ASSESSMENT OF PUBLIC FINANCE MANAGEMENT PRACTICES IN LOCAL GOVERNMENT COUNCILS IN ENUGU STATE

Abstract

The study assessed the public finance management practices adopted by Local Government Councils in Enugu State. To achieve the objective, four specific purposes were answered while three null hypotheses were tested at 0.05 level of significance. The study adopted survey research design. The population of the study was 51 public finance managers made up of the treasurers, cashiers, and internal auditors. In view of the relatively small size, the entire population was studied. The instrument used for data collection was a 42-item structured questionnaire   titled:   Finance   Management   Practice   Questionnaire (FMPQ). The instrument was face-validated by three experts in Business Education  unit of the  Department  of Vocational  Teacher  Education, University of Nigeria Nsukka. To establish the reliability of the questionnaire, Cronbach Alpha reliability technique was used and an overall coefficient of 0.77 was obtained for the entire instrument. Data for the study were collected by the researcher with the help of three research  assistants.  All the  51 copies  of questionnaire  administered were retrieved representing 100% return rate. Data collected were analyzed using mean to answer the research questions while t-test statistics and analysis of variance (ANOVA) were used to test the null hypotheses at 0.05 level of significance. Based on the data analysed, the study found that accounting staff in local governments in Enugu State adopted only 24 out of 42 identified fund management practices. There were no significant differences in the mean ratings of rural and urban accounting staff on revenue generation practices adopted by accounting staff of Local government in the state. There were no significant differences in the mean ratings of accounting staff based on their designation years of experience on fund management practices adopted. Based   on   the   findings   of   the   study,   the   study   among   others recommended that the state government through its local government service commission should help organize periodic workshop and conferences  for accounting  staff  of local  government  in  the state  to update their fund management competencies and practices.

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CHAPTER I INTRODUCTION

Background of the Study

Recently,  the  federal  government  gives  huge  amount  of money via budgetary allocation and subvention to local governments. Local government also gets its own internally generated revenue. Despite all these, local governments perform below expectation with respect to the provision of basic amenities including   electricity,  pipe   borne   water,   hospital  etc  to   the grassroots  people  it  serves.  Public  sector,  according  to  David (2002), sometimes referred to as the state sector, it is the part of a state that deals with production, delivery and allocation of goods and services by and for the government or its citizens whether national, regional or local/municipal.   The author affirmed that public sector activities range from delivering social security, administering  urban  planning  and  organizing  national defense. Adams (2005), defined public sector as all organizations, which are not privately owned, or operated but, which are operated or established by government on behalf of the public.  In the opinion

of the author, public sector consists of organizations where control

lies in the hand of the public1

as opposed to private owners, and

whose objectives involve the provision of services, where profit is not a primary objective.   Udeh (2008), posited that public sector engaged in providing services and in some cases, goods not by the direct wishes of the consumers but by the decision of the government bodies. So far, it is obvious that the public sector is always engaged in one activity or the other; like the provision of goods or services or both.   Therefore, the activities of the public sector can not be properly performed without adequate finance.

Finance is the lifeblood of any sector.   It is a key factor of production.    With  adequate  finance,  public  sector  can  acquire other   factors   of   production   such   as   labour,   machinery/ technology,  management,  land,  as  well  as  raw  materials  and embark on any business activity.  Succinctly put, finance means the money that is available to a person, company, government, organization to spend (Chuke, 2001).  To finance means to provide money  to  pay  for  something.    Olaitan  (2008),  conceptualized finance as a basic tool for success in any development project.  In his view, finance can be expressed as cash or material resources that could be exchanged for money and made available for a particular project.  The author noted that finance also involves the management  of  available  cash  or  material  resources  at  the

disposal of a project or programme. Chuke (2001), declared that there are three categories of finance namely: private sector finance, public sector finance and international finance.  But this study, is interested only in the public sector finance particularly the management practices in the local government council.

Public sector finance as submitted by Chuke (2001) is concerned with the financial management of operations of public authorities.  The  author  stated  that public finance involves  the examination of how government revenue and expenditure policies affect the economy and the welfare of the citizenry.  Ugwu (2003), explained that public finance involves those financial activities which are associated with any tier of government.  These comprise taxes, customs, public debt, public expenditures and related activities.  Public finance as articulated by Prof. Dalton in Adams (2005), is concerned with the income and expenditure measures of the public authorities and with the adjustment of one to the other. Public  finance  could  therefore,  be  defined  as  the  financial operations of the public sector and the implications of it.   Udeh, (2008), recorded that public finance means the study of income and expenditure of federal, state and local governments and the principles underlying them.  The author further noted that public

finance is also a field of inquiry about the income and expenditure of government under the following major divisions-public revenue, public expenditure, public debt and certain problems of the fiscal system as a whole, such as fiscal administration and fiscal policy.

