievement of the organizations objectives, focus on the effectiveness and efficiency of operations; the reliability of internal and external reporting; as well as compliance with applicable laws and regulations and internal policies. CoCo indicates that control comprises, those elements of an organization (including its resources, systems, processes, culture, structure, and tasks) that, taken together, support people in the achievement of the organizations objectives.According to PAIB (2006), "CoCo uses four essential elements as groupings within which it articulates 20 criteria of control. These criteria are interrelated and together they provide the framework for looking at the whole organization from a control perspective, Purpose criteria, Commitment criteria, Capability criteria, and Monitoring and Learning criteria.

2.1.3Financial Control Framework in Enugu State GovernmentAccording to MBEOO3 (2010:11-14), an assessment of Institution's internal financial controls should be based on a suitable, recognized control framework established by a body or group that has followed due process procedures, including the broad distribution of the framework for public comments. The following are recognized control frameworks, applicable to Internal Financial Controls:The 1999 Constitution of the Federal Republic of Nigeria (As Amended, 2011)Section 120 of the Constitution provides very important guidelines on financial controls adopted by the State.MBEOO3 (2010:11), states that some of the important provisions are:1) All revenues or other monies raised or received by a State (not being revenues or other monies payable under this Constitution or any Law of a House of Assembly into any other public fund of the State established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the State.2) No money shall be withdrawn from the Consolidated Revenue Fund of the State except to meet expenditure that is charged upon the Fund by the Constitution or where the issue of that money have been authorized by an Appropriation Law, Supplementary Appropriation Law or Law passed in pursuance of Section 121 of the Constitution.MBEOO3 (2010:11), states that by implication:1.) All revenues accruing to Enugu State Government must be paid into the Consolidated Revenue Fund and regarded as such (irrespective of the bank account where it is domiciled).2.) Withdrawal of funds from the Consolidated Revenue Fund can be effected through the passing of Annual Appropriation Bill by the State House of Assembly and signed into Law by the Executive Governor.In MBEOO3 (2010:11), additionally, Section 123 provides that:1.) A House of Assembly may by Law make provisions for the establishment of a Contingency Fund for the State and for authorizing the Executive Governor, if satisfied that there has arisen an urgent and unforeseen need of expenditure for which no other provision exists.2.) Where there is urgent need for government expenditure, a Supplementary Appropriation Bill shall be passed by the State House of Assembly and signed by the Governor.The Finance (Control & Management) Act, No. 33, 1958 (As Amended)The Act governs the management and operation of government funds. It also regulates the accounting system, the books of accounts to be kept and the procedures to be followed in the preparation of accounts and financial statements. Section 33 of the Act stipulates that the Accountant General shall render to Auditor General Accounts showing government finance at the end of the financial year. Similar legislation applicable in Enugu State, is the Enugu State Public Finances (Control & Management) Laws 2005.According to Bello (2014), "these regulatory provisions are capable of bringing about financial discipline in the operations of government if well applied. But the fact is that the provisions are only on paper and are not to the knowledge of most of those who are expected to apply them. Since there is no application, the financial regulations themselves might be considered outdated." However, on 14th October, 2015, there was a first reading in the National Assembly, for the Finance (Control and Management) Act No. 33 1958 (Repeal and Re-enactment) Bill 2015.Audit Law of Enugu State CAP 14, Revised Edition, Laws of Enugu State, 2004Apart from empowering the Auditor-General to audit the accounts of the federation, the Audit Act (1956) also requires the Accountant-General to sign and present, within a period of seven months after the close of each financial year, to the Auditor-General for the federation, the accounts showing the financial position of the federation of Nigeria on the last day of such financial year. However, this law is no longer applicable in Enugu States. Only the Audit Law of Enugu State CAP 14, Revised Edition, Laws of Enugu State, 2004; and