Dealing with failure to submit financial accounts

Audit is part of the cycle and chain of public finance management. It is not an optional process, but a mandatory process stipulated in the Constitution of the Federal Republic of Nigeria 1999 (as amended) – the grundnorm, being the highest in the hierarchy of the Nigerian law. The Constitution is supreme and if any law, policy, or practice is inconsistent with the constitution, the latter prevails and such a law, policy or practice will be void to the extent of its inconsistency with the constitution. This discourse reviews the impunity in the failure of some agencies of the Federal Government to submit to audit as demanded by the constitution, and the appropriateness of the response of the Auditor-General for the Federation (AuGF) and the Public Accounts Committee of the National Assembly to this development.

By Section 85 (2) of the Constitution:“The public accounts of the Federation and of all offices and courts of the Federation shall be audited and reported on by the Auditor-General of the Federation who shall submit his reports to the National Assembly; and for that purpose, the Auditor-General or any person authorised by him in that behalf shall have access to all the books, records, returns and other documents relating to those accounts”. This subsection creates a mandate and a duty incumbent on the AuGF to audit the accounts of the Federation as well as confers the power on the AuGF to access all the books, records, returns and other documents to facilitate the performance of that duty. 

By the Federal Financial Regulations made under the authority of the Finance (Control and Management) Act, the AuGF’s power to access documents and information needed for audit is further amplified to include access at;“all reasonable times, to books of accounts, files, safes, security documents and other records and information relating to the accounts of all federal ministries/extra ministerial offices and other arms of’ government or units. The AuGF is also entitled to require and-receive from members of the Public Service such information, reports and explanations as (he) may deem necessary for the proper performance of (his) functions.”

For government statutory corporations, commissions, authorities, agencies, including all persons and bodies established by an Act of the National Assembly, they are not to be directly audited by the AuGF. They are to appoint their auditors from a list provided by the AuGF. He is to provide guidelines on the level of fees to be paid to external auditors, and comment on their annual accounts and auditor’s reports thereon. He is also empowered to conduct periodic checks of all government statutory corporations, commissions, authorities, agencies, including all persons and bodies established by an Act of Parliament. The AuGF is to comment on the accounts of these bodies and make a report thereon and his comments and recommendations are included in his annual statutory report.

Beyond the mandate of the AuGF, the constitution and Financial Regulations quoted above create implicit obligations for public servants entrusted with the management and supervision of the Ministries, Departments and Agencies of government to cooperate and make available to the AuGF the books of accounts, files, safes, security documents and other records.

It was reported in the 2017 AuGF’s Audit Report that 160 agencies defaulted in the submission of audited accounts for 2016 and 265 agencies defaulted in submission of their audited accounts in 2017 while 11 agencies had never submitted any financial statements since inception. The 65.6 per cent increase in default rate between 2016 and 2017 signals impunity and contempt for the law. In failing to submit audited accounts, two scenarios are possible. The first is that there is no prepared account for audit to take place or there is an audited account which produced a report that even the Agency that commissioned it is so ashamed of. As such, it could not submit same to the AuGF.

By the 2018 AuGF’s Report, it was stated: “Several of the Government Corporations, Companies and Commissions have not submitted their audited accounts to me as (at) the time of this report despite the provision of the Financial Regulation 3210 (v) which enjoins the Chief Executive Officers of these bodies to submit both the audited accounts and management reports to me not later than May 31 of the following year of the accounts.

Although, we have noticed an improvement since my last report, there are still violations of statutory financial reporting obligations by parastatals”.

However, going through the 2016, 2017 and 2018 reports of the AuGF, there is no list of the agencies that failed to submit their accounts. It is left to public conjecture as to the identity of these agencies. But the identity of the agencies who failed to submit accounts is very well known to the AuGF. On the other hand, most of the agencies that submitted reports had comments and recommendations made against their reports including recommendations for refund of mismanaged or misappropriated funds and possible prosecution of offenders. This scenario offers a perverse incentive against reporting of the accounts to the AuGF. If an agency reports, it may be criticised and brought up to the Public Accounts Committee of the National Assembly for sanctions and to the Nigerian public for naming and shaming. If an agency fails to report, there is nothing upon which a recommendation can be made, and the accounting officer and political head can get away with corruption, improprieties, irregularities, and fiscal murder!

For the AuGF to fail to compile and put the list of defaulters in the public domain through his reports sends a very wrong signal to the defaulters. Apparently, it emboldens and encourages the defaulters. A couple of days ago, the Senate President merely threatened to publish the names of defaulting agencies during the consideration of the reports of the Senate Committee on Public Accounts. This is rather unfortunate. A mere threat to publish the names of defaulters while the PAC summons and “disturbs” those who complied and have some challenges with their accounts. In the circumstances, any agency with skeletons in its cupboard is encouraged to stay away from submitting its account since the leadership of the agency will only be disturbed when they submit accounts to AuGF.

The AuGF and the NASS are therefore called upon to act in the public interest through a process that activates sanctions considering that law is the command of a sovereign backed by sanctions. Otherwise, audit obligations backed by law become mere moral adjurations. First, the AuGF must publish the list of defaulting agencies with the name of their chief executives and make the only clear and unequivocal recommendation which is the removal of these chief executives. The second is that the National Assembly should summon the chief executives to explain their impunity, direct the withholding of financial releases to the agencies and by resolution demand that the President relieves the chief executives of their posts. If the impunity extends to the appropriation period, the National Assembly should make the presentation of their accounts to the AuGF a precondition for considering their requests for appropriation.

For agencies that have not submitted any reports at all since their creation, the lawmakers should give them a timeframe to submit all due reports. Failure to comply with timeframes should attract requisite sanctions as listed above.