CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Local government is a government at the grassroots level. According to Ojofeitimi (2008), the word “local” connotes that councils are meant for small communities and the word “government” means that they have certain attributes of government. Thus, local government can therefore be defined as “… a political sub-division of a nation (or in a federal system, a state) which is constituted by law and has substantial control of local affairs including the power to impose taxes or to demand labour for prescribed purposes. The main responsibilities of local governments in Nigeria as noted by Obinna (2012) include mobilization of local resources, promotion of social and economic improvement and development as well as national unity. They are also expected to carry out regional policies with respect to agriculture and selected industries, thereby helping to ameliorate unemployment. Part of the responsibilities of local governments includes revenue generation, budgeting, development planning, provision of services and community mobilization. Given these multifarious responsibilities, local governments were equally bestowed with many sources of revenues to cope with these demands. Unfortunately, many local governments in Nigerian have taken this to be a filial responsibility as many local governments lack basic social amenities like pipe borne water, good road, recreational facilities etc.

An incisive look into local government administration in Ebonyi state is nonetheless different, as development in the rural and urban areas continue to remain a major challenge to the government of the state. Located in the south east region, Ebonyi state boast of 13 local governments evenly spread to accelerate socio-economic development within its local jurisdictions. Despite this measure, most of the local government areas are far from the dream land. Faced with many challenges, the major challenge of local government administration in Ebonyi state and Nigeria at large is finance. Finance as noted by Amujuri (2014: ) is the brain as well as the central nervous system of any organization. It is the lubricant that makes administrative machinery especially of formal organizations work. Although, local governments require finance to perform their statutory duties, the need for efficient management of available funds cannot be overemphasized. Financial management has to do with the efficient use of funds. It is a method of showing and ascertaining the financial position of government or business from time to time. Buoyed by the need to enthrone development within the local government areas in Nigeria, various financial regulations have been put in place to enhance good governance, accountability and transparency. But sadly enough, these regulations are rarely adhered to, as funds mend for development initiatives, most times end up in private accounts or pockets of principal officers of the local governments through various forms of corruption.

1.2 STATEMENT OF THE PROBLEM

Local government as a third tier of government was established with specific functions to assist the federal and state governments in enthroning effective rural development and good governance at the grassroots level (Nwankwo, 2014). However, the local governments system in Nigeria has failed to accelerate socio-economic and human development, mainly because of inadequate funding. Adebayo (2013) argues that inadequate funding has contributed immensely to the failure of local governments to perform their primary functions. Apart from generating funds through local taxes, the major source of revenue is through statutory allocations from the Federal and state governments. To this effect the federal government is mandated to remit 20% from the Federation Account on a monthly basis to local governments through State Joint Local Government Account while each state is expected to pay 10% of its internally generated revenue to its local government councils (Okafor, 2010). This financial arrangement is often distorted by the lack of genuine autonomy of local governments as their funds are rarely provided state governments. Nwankwo (2014) observed that local governments in Nigeria do not have substantial degree of financial autonomy to engage in any meaningful development. Local governments have over the years suffered from the continued whittling down of their powers as state governments have continued to encroach upon what would normally have been the exclusive preserves of local governments and consequently there has been a divorce between the people and government at their most basic levels. Nwakwo (2014) blamed the lack of development in rural areas on poor financial management, which has over time hampered the completion of public projects, especially those that has to do with the provision of social welfare services. Most public projects in Nigeria are abandoned because of corruption. According to Aghayere (2007) corruption has for a long time has rendered local government administration inactive and devoid of concrete development activities.

Corruption is predominantly wide spread, undiluted and unambiguous in the local government. It is a statement of fact that in the local government system, corruption has become all pervading, unabashed, uncontrolled and persistent. Corruption within the local government system is mainly perfected through; inflation of prices; ghost workers syndrome; award of contracts and subsequent abandonment; and outright payment of huge sums of money to political godfathers, etc. In enthroning financial prudence and effective management of local government funds, a financial memoranda was developed. The financial memoranda is an internal control mechanism aimed at guaranteeing accountability within the local government system. Due to poor supervision, socio-economic factors, biting inflation and sapping conditions etc, most local governments are not financially accountable and do not adhere strictly to the provisions of the financial memoranda (Agu, 2014). The implications of poor management of local government funds cannot be overemphasized. Presently local government councils exist only in name not in service delivery as many local governments lack basic infrastructure such as; electricity, water, hospitals, roads and schools. Mismanagement of resources in the local government has also heightened; poverty, illiteracy, unemployment, crime etc. Considering these aforementioned problems, this study poses the following objectives

1.3 OBJECTIVES OF THE STUDY

The objectives of this study is to investigate and evaluate the internal control system in the Local Government and their adequacy to enhance efficient and effective financial management and overall accountability on the Local Government sectors in Izzi Local Government of Ebonyi State and include;

1) To ascertain and evaluate the internal control system in Izzi Local Government Area of Ebonyi state.