In the opinion of Musgrave (2008), public finance is closely connected to issues of income distribution and social equity. Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently. Public finance the author continued, explains how self-interested voters, politicians, and bureaucrats actually operate, rather than how they should operate. Joseph (2009) summarized that public finance is a study of the principles which govern the income and expenditure of the various levels of government,  for  the  collective  satisfaction  of wants  and  of  the effects of their financial policies.   It is an open secret that the objective of  the  definition above which  is  to  collectively satisfy wants and effects financial policies can not be achieved without a sound public finance management.

Public finance management as opined by Chuke (2001), is that management activity which is concerned with the planning, acquisition, and control of financial resources of the public sector

in order to achieve the goal(s) of the sector.  It focuses on how the public sector generates revenue and how the revenue is spent for the  benefit  of  the  citizenry.    Udeh  (2008),  upheld  that  public finance management deal with the administration and control of income and expenditure of public authorities, be it federal, state and  local government.     Public finance management as acknowledged by Buchanan and Musgrave (2008), deals with the collection   of   sufficient   resources   from   the   economy   in   an appropriate  manner  along  with  allocating  and  use  of  these resources efficiently and effectively. Resource generation, resource allocation and expenditure management (resource utilization), the authors continued, are the essential components of a public financial management system.  Public finance management (PFM) basically deals with all aspects of resource mobilization and expenditure management in government.    Public finance management is a government including local government council.

Infact, public finance management is an essential part of the governance process in local government.  Atkinson (2009) reported that public finance management in local government includes resource mobilization, prioritization of programmes, the budgetary process,   efficient   management   of   resources   and   exercising

controls.  In recent times, rising aspirations of people on how local government should function have placed more demands on how financial resources of the local government are managed. The emphasis of the citizenry is on value for money allocated to this tier of government, thus making public finance management in the local government increasingly vital.

Local  government  is  grassroots  government  recognized  by law.  Maddick (1963) described local government as a sub-unit of government controlled by a local council which is authorized by the central government to pass ordinances having a local application, levy taxes or exact labour and within limit specified by the central government can vary centrally decided  policy when applying it locally.  The United Nations defines local government as a political sub-division of a nation (or in a federal system, a state) which is constituted by a law and has substantial control of local affairs including the power to impose taxes or to exert labour for prescribed purposes.   Also the reform document of federal government of Nigeria (1976) that postulated local government as government at local level exercised by representative council, established by law to exercise specific power within define areas. From the three definitions above, it is clear that local government

is a subordinate system of government mandated to carry governance to the grassroots.  Furthermore, local government has both legal and constitutional power to perform certain legislative, administrative and quasi judicial functions. To perform these mandates  efficiently  and effectively, the  thirty  six states which include Enugu State, together with federal capital territory Abuja that make-up the federal republic of Nigerian were sub-divided into 774 different local government areas.

Enugu State is made up of seventeen local government areas which in turn gave birth to three Senatorial Zone in Enugu State. Namely: Enugu East, Enugu West and Enugu North.  These local government areas have workers who pilot the affairs of the local governments. Some of these local government areas were located in the urban areas of the state were they are a lot of petty trades who contribute to the internally generated revenue of the Local Government Area while some were located in the rural areas where most of its citizenry are subsistent farmers who depend mostly on the  Local   Government  Councils   for  the  provision  of  social amenities. Some of the local government received big allocation from the federal government based on their size and contribution to  nation’s  gross  domestic  product  while  some  received  less

allocation based on the same reason. Most of these local government workers  are highly  experienced  in  their  jobs  while some are still in-experienced due to the length time they have stayed on the job. Some of the local government workers are in the position of treasurer, cashier and internal auditors.  But in spite of all these quality Local Government in Enugu North still perform below expectation particular in the area of public finance management.   It is on this note that the researcher set out to assess the public finance management practices in Local Government Councils in Enugu State.