other audit laws, such as the Draft Enugu State Audit Reform Bill, 2010; are applicable.The Appropriation Acts in Enugu StateGovernment budgets contain the annual estimates of capital and recurrent expenditures and revenues of the government. The annual appropriation Acts regulate financial matters to the extent that expenditure made which is not contained in the Act becomes an impeachable offence. Over the years, Nigerian governments, civilian or military, have been making annual financial planning in the form of a budget also as to regulate their financial activities for the achievement of national goals and objectives. For a civilian government, there are usually some constitutional provisions empowering the legislative body to grant approval on modifications to both the capital and recurrent expenditure and revenue estimates before any funds can be expended or collected. The Executive undertakes the execution of the budget in relation to the collection of revenues and disbursement of public funds. At the end of a financial year, the actual results (in the form of Accountant-General Reports) have to be measured and released for comparison with Budgeted results, so that appropriate actions could be taken on the variance that might arise. (Bello, 2014)Treasury and Finance Circulars in Enugu StateIn Federal Republic of Nigeria Official Gazette, Vol. 96, No. 7, (FG, 2009), Pursuant to FR 501, the Accountant-General shall issue from time to time Treasury Circulars and Accounting Manual to guide Accounting Officers and other employees of each ministries/extra-ministerial offices and other arms of government on all matters relating to the provisions of the Financial Regulations. The frequent movement of accounting staff between ministries, extra/ministerial offices and other arms of Government calls for a degree of standardization in the accounting procedures in use in all federal ministries and self-accounting units. For this purpose, state ministries, extra-ministerial offices and other arms of government shall use the Treasury Accounting Manual and Treasury Circulars issued by the Office of the Accountant-General in accounting for their daily financial transactions. The Treasury and Finance Circulars are directives issued in form of circular, letters or memo to guide the day to day activities of government ministries or departments. They are used to amend existing financial regulation or introduce new policy. (Bello, 2014)Finance Instructions in Enugu StateMBEOO3 (2010:11) holds that, "the various laws that established the Enugu State Financial Instructions (FI) are enumerated in Section 0101. The current edition applicable to Enugu State Public Service is the version revised in January 2003. Unless otherwise stated, any reference to FI refers to the Enugu State Financial Instructions, Finance and Stores (Revised in January 2003)." The Financial Regulations are the laws by which Government Finance and Accounting procedures are regulated, and are called Financial Instructions in the States. They derive their powers from the Finance (Control and Management) Act 1958. Section 0103 provides that all officers and employees in the Public Service are required to carry out their duties strictly in accordance with the FI. Failure to comply with provisions of the FI would be treated as offence that attracts sanctions in accordance with the CSR. All employees are therefore required to study and be acquainted with the provisions of the FI and interpret it correctly.

2.1.4Institutional Structure of Internal Controls in Enugu State Government (ENSG)Public Accounts Committee, Enugu State National AssemblyEnugu State National Assembly is part and parcel of the legislature, and it authorizes expenditure through the approval of the Annual Appropriation Bill. The 1979 and 1999 Constitutions brought into existence the Public Accounts Committee of the House of Assembly. The purpose of the committee is to expose waste, corruption or inefficiency in the handling of public funds or projects. It is empowered to monitor the implantation of budgetary provisions according to the Appropriation Act, and to examine audited accounts of the State and the Auditor-General's Reports. This is a high level control aimed at ensuring accountability in the public service.Enugu State Ministry of Finance and Economic DevelopmentThis Ministry is usually headed by a Commissioner of Finance, and Mrs. Eucharia Uche Offor is currently the Commissioner for Finance (Enugu State). According to MBEOO3 (2010:12), "Section 0104 of FI also charges the Ministry of Finance with the responsibility of enforcing provisions of the FI in the State Public Service. Section 0101 and 0102 of FI empowers the Executive Governor to assign to the Commissioner of Finance the responsibility of the