2) To ascertain possible weakness in the internal control system of Izzi Local Government Area of Ebonyi State

3) To ascertain the factors that impede the effective management of funds at the local government level in Izzi Local Government Area of Ebonyi state .

1.4 SIGNIFICANCE OF THE STUDY

Pragmatically, this study will help in recognizing more powerful ways of inculcating effective and efficient methods of control mechanism in the management of funds of local governments in

Nigeria. More so, it is equally hoped that this study will help local government functionaries and other political office holders in the effective management of funds. And it is also hoped that this study will contribute to the body of literatures on this subject. This study will also be of benefit towards the rural development through effective fund management.

1.5 SCOPE OF THE STUDY

The scope of this study is limited to Izzi Local Government Area of Ebonyi state and it focuses on control mechanisms and management of public funds in the local government system in Nigeria, particularly Ebonyi state. The outcome of the research work is assured to be applicable to all the thirteen local government areas of Ebonyi State since the mode of operation is the same in all the local government areas of Ebonyi State and throughout the federation.

1.6 RESEARCH QUESTION

For the purpose of carrying out this study effectively this research work will endeavour to provide answers to the following research questions;

1) To what extent is evaluation and internal control systems available in Izzi Local Government Area of Ebonyi State?

2) To what extent are weaknesses in the internal control system Izzi local government area of Ebonyi State?

3) To what extent does management of funds impede the effective management of funds at the local government level in Izzi Local Government Area of Ebonyi state?

FORMULATION OF HYPOTHESIS

The hypotheses that will be tested in the course of the study are mainly derived from the research questions and they are:

a. Ho: There is no efficient funds management and control in Local Government Area

Hi: There is efficient funds management and control in Local Government Area

b. Ho: The poor funds management and control in Local Government Area is as a result of weak internal control system.

Hi: The poor funds management and control in Local Government Area is not due to weak internal control system

c. Ho: There is no adequate control over expenditure pattern of the Local Government Area

Hi: is adequate control over expenditure pattern of the Local Government Area

1.6 LIMITATIONS AND DELIMITATIONS OF THE STUDY

This study was constrained by the inability to get specific requisite reference materials and the unwillingness of most local government operatives to divulge certain information that would have helped the course of this study considerably. The study was also faced with the overwhelming task of convincing most of the sample population to participate in this study by filling questionnaires distributed. Other limitations are finance and time, unwillingness of the officials to divulge information for fear of their job security, inability of the researcher to have access to some relevant documents because such documents have been classified as “Top Secret” Because of this, the researcher decided to limit the study to Izzi Local Government Area of Ebonyi state.

1.7 DEFINITION OF TERMS

Meaning of Local Government:

Local government refers to a political authority set up by a state by a subordinate authority for the purpose of dispersing or decentralizing political power as well as promoting local initiative and response to local needs’. The United Nations Office for Public Administration defines local government as a political subdivision of a nation or (in a federal system) State, which is constituted by law and has substantial control of local affairs including the powers to impose taxes or to exact labour for prescribed purposes. Local government is a government at the grassroots level. According to Ojofeitimi (2008), the word “local” connotes that councils are meant for small communities and the word “government” means that they have certain attributes of government. Thus, local government can therefore be defined as “… a political sub-division of a nation (or in a federal system, a state) which is constituted by law and has substantial control of local affairs including the power to impose taxes or to demand labour for prescribed purposes. The main responsibilities of local governments in Nigeria as noted by Obinna (2012) include mobilization of local resources, promotion of social and economic improvement and development as well as national unity.

Revenue

It refers to the amount of memories or cash that is received by way of statutory or during specific period of allocation, loans and change? which enable the government to carry on their day-to-day function includes capital expenditure programmes. It means “the different way, the government get is money” (Ezanyagu 2000:).

Expenditure

It refers to all cost incurred and paid for in order to carry on the operation of the local government i.e. Those cost of recurrent of the capital. According to Ezeayagu, (2000) it is defined as the total amount expended by the government as essential for its administrative and infrastructural services.

Funds

This is refers to a separate fiscal and accounting unit in which financial resource are held or governed by special regulation segregated from other Finds and established sources.