CHAPTER ONE

INTRODUCTION

• Background of the study

Government parastatal entities are institutions created by the government to provide essential goods/services to people at affordable prices. The government, at different levels, invests billions of naira in parastatals, in the interest of citizens for the tiles. These institutions can only achieve the purposes for which they were created if they are managed, operated and effectively controlled to prevent fraud.

Frequency of fraud continues to increase in public and private sector organizations and in all countries. Fraud is a universal problem, since no country is immune, although it is the developing countries and their various states that suffer the most. Fraud includes all the multiple means that human ingenuity can create that one individual uses to gain an advantage over another through false suggestions or suppression of the truth. This includes surprises, tricks, cunning or concealment, and any unfair means by which another person is deceived (Black’s Law Dictionary, 1979).

Internal control has been recognized as an important mechanism for detecting and preventing financial fraud (Roato 1992). Since then, internal control has been used preventively to combat financial fraud. According to Chartey (1982), the activities of Egyptian treasurers in the year 200 a. C. as grain collectors were examined by the scribes. The Scribes made the check to prevent the treasurer from diverting grain revenues.

The internal control arrangement within an organization according to Culley and Bauer (1953) are set up to safe guide cash, merchandise, and other assets,  and also to provide checks on tile accuracy of the records and compliance with the organization policies.  Without internal control, the existence and success of an organization would be in doubt, as the system would collapse clue to errors, frauds and maladministration.

In the ministry of Works, Kwara State, the board members and some top management staff are not always there in the establishment, making it an impossible task to supervise the employees individually. To overcome this inherent problem, management must introduce an internal control system to ensure that its decisions and policies are properly adhered to. Through internal control, management will obtain information that is very essential to the successful operations of the organization.

Employee fraud and management, misappropriation of theft and other financial crimes are increasing, therefore, accounting and auditing personnel must have the training and skills to recognize these crimes, both at the state level and at the local (local) level. To better guarantee the state perspective in the state. Fraud prevention, deterrence, detection, investigation and remediation area. By referring outside the scope of this investigation to improve the need for the internal control service in the state of Kogi, the news reports following the September 11 attacks showed how the terrorists used the international banking system to finance their activities, transfer money and hide your information. Finance, and noted the need for researchers to understand how financial information can provide clues about future threats.

Several reasons explain why many people are involved in financial fraud. According to lmasa (1991), many people consider fraud a crime without victims, while many organizations act as if it were not a crime at all. He added that they do not report it to the police, but make regular budgetary adjustments and treat it as part of the cost of doing business. As stated by Biakie (1999), the craving for materialism is one of the prohibitions of Nigerian society and is largely responsible for the series of frauds that have irremediably engulfed our society. He added that Nigerian society seems to have accepted and encouraged the acquisition of wealth acquired by all means, since the practice is reinforced by the title and other recognition marks granted by their communities, religious groups and societies. Udo (2000) supports this, in his statement said that the visualization of the material polarity of man’s being and the desire to be recognized in society as a result of material influence has become the order of the day.

According to him, the circle of avarice and ostentatious living perpetuates itself by winning more disciples year in year out, also responsible is the absence of moral value and discipline in the way of life of many Nigerians. According to Shehu (2000), many Nigerians see government fund as free money. They therefore collude and defraud the government of its financial resources. Usman cited in Oyaide (2000) said that today many people see public service primarily as machinery for acquiring and retaining wealth and accumulation of private property no matter at what cost to the nation. He further said that one explanation for the widespread of fraud in the public service is believed to be a culture of neglect to call erring public officials to order.

For government parastatals to meet the objectives for which they were established, various internal control measures must be adopted to prevent financial frauds. It is the duty of the management to enforce strict compliance of internal control measures.

The organizational structure of an establishment serves as a framework for direction and control of its activities. An effective structure provides for communication of the delegation of authority and scope of responsibility (Anderson 1976). It should be designed in such a way that an individual does not have an overriding control.

One of the most important elements of successful internal control is personnel Unqualified and dishonest persons can undermine a system no matter how well planned the organization may be. According to Hongren and Foster (1987), individuals must be given authority, responsibility and duties commensurate with their abilities, interest, experience and reliability. Careful selection places an employee in a position he is best suited.

The internal control measures can be effective in preventing financial frauds if they are strictly adhered to by the employees and if they are properly enforced and supervised by management. Effective separation of duties is paramount in preventing financial frauds. Authorization, execution, custody arid recording are the four main functions, which need separation (Howard 1982).

Effectiveness of internal control measures will be enhanced if employees of an organization are carefully selected and placed at positions where they are best suited. Attwood and Oepaul’a (1982) noted that an important feature of effective internal control is that the directors should review the organization’s financial operations and positions at regular and/ frequently intervals. This study, therefore, is taken up against the backdrop of fraud reports in the ministry of works, Kwara state to provide possible means towards preventing frauds in the Ministry of Works, Kwara State.

