Managing Internal Control Systems in Nigeria's Government

Out of curiosity I trawled the internet for Corporate Governance in Nigeria and most of the results I found came up with information to do with the banking and insurance sub-sector. I was interested in how our federal government departments managed their everyday businesses more so with regards to internal control systems. Shockingly and as the time of writing this paper none was available on any relevant Nigerian government ministry website. A listing of the federal ministries and government agencies on the Nigeria government website (http://www.nigeria.(gov.ng/index.html) came up with the message “This Page will soon be available...” This was repeated for all the ministries and departments listed on this so called “Nigerian Government Official website”!

I changed my approach and searched specifically for the individual websites of government ministries and narrowed this down to the Ministry of Finance. Although a well-designed website, there was little mention of risk management from an internal control systems point of view other than the mention of Corporate Governance targeted at specific business areas such as the financial industry e.g., banking and Insurance sector. My research was purely based on my need to know what obtains for governance and business practice in the average Nigeria government department.

There are quite a few submissions on corporate governance and risk management in Nigeria on the internet, but most are either asking you to buy a book or they make references to a publication (for sale) and/or speeches made by government minister(s) at one business function or the other. To that end I am making this submission free of charge to anyone that cares to know about Corporate Risk Management from managing Internal Control Systems perspective and how this can be applied to public bodies in Nigeria. The write-up is intended to show how this can be embedded in Nigerian government ministries. My believe is that with solid and well managed government agencies or ministries Nigeria can begin to forge a way devoid of the intellectual inadequacy that allows for malpractices and corruption in our ministries at both state and federal government level. A well managed government department in the country can only result in reliable government thus meeting the needs of Nigerians. All references to practice policies below assume there is one in place, or one would be developed to meet the business control area specified below.

The Purpose of the System of Internal Control

Without being too academic about it, the following excerpts define the purpose and need for Nigerian government agencies or ministries to have clearly defined and effective system of internal control.

“The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness.

The system of internal control is based on an ongoing process designed to identify and prioritise the risks to the achievement of the organisation’s policies, aims and objectives, to evaluate the likelihood of those risks being realised and the impact should they be realised, and to manage them efficiently, effectively, and economically - (source: FReM).

To be effective in Nigerian government departments and ministries, it is essential for strong internal controls to apply to all areas of financial management, risk management, staff management and development as well as asset control. The above principles if adopted will minimise the rot in some of our government ministries and agencies at both states and federal levels.

Significant Areas of Control in Nigerian Ministries

At the end of each financial accounting year in Nigeria an assurance gathering process should be initiated by each ministry or government department by the relevant unit- it could be finance division or unit responsible for internal audits in the ministry. Focus should be in the more significant areas of business control in each of the ministries. Ideally requests for evidence in support of these areas would normally be obtained from the management structure of these Nigerian ministries. The evidence underpinning the responses to the requests for information on these identified control areas should at times be subjected to internal or external audit reviews.

Control Areas:

Core business - Processes as described in appropriate Standard Operating Procedures (SOPs) should be followed for all core Ministry businesses. SOPs also reduce the over reliance on key personnel since Nigeria civil servants are known for being hardly present at their desks, anyway. SOPs will encourage ‘efficiencies’ in the already over-bloated civil service structure in Nigeria more so when it comes to implementing ‘efficiency drives. It also allows for continuity and uniformity in approach to relevant everyday tasks where personnel need not be specialised - a cost saving measure.

Procurement propriety - Procurement should be sourced through multiple tendering from suppliers. Although quite a lot is mentioned in the Ministry of Finance website, for example, but enforcing an honest and transparent procurement policy will minimise the tendency for bribes and over-inflated government contracts. Where procurement is sourced through single tenders, proper authorisation should be obtained. The civil servants in charge should be made are aware of the need to authorise supplier invoices promptly in accordance with laid down payment policy; a pain in the neck for government contractors as procurement in Nigerian government departments have always been open to abuse.

Staff Performance and Development - All Performance Appraisals (including mid year reviews) and Training Plans should have been completed to the deadlines set by Human Resources in each government ministry. Training coordinators and Training plans should be in the place for the year under review. Question: When have you ever heard of a Nigerian civil servant undergoing performance appraisal review? Exactly! This is why we have some incompetent people in our government departments. They should be held to account for their performances and/or work objectives and this should be applied from top down as is done in the private sector. A performance pay culture should be encouraged for high achieving civil servants through a series of agreed performance grading.

Security of Information and Data Protection – Although information technology in Nigeria is still undergoing development in the public sector, it can be said to be well established in private sector e.g., banking. Nonetheless there is little evidence of security systems access rights and password control procedures meeting high standards required and stated. Access rights for IT network need to be up-to date. Our civil servants ought to be made aware of the need not to share passwords even when ‘Oga’ is away shopping in London while his staffs cover his/her back. Staff should also be made aware of their responsibilities under the Ministries’ IT Security and Information Security policies; hopefully these agencies will develop these soon. Nigeria’s civil servants should be reminded of their responsibilities under data handling procedures. The recently passed FOI or ROI, depending on who you listen to, could be open to abuse or simple misunderstandings by some of our poorly trained civil servants up and down the country if data handling training is lacking.