Statement of Problem

Local Government Council is the third tier of Government in Nigeria.  They  are  also  known  as  the  grassroots  government because of their closeness to the people they serve. Unlike the other tiers of government, they are familiar with the local culture, values, attitudes and aspirations of the governed.

In recent times, there have been discussions and criticisms on how Local Government Councils’ resources are being misused and mismanaged as there is little or no evidence on where or how this resources are applied for the provision of social amenities.

The people’s hope to enjoy social amenities is still a mirage despite the huge allocation accruing to the local government councils.

Enyin (2009) posited that in spite of the huge revenue allocation accruing to them from the federation account coupled with the internally generated revenue, investment in the provisions of basic social amenities are inadequate and not commensurate with  the  revenue.  The  author  attributed  the  inadequate  basic social amenities to the type of budgeting and implementation practices adopted by the local government council in managing public funds.

The researcher therefore, has this in mind and intends to assess the public finance management practice adopted by Local Government Councils in Enugu State.  The research seeks to find out   whether   the   non-provision   of   basic   social   amenities irrespective of the huge sum of allocation and subvention sent to the Local Government Councils is due to the type of revenue generation, budgeting and implementation manner of expenditure, monitoring and evaluating   practices adopted by these Local Government Councils in managing public funds at their disposal. Hence if these management problems are rectified, management attitude  towards  the  subject  on  how  public  finance  is  being

managed will change thereby improving the local government performance   and   stewardship   in   the   management   of   this grassroots government.

Purpose of the Study

The major purpose of this study was to determine the public finance management practices in Local Government Councils in Enugu State.  Specifically, the study sought to:

1.     determine the public finance management practices adopted by  Local  Government  Council  for  revenue  generation  in Enugu State,

2.     determine the public finance management practices adopted by Local Government Councils in Enugu State for budgeting and implementation,

3.     determine the public finance management practices adopted by Local Government Council in Enugu State for expenditure of funds,

4.     Determine the public finance management practices adopted by Local Government Council in Enugu State for effective monitoring and evaluating public fund usage.

Significance of the Study

The information that was generated by the study will be of immense  benefit  to  local government  service commission,  local government, the general public and researchers.

The study will benefit the local government service commission because it will help them to know the area on where funds are lacking, and make proper budget allocation to the most needed area. It will further help them to know the local governments that are actually carrying out the mandate of grassroot governance and the once that are not in other to proffer a solution to those local government.

Furthermore, local government workers will benefit from the study in the area of regular payment of salaries. They will further be entitle to other incentives like housing scheme health scheme, which they suppose to get from the local government council.

Moreso, the study will benefit the general public because the revenue generated by the local government through efficient public finance management will be used to provide capital projects that will alleviate the problems of the people both in the rural and urban areas.

Finally, the findings of the study will benefit the researcher in the area of further research and being knowledgeable in the affairs

of local government. Adequate public finance management will ensure availability of funds in local government thereby propelling them to carry out the mandate of development which they are meant for.

Research Questions

The following research questions are postulated for the study according to the specific purpose of the study:

1.     What are the public finance management practices adopted by  Local Government Council in Enugu State for revenue generation?

2.     What are the public finance management practices adopted by Local Government Council in Enugu State for budgeting and implementation?

3.     What are the public finance management practices adopted by Local Government Council in Enugu State for expenditure of funds?

4.     What are the public finance management practices adopted by Local Government Council in Enugu State for monitoring and evaluating public fund usage?

Null Hypotheses

The following null hypotheses were formulated for the study and were tested at 0.05 level of significance.

H01: Difference in location of Local Government Areas is not a source of significant difference on the management practices adopted  by  the  accounting  workers  in  Local  Government

Council in Enugu State for revenue generation.

H02: The designation of accounting workers is not a source of significant difference on the management practices adopted by  accounting  workers  in  Local  Government  Council  in

Enugu  State  on  budgeting  and  implementation  of  public finance.

H03: Years of experience of accounting workers were not a source of   significant   difference   on   the   management   practices

adopted  by  the  accounting  workers  in  Local  Government

Council in Enugu State on expenditure of funds.

Scope of the Study

This study was delimited to the assessment of public finance management practices adopted by Local Government Councils in Enugu State for their revenue generation, budgeting and implementation, expenditure, of funds, and monitoring and evaluating of public fund.   The opinions of some workers of the local government staff were sought to determine the practices that are functional in the local government councils.

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