financial affairs of the Government. Detailed specifications of the powers and responsibilities are announced by notice in the Gazette from time to time." Office of the Accountant General (Enugu State)According to MBEOO3 (2010:12), the Accountant General of the State is the Head of the State Government Accounting Services and the Treasury. FI0201 states that, he is thus responsible for:a.) Receipts and payments of government funds.b.) Supervision of the Accounts of the Ministries and Extra-Ministerial Departments.c.) Collation, presentation and publication of statutory financial statements of the State and any other statements of Accounts as required by the Commissioner of Finance.d.) Management of the Ministry of Finance Investments (MOFI).e.) Maintenance and operation of Accounts of the Consolidated Revenue Fund, Development Fund, Contingencies Funds and other Public Funds as may be created by the State Government and provision of cash backing for the operation of the State Government.f.) Procurement, maintenance and operation of the State Share of Federation Accounts.g.) Establishment and supervision of Sub-Treasuries/Pay Offices in the state and the State Liaison Offices.h.) Conducting of routine and in-depth inspection of the books of accounts of the State, Ministries and Extra-Ministerial Departments to ensure compliance with FI, regulations, policies and decisions. This includes surprise cash survey and annual board of survey.By virtue of the functions and responsibilities of the Accountant-General of the State, he or his representatives shall have free access at all reasonable times to the files, safes, documents, books and other records relating to the Accounts of the MDAs. He shall also be entitled to require and receive from members of the public service such information, reports and explanations as they may deem necessary for the proper performance of their functions. He has the responsibility for providing adequate accounting systems and controls in Enugu State Ministries, Commissions and Extra-Ministerial Departments. Honourable (Mr.) Pascal Okolie is currently the Accountant General of Enugu State.Auditor General of the State (Enugu State)MBEOO3 (2010:13), holds that, the Auditor General, as an external auditor, usually audits prepared accounts of the state, including courts, commissions, boards, agencies and non-ministerial departments. FI 0202 provides that the State Auditor-General is responsible for the audit of and report on the public accounts of the state including all MDAs, persons and bodies established by law entrusted with the collection, receipt, custody, issue, or payment of state public money or with the receipt, custody, issue, sale, transfer or delivery of any stamps, securities, stores or other property of the State Government and for the certification of the Annual Accounts of the Government. Also by virtue of the functions and responsibilities of the Auditor-General of the State, he or his representatives shall have free access at all reasonable times to the files, safes, documents, books and other records relating to the Accounts of the MDAs. He shall in addition be entitled to require and receive from members of the public service such information, reports and explanations as they may deem necessary for the proper performance of their functions.In MBEOO3 (2010:13), "the Auditor-General of the State shall examine and ascertain in such manner as he may think fit, the accounts relating to public funds and property, and shall ascertain whether in his opinion:a.) That the accounts have been properly kept in accordance with the financial statutes.b.) That public money has been fully accounted for, and the rules and procedures applied are sufficient to become an effective check on the assessment, collection and proper allocation of revenue.c.) That public fund has been expended for the purposes for which they were appropriated and the expenditures have been made as authorized.d.) That the essential records are maintained and the rules and procedures applied are sufficient to safe-guard and control public property and funds.Accounting OfficersFI 0203 provides that the term Accounting Officer means the Officer of a Ministry or Department who upon receiving an appointment or acting appointment as a Permanent Secretary or Head of an Extra-Ministerial Department is consequently designated and appointed Accounting Officer for his MDAs. The Accounting Officer is responsible for the safe-guarding of public funds and the regularity & the propriety of expenditure under his control. FI 0203 also states that the Accounting Officer shall be held personally and peculiarly responsible for all wrong doings in his MDAs. Delegation of his duties or functions shall not absolve him from these responsibilities and