Delegated Authority – this is a very important area under finance and the management of the spending of taxpayers’ money in Nigeria. Rather than have “Oga in finance department” of the Ministry always signing for the payments of all and sundry (subject to egunje in some ministries) a culture of “delegated authority” should be encouraged to minimise the over reliance on key staff provided there is a culture of regular financial audits in these ministries. Delegations of authority should be up-to date and approved by the Accounting Officer in each government department.

Security of assets - Assets should be safeguarded from losses in accordance with stated policy and procedures. Ministry staff should be made aware of their responsibilities to safeguard assets (e.g., laptops, other specialist equipment) from losses. How many times have government assets gone missing more so when there is a change in government?

Fraud policy – Nigeria civil servants should be made aware of their responsibilities under the ministries’ fraud policy. This is one area that has crippled Nigeria to date. This malady goes right to the top of government. An accountable and effective civil service doing its job properly will forestall this Nigerian malady. We are all living witnesses to how this corruption disease has pervaded life in Nigeria both at federal and state government levels. Persons ‘ordering’ goods or payments for goods and services in government ministries should not themselves be the ones ‘authorising’ payments. This lends itself to fraud in the Nigeria civil service.

Risk Management - Risk management procedures should be in place to monitor, review and mitigate risks. Each division within every ministry in Nigeria ought to have a divisional risk register that is updated regularly. High-risk areas should be monitored and, if required, escalated on to the ministry’s Corporate Risk Register itself. Timely information on the divisions’ risk management position should be notified to the Corporate Risk Manager for inclusion in the Corporate Risk register. Actions to mitigate identified risks should always be on schedule for completion. Any senior manager within our civil service establishments can assume the responsibility for managing each identified risk - a Senior Responsible Owner – provided they understand the business objectives of the ministry itself.

Business Continuity Planning - this is an area for which no mention was made even on the Ministry of Finance website, for example, amongst others. In the advent of a disaster most of our ministries would be found wanting. Our ministries should be encouraged to develop BCPs and test run these at regular intervals, say at least once a year. The reliance on “the heavens and prayers for protection” is fancifully laudable but practicality and professional sense of purpose in the administration of government work is required if Nigeria is to move forward. However do our civil servants know what to do in the advent of a disaster, what key functions to run, how to reach staff in an emergency if they are required to keep away from the ministry office buildings, how to recover data and back up systems if there is a disaster to premises, do the back-up and/or recovery process actually work, capacity recovery – would everything be recovered and if not what percentage would, etc?

Internal Audit – finally and where appropriate, actions arising from relevant Internal Audit reports (not just financial audits) should be implemented in accordance with agreed implementation dates. Where appropriate, actions not yet implemented ought to be closely monitored for updates and fully explained. Do we have internal audits to cross-check if our government ministries are fulfilling the purposes for which they were created? Does anyone care? I hope you do.

Finally, the Head of each government ministry or agency should be made to sign an end year Statement of Internal Control (SIC) confirming the above processes described have been followed and imbibed during the accounting year. Such persons should be made accountable for the effective running and management the federal government ministry or agency under their control. This simple process of end-year accountabilities will also encourage the appointment of well qualified persons as heads of government ministries and agencies in Nigeria rather than the current system which often relies on patronage. Ill prepared and informed elected persons in both Houses of legislature would be discouraged from interfering in the running and management of the civil service system in Nigeria should this sort of accountability be put in place. Members of the relevant House Committees to whom such ministries are accountable would be encouraged to take a more studied scrutiny of these annual returns rather than the current “carry go” culture in place.

There are ways and means of putting an effective structure in place in our federal government and state ministries and/or agencies to ensure the control systems described above work diligently. The above is sensitise readers to possibilities if we truly apply ourselves. Nigerians deserve an effective and professional civil service that meets the objective of the government of the day provided we have a government with ambition matched with the wherewithal. An effective internal control system not only enhances accountability and professionalism in our civil servants, it also attracts the best talents into civil service rather than the over bloated system currently in place which is often unaccountable and open to abuse. It also enhances the possibility of an independent civil service structure albeit a pipe dream for now. Most of all, a system of accountability on the part of the heads of these government ministries will reduce the immense pressure on them to sometimes do the odious biddings of elected but sometimes corrupt politicians who may want to abuse the civil service system for party political gains or enrich themselves personally. Whatever political parties or ‘personalities’ win or have already won the forthcoming states’ Governorship or Presidential elections I hope they would take some time and seriously consider professionalising their civil service bodies.