The Incurable Leakages in Public Finances

Although the deployment of technology has simplified government business by enhancing seamless transactions thereby saving time and manpower; this has not significantly prevented corruption as well as plugged financial leakages in the public workspace, James Emejo writes.

Given that endemic corruption is one of the biggest problems limiting the development of the country, coupled with the leadership challenges, the federal government has in recent times invested so much in critical reforms, which not only seek to fast-track operational processes but also plug financial leakages in the public service.

The government still remains the biggest spender in the economy and so much corruption has been associated with public finance administration. The many financial atrocities of public office holders, especially politicians and civil servants have remained the hallmark of various administrations.

The menace of corruption has continued to set the country backwards as monies allocated for projects are rarely utilised for the intended purposes but ended up in private bank accounts.

The recent case at hand where the Accountant General of the Federation had been arrested by the anti-graft agency for alleged mismanagement of public funds to the tune of over N80 billion has kept Nigerians wondering why despite the government’s huge investment in technology to reduce financial theft, corruption has remained business as usual in the system.

The development has caused the opponents of IPPIS to insist that the solution constituted an avenue to perpetrate fraud rather than stop corruption.

However, the government has in recent times embarked on critical reforms in financial administration as well as procurement regime in order to reduce fraud and improve governance, particularly in Ministries, Departments and Agencies of Government (MDAs), which are responsible for the execution of public contracts through which resources are siphoned.

 Innovations

The federal government in October 2006 introduced the Integrated Payroll and Personnel Information System (IPPIS) as one of its reform programmes to improve the effectiveness and efficiency in the storage of personnel records and administration of monthly payroll. The initiative was specifically aimed at eliminating ghost workers who constituted a huge drain on public finances.  Although the application is said to have significantly cut the government’s recurrent spending, the payroll still has illegitimate workers who ought not to be in public service, a situation, which continues to exert pressure on public finances.

Also, the Treasury Single Account (TSA), which remains an essential tool for consolidating and managing governments’ cash resources to among other things address fragmented government banking arrangements has been introduced.

However, there are concerns that apart from the consolidation of government accounts into a single entity for transparency and easy administration, the TSA has not really addressed the issue of corruption in the country as witnessed in recent times as issues of brazen corruption continues to define the public space.

Despite having a good procurement policy, other objectives are to promote transparency and accountability in governance as well as ensure that the required standards are transparently maintained in the conduct of government business, the Public Procurement Act is constantly breached by public officials and has continued to serve as a conduit for corruption, notwithstanding the fact that various procurement technologies are in place to check some of these excesses as well as sanitise the public contractual system in the country.

 Will Technology Suppress Corruption?

There had been arguments that the deployment of solutions would nip corruption in the bud apart from simplifying processes for timely results. Many believed the continued execution of processes albeit manually had helped to fester corruption. But even when most of the government’s activities have been moved online and digitalized the menace still persists as observed even the country’s tax administration processes.

In a 2019 interview with THISDAY, Technical Manager, IT and Profession, Institute of Chartered Accountants in England and Wales (ICAEW), Mr. David Lyford-Smith, had discussed the limitations of technology to curbing corruption as more organisations are embracing digital technology for efficiency and controls.

According to him, despite technology and digitisation, there could still be elements of corruption in any system.

He said, “I think that it is naive to think that as we move on to the systems there will no longer be these problems but it is a powerful tool and also an opportunity to try to improve these systems practices and controls is still really important, governance is still really important because these technologies for all that they do a lot of work by themselves…it is not the end to corruption but I think it’s a great opportunity to find ways of reducing the possibilities.”

Lyford-Smith also said, “It’s connected to a lot of the underlying issues with different kinds of technology and it’s also true for things like bias and errors as well as the corruption that you can control. In some respects, you have a greater degree of control of technology because you are taking humans out of the loop that might be tempted to engage in these activities. So you can make systems which are not open to temptations and manipulation.”

Furthermore, analysts in separate interviews with THISDAY lamented the lack of political-will to eliminate corruption in the system.   

Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, said “Technology alone merely makes processes more efficient and if there are fundamental flaws in the design of those processes then it will essentially exacerbate an underlying problem.”