 

• Statement of the problem

Fraud and fraudulent activities are reported each time in print and electronic media in Nigeria. Several cases of financial fraud occur in the Ministry of Public Works. Many financial frauds are perpetrated by government ministry staff, while in others, staff collaborate with outsiders (Shehu, 2000). According to Chukwu (1993), many government officials in parastatals want only wealth accumulation without taking into account the continuity of the institution.

The persistence of financial fraud can be attributed to the inadequacies of internal control measures in parastatal governments (Government White Peper, 1979). Internal control measures can play an important role in reducing the minimal incidence of financial fraud in government parastatals.

The internal control system must be improved beyond what is currently being done in most of the government’s parastatal entities to address the challenges posed by the current financial fraud wave in Nigeria (Chukwu, 1993). Frequent financial fraud has been attributed to the lack of supervision of those in positions of authority. The persistent problem of financial fraud has also been attributed to the inability of parastatal employees to adequately comply with established procedures of the internal control system (Commission Report 1981). The problem of widespread financial fraud has also been attributed to the scarce selection and training of employees, and the apparent lack of government action in some cases, to punish the report of the committee of errant officials, he added.

These factors, as well as other factors, could be at the root of the increase in financial fraud within parastatal companies. However, the measures taken by the government to stop the increase in financial fraud in the state are not clear. This study is therefore undertaken to examine the problem of accounting records and fraud prevention in the ministry of works, Kwara state. With these, the research questions below were drafted.

 

• Research Questions

The following research questions served as a guide towards executing this study

• What are the various types of financial frauds prevalent in Kwara state ministry of works?
• What are the causes of financial frauds in Kwara state ministry of works?
• What are the various internal control measures adopted to prevent financial frauds in Kwara state ministry of works??
• What are the opinions of junior and senior staff on the causes of financial frauds in Kwara state ministry of works?
• To what extent are the various internal control measures effective in preventing financial frauds in Kwara state ministry of works?

 

• Research Objectives

• Main Objective

The main objective of this study is to identify and assess accounting records and the internal control measures for preventing financial frauds in Kwara State Ministry of Works.

• Specific Objective

The following specific objectives are used in this study

• To ascertain the various types of financial frauds prevalent in Kwara State Ministry of Works.
• To ascertain the causes of financial frauds in Kwara State Ministry of Works.
• To ascertain the various internal control measures adopted to prevent financial frauds Kwara State Ministry of Works.
• To ascertain the opinions of junior and senior staff on the causes of financial frauds Kwara State Ministry of Works.
• To determine the various internal control measures that are effective in preventing financial frauds in Kwara State Ministry of Works.

 

• Hypothesis

The following null hypothesis were propounded to be tested by the researcher.

H₀₁: There are no internal control measures adopted to prevent financial frauds Kwara State Ministry of Works.

H₀₂: There are no internal control measures that are effective in preventing financial frauds in Kwara State Ministry of Works.

 

1.6             Significance of the study

The researcher now discovered that it will be reasonable to encourage Nigeria business promoters (both public and private) to introduce a proper and vital accounting system where fraud and all forms of embezzlements can be checked in all the organizations.

The findings are expected to have implications on policy, practice and theory building. In relation to policy and practice, the findings of the study are also expected to be significant to government parastatals to maintain an enhanced controlled environment by helping management and employees to establish and maintain an environment throughout the establishment that sets a positive and supportive attitude towards internal control, reliable management, operating personnel for effecting internal control and internal audit for evaluating whether appropriate controls have been implemented and whether the internal controls are functioning as intended.

1.7     Scope of the Study

In the light of broad coverage, the researcher focuses on the fraud detection and prevention in Kwara state ministry of works. The scope of the research therefore, covers a period of 2014-2018. 

 

• Organization of the study

This study is treated under five chapters.

Chapter one is an introduction to the study, which includes a background of the study, statement of the problem, research questions/objectives, research hypothesis, significance of study, scope of the study, organization of the study and a definition of important terms.

Chapter two is a review of related literature which is broken down under conceptual review, empirical review and theoretical review.

Chapter three involved and explanation of the research method used in carrying out the study.

Chapter four involves the analysis of data, results and discussion.

Chapter five gives the conclusion of the study. It will also list some precise recommendation to help the study and for future purposes.

 

• Definition of important terms

• Fraud/Embezzlement– illegal methods of collecting/getting money from organization (it is a criminal offence).
• Internal control – Internal control, as defined in accounting and auditing, is a process for assuring of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.
• Ethnics – rules, principles or order governing a profession.

Leader – the person in authority (Head of a country of organization)

• Management– the art of running and controlling a business or similar organization. According to Fubara (1986) views management as an activity carried on in an environment that comprises of resources in capital and human, having alternative uses.
• Internal Auditor– a professional expert in checking of books of account or records.
• Internal Audit: It is an independent appraisal activity established within an organization as a service to it. It is a control which functions by examining and evaluating the adequacy and effectiveness of other controls; a management tool which analyses the effectiveness of all parts of an entity’s operations and management.’ (CIMA’s Management Accounting Official Terminology).