liabilities. He should therefore step up supervision and controls to ensure that nothing goes wrong (MBEOO3, 2010:13)Sub-TreasurerAccording to MBEOO3 (2010:14), FI 0204 provides that a Sub-Treasurer is an Officer who is entrusted with receipt, custody and disbursement of public money and who is required to keep Cash Book, ENT Book 107, together with such other books of accounts as may be prescribed by the Accountant-General. Transactions in this book would be consolidated in the final accounts rendered to the Accountant-General as prescribed in FI 0201.Revenue CollectorsAccording to MBEOO3 (2010:14), FI 0205 defines a Revenue Collector as an Officer, other than a Sub-Treasurer, who is entrusted with an official receipt, licence or ticket booklet for the regular collection of some particular form of revenue. He is required to keep a Revenue Collectors Cash Book or such other books as may be prescribed by the Accountant-General of the State.Imprest HoldersAccording to MBEOO3 (2010:14), FI 0206 describes an Imprest Holder as an Officer other than a Sub-Treasurer who is entrusted with the disbursement of public money, for which vouchers cannot be presented immediately to a Sub-Treasurer. He is required to keep a Vote Book (DVEA Book) and other books of accounts necessary for his work.In Federal Republic of Nigeria Official Gazette, Vol. 96, No. 7, (FG, 2009), Imprest cash shall be kept separate from other moneys at all times. The provision of Regulations 1103 or 1104 as appropriate will apply with regard to the custody of imprest cash. The duty of maintaining the imprest cash and cash book shall not be delegated to an officer on a salary grade level lower than Assistant Executive Officer (Accounts). The officer must also be conversant with the bookkeeping procedure for posting and balancing of the cash book. Imprest holders must duly observe all regulations regarding the control of expenditure and the disbursement of public money and are responsible for the correctness of vouchers signed by them (see Regulation 410). They are also responsible for ensuring the early submission of paid vouchers for reimbursement. The imprest may be used only for the purpose for which it is issued and Imprest holders shall not use other public funds for imprest purposes. Where an imprest is granted, the imprest holder must open a bank account in his official designation, unless authority is given to the contrary by the Accountant-General. The accounts of Imprest Holders are subject to inspection by the Accountant-General and the Auditor-General.Internal AuditorsAccording to MBEOO2 (2010: 13), FI 1901 provides that the Permanent Secretary of a Ministry or Head of Extra-Ministerial Department shall ensure that an Internal Audit Unit is maintained in their MDA to provide a complete and continuous audit of the accounts and records of revenue and expenditure, plants, allocated stores and unallocated stores as appropriate. The Internal Audit function shall also include Management Audit encompassing other areas of activities and functions of an MDA. The existence of an Internal Audit Unit will not divest any member of the MDA of their individual responsibilities; neither will it obviate the necessity for normal departmental checks and balances (also known as internal control system). FI 1902 also provides that the Permanent Secretary of the MDA shall ensure that the Internal Audit function is placed directly under the control of a competent Accounts Officer trained in Treasury duties by the Office of the Accountant-General.FI 1902 provides that the Internal Auditor will be directly responsible to the Permanent Secretary for a comprehensive audit of all the operations and activities of the MDA. For this purpose, he shall carry out financial and management audit of all areas of the MDAs functions, with a view to monitoring their efficiency and effectiveness MBEOO2 (2010: 16).ISP014 (2009:24) states that, For the internal audit function to be effective, the internal auditors must be seen to be independent; and their functions should complement those of the Auditor General of the State. In Enugu State, the internal audit function is part of the responsibility of the Accountant General, who selects and posts internal auditors to MDAs.The Internal Auditor shall report monthly and quarterly, to the Permanent Secretary or Head of the MDA on progress of the audit and submit copies of these reports to the Accountant-General and the Auditor-General; FI 1906. FI 1907 also provides that the Internal Auditor will render a half-yearly report to his Permanent Secretary, with copies to the Auditor-General and Accountant-General to certify to what degree he is satisfied with the safeguards against fraud, controls of the receipts and payments, controls on the issues and consumption