He pointed out that processes are easily circumvented when there are weak checks and balances and those entrusted with managing the public finances may be compromised.

He said, “Ultimately, we must look at the root causes of all this, which is that civil servants are inadequately remunerated but potentially have access to billions of government funds to spend. These funds can easily be routed back to them via shell companies and ‘loyal’ contractors.

“Despite the IPPIS, we still have cases of ghost workers in the civil service, which indicates that the input stage of onboarding employees onto the system is compromised.”

Shelleng, however, noted that there is no doubt that the implementation of IPPIS and TSA as well as other deployed technology has greatly helped government finance.

“We have seen the likes of Customs and FIRS record significant gains in revenue collection since TSA was implemented, which has greatly improved non-oil revenues,” he said.

Absence of controls

Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said IPPIS and TSA are Information technology devices made by man to improve the system for more efficiency and to reduce burden and corruption in the system.

He said, “Unfortunately the system was made by man and can be circumvented by man. What is wrong is that the control system is faulty. The system as set up was devoid of adequate control in a corruption tolerant system.  Culprits have hardly been adequately punished in the past.”

Also commenting on the issue, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the only way to plug leakages was to outsource the audit process of the payment systems to private firms and with oversight by NGOs as whistleblowers.

He said the federal government did not take cognizance of back end controls, which could help the operators to perpetuate fraud.

Gbolade said, “The federal government also did not have a standard audit procedure in place that should have been executed by global firms credited with excellent audit practices.

“The loopholes in the IPPIS and TSA payment system were exposed to ridicule because the federal government is complacent in the sense that both the operators and authorizers of the transaction are not separated knowing fully well the penchant of Nigerians for corruption.”

On his part, Associate Professor of Agricultural Economics at the University of Port Harcourt, Anthony Onoja, alleged that over N200 billion had been stolen from public coffers this year by those entrusted with guarding and managing the nation’s treasury. He also described the development as worrisome.

He said, “Leakages in public finance in Nigeria can only be blocked if we are able to understand deeply the root causes of corruption, the mechanisms deployed, the impact it has on individuals as well as a community and workable strategies for reducing corruption which has become endemic in Nigeria. 

“PricewaterhouseCoopers signaled that unless urgent measures are taken to fight corruption now, it is going to cost Nigeria about 37 per cent of her GDP by 2030, or around $1,000 per person.”

Onoja said, “Corruption is killing Nigerians indirectly as it exacerbates human misery and fast-tracks Nigeria to the unenviable rank as one of the countries inhabited by the poorest people on the planet.   Corruption control in Nigeria has been mostly left in the hands of government agencies for a long and with no reasonable success.

“With recent incidents on this front, a time has definitely come to engage civil societies and other stakeholders in the fight against corruption in Nigeria. Since the government cannot do the job alone as the evidence on the ground suggests, it is about time for other strategies to be deployed. I recommend the use of advanced technologies to detect and mitigate corruption in both public and organized private sector.”

He said the civil society groups including Socio-Economic Rights and Accountability Project (SERAP) should commence litigations to hold government and public officials responsible for corruption as well as ensure proper service delivery and promote legal reform.

According to him, “There is a need for more awareness about what causes corruption, the dangers and consequences of corruption against national development, especially creating more awareness at local levels on how the practice of corruption in public offices link to the impoverishment and human misery suffered by the ordinary Nigerian.

“Advocacies need to start from homes, churches, mosques, schools and public institutions as well as in organized private institutions. The universities should intensify research from different disciplinary perspectives on how to curb Nigerian corruption.

“Laws aimed at fighting corruption in Nigeria are plenty but the problem lies with enforcement. The judiciary and law enforcement agencies in Nigeria need to first rid themselves of corrupt elements in their midst so that they can be fully armed to do the job of bringing justice to those who impoverish the people by stealing public funds meant for the development of all.

“Every organisation and home needs to do something about reducing Nigerian corruption. Poverty in terms of mental and material poverty also stands against the move to eliminate corruption. So empowerment of youths, women and the vulnerable can go a long way in reducing poverty.”