of Stores, with the verification of cash and stores held, and with the accuracy of the accounting records. The report will also include his observations on the economy of co-operation, efficiency and effectiveness of other areas of activities and functions of the MDA (MBEOO2, 2010: 19).The FI 1901 and 1902 issued in 2003 provides that all MDAs should develop and maintain effective and efficient Internal Audit Unit which reports directly to the Accounting Officer. It is the responsibility of the Accounting Officer to prevent losses resulting from criminal conduct and take necessary steps against perpetrators. The three major areas of management focus are, Procedures to deal with fraud, Internal Control and Risk Management (ICRM), and Internal Audit and Audit Committees MBEOO2 (2010: 21). MBEOO2 (2010: 21), states that, the duties and responsibilities of the Internal Auditors are at the discretion of management. However, the following are the areas of interest to an Internal Auditor: a) Prepayment Audit (also known as pre-audit) b) Vouching of Payroll and third party claims c) Auditing of Store movements and records d) Conducting internal investigations and evaluation for management e) Constant review and appraisal of the existing internal control procedures

2.1.5Operational Controls in Enugu State Government (ENSG)Operational control measures are expected to re-orientate the belief, culture, attitude, integrity, competence and commitment of staff in ENSG. Optimal performance and productivity in the Public Service is expected to improve significantly if these controls are properly implemented. Both senior and junior public servants have important roles to play to make the internal control procedure succeed (MBEOO3, 2010:15).According to MBEOO3 (2010:15), the internal control measures in Enugu State Government comprise the following elements:1) Controls of Operating Environment2) Controls on Core Financial Activities 3) Risk Management Controls4) Information & Communications Controls5) Monitoring of Controls to Ensure ComplianceMBEOO3 (2010:15), posits that, critical practices that should be evident in the MDAs where controls are operating include the following:a.) Issuance of financial authorities, such as Supplementary Warrants.b.) Appointment of Committees to carry out critical ad hoc assignments.c.) Centralisation of all payments.d.) Preparation of standing orders and instructions on the signing of cheques issued, payments on accounts, etc.e.) Establishment and maintenance of Internal Audit Units.f.) Preparation of estimates of income and expenditure.g.) Budgetary controls and feedback processes.h.) Preparation of regular Activity Reports, including the discussion and implementation of valid recommendations.Controls of Operating EnvironmentMBEOO3 (2010:15), posits that, the objectives are to create positive and supportive environment for practicing sound internal control measures in Enugu State Government. Controls of operating environment are necessary to provide the framework for good governance and adherence to basic acceptable standard practices in government offices. For government business to be carried out orderly, control measures are necessary to ensure accountability and safety of the MDA assets.The major elements under operational controls in Enugu State Government include:1) Ethical values and integrity controls2) Controls to ensure competence of employees3) Controls to ensure that senior public servants lead by example4) Organisational structure controlsControls on Core Financial Activities"Control on core financial activities is implemented to prevent or reduce the risks that can impede accomplishment of government programmes. The control activities could be directive, preventive, detective or corrective" MBEOO3 (2010:18). Important controls that should be implemented on core financial activities include:1) Documentation Controls1) 2) Approval and Authorisation Controls3) Verification Controls4) Supervisory Controls5) Segregation of Duties Controls6) Reporting Controls7) Physical and Security Controls on Fixed AssetsMonitoring of Internal Control System in Enugu State GovernmentMonitoring is the review of an organisation's activities & transactions to assess the quality of performance over time and to determine whether controls are working effectively as designed. Management should focus their monitoring efforts on internal controls and performance to ensure achievement of the organisation or MDA's objectives. For monitoring to be effective, all employees need to understand the organisation's mission, objectives, and responsibilities and risk tolerance levels. Monitoring activities are most often carried out by Internal Audit, Risk Management and Internal Control Units of the organisation. (MBE003, 2010:10)MBEOO3 (2010:33), posits that, After implementing the strengthened Internal Control System in Enugu State Government, it is important to monitor compliance so that the project would be successful. All staff within the MDA should have diverse roles to play in the monitoring of internal control processes to ensure that the benefit is maximized. The first step in attracting all staff to participate actively in monitoring the internal control system is to create awareness by the Government and MDA's values, mission, objectives, responsibilities and risk tolerance levels.In addition, MBEOO3 (2010:15), states the measures recommended to be taken by the Accounting Officers or HODs to monitor controls in the MDAs include the following actions:(a)Regular Meetings(b)Performance Reports(c)Recording of Events(d)External Correspondences(e)Internal Control Unit Reviews(f)Internal Audit Reviews(g)Prepayment Audit of Vouchers(h)Suggestion Box(i)Board of Surveys(j)Surprise Inspection(k)Public Accounts Committee(l)Audit Review Committee

2.1.6Specific Financial Controls in Enugu State Government (ENSG)MBEOO3 (2010:25), posits that, financial Control is the process which assures that revenues are economically generated and efficiently utilized in the execution of government projects. It is an integral process of financial decision making and includes monitoring actions to ensure accomplishment of business plans. Necessary internal control measures that should be applied in managing revenue and expenditure are illustrated below.Revenue GenerationRevenue is the income accruing to the government. Government generates revenue to executive its programmes and pay the emoluments of civil servants. There should be adequate controls to secure the revenue generated by the state. Enugu State Government has over the years expanded its revenue base. some of the identified sources of revenue accruing to the state include; Statutory Allocation of the Federal Government; Internally Generated Revenue (IGR); other sources, such as Internal Loans, External Loans, Grants from Local & Foreign Agencies, and Donations (MBEOO3, 2010:25). Revenue Controls are the various measures put in place to ensure that all monies due to the government are received and reported. As the actual revenue continues to increase, there would be need for effective controls, to minimize leakages. The Internal Control System that should be developed around IGR includes Assessment, Recording of Demand Notice, Settlement of Revenue Assessment, Bank Statement and Reconciliation, and Memorandum of Understanding (MOU) with Banks (MBEOO3, 2010:25-26).Expenditure of FundsMBEOO3 (2010:26), posits that, government expenditure represents payments made for goods and services in the course of executing public projects and programmes. All expenditure must comply with Sections 120 to 122 of the Constitution of the Federal Republic of Nigeria, 1999. Some of the public expenditure that the government may incur includes: Payment to contractors for executed Projects, payment to suppliers, payment of expenses claims, remittances of proceeds to third parties, donations, payment of subventions to parastatals, repayment of loans to banks, payment of salaries and wages to public officers, payment of pension to retired officers.The general objective of Expenditure Control is to ensure that all payments are covered by budget, and that documents accompanying the payment vouchers validates such claims, and that payments are made for the intended purposes. The following controls should be maintained around government expenditure; Authority to Spend, Controls on Purchases and Contracts, Controls of Payments, Controls on Processing of Payment Vouchers, and Supporting Documents to Payment Vouchers (MBEOO3, 2010:26-27).Control Over Cash and Revenue Bank Accounts (RBAs)There should be adequate control over cash as it is vulnerable to losses. The Accounting Officer should take necessary steps to ensure that cash belonging to the MDA is safe and accounted for at all times. The cardinal objective of cash control is to ensure that funds are not mismanaged or misappropriated. (MBEOO3, 2010:27-28)The following controls and rules shall apply in the opening and operation of government bank accounts; Authorisation, Signatories, Operating the Bank Account, and Recording of Amount Deposited. Please see Chapter 11 of Financial Instructions, revised in 2003, for more details on the controls over bank accounts. The Permanent Secretaries, Head of MDAs, Officers Controlling Expenditure, Sub-Treasurers, Imprest Holders, Collectors of Revenue or other Financial Officers also have great influence on cash control (MBEOO3, 2010:28-29).Control on Security Documents and BooksSecurity Documents should be handled and kept with utmost care to avoid ge