Dysfunctional predatory governance at FRC (2)

A director has a measure of professional authority and with income level that allows him economic security necessary for the courage to challenge management on important issues of deviation from policies and procedures. The head of internal audit of the FRC is many levels below a director and CEO. This is a definite point of control failure that will allow management, and in this case the executive secretary/CEO who is the only management staff (according to the FRC website), to contravene financial policies with impunity.

It is curious that the FRC board populated by eminent persons from eclectic professional backgrounds appear to have failed to see the governance risks posed by the deliberate demoralization, de-empowering and marginalization of staff and widening of the command chain by the FRC executive secretary. It is even more curious that the external auditors did not identify the chasm in the management control hierarchy as “significant weakness” in internal control as required by professional standards and best practices in auditing, which should make the poor governance structure a “reportable condition”. How could the defences represented by the board and the external auditors, who are corporate gatekeepers, fail so woefully?

The picture gets worse or clearer when one reads that the agency has posted the executive secretary/CEO’s brother-in-law, who allegedly does not possess the prerequisite experience and qualification, to head procurement unit in the FRC. What could be more predatory than a combination of systematic degradation of governance, one-man management team, weak internal controls and demoralized staff and internal audit function? Were the gatekeepers sleeping or partying, as happened the night that the Babylonian empire collapsed, such that they do not seem to see what is happening at the FRC?

One ordinarily expects the FRC to be a model, a reference point in good corporate governance. Unfortunately, this agency run by a one-man management team could be said to have failed the Nigerian capital market and the public by not carrying out the its mandate due probably to the hubris and inordinate ambition of one man to dominate other stakeholders. From the information available on the FRC website, the issue here is that no member of management team exists to ask tough questions or bring up serious matters to the board. Apparently, only Obazee did what he liked and intimidated the board to acquiescence by dropping presidential names as the source of his political powers.

This is a total failure of internal control. Effective internal control has the main purpose of safeguarding the assets and incomes of an organization. Internal control in FRC failed to safeguard the potential income from placing N853 million in fixed deposit, contrary to the board’s directive. The board also failed by not following up and enforcing its directive.

With the weak corporate governance in FRC, how can the agency positively influence the market other than selective imposition of sanctions and extortionate fines against companies and auditors that the management team (i.e., Obazee) does not like? Without a management team for five years, who has been taking all the decisions in FRC all this while? Can Obazee now publish on the website who the members of the FRC management team are for the world to see, and for how long they have been in management? How has procurement been processed and approved for five years without a management team? How have all the functions of the FRC as specified by law been carried out for five years without a management team, particularly considering that the executive secretary/CEO is said to be continually in transit most of the time?

FRC due for governance and forensic audit

Industry opinion leaders are strongly feeling that the situation in FRC calls for urgent governance audit to determine if the agency under current structures is achieving or can achieve its statutory mandate, and a separate operational forensic value-for-money audit to determine whether all significant spendings via consultants and contractors and how they won all the bids at the agency under Jim Obazee’s tenure have been adding value to the agency. Of course, as Obazee requested that Sanusi the CBN governor step aside to allow fair investigation of the CBN, he (Obazee) should also step aside, even if it is for only the periods of investigation, to allow unimpeded governance and forensic audit of the FRC – only such can lead to transparent, true and effective investigation. It is also necessary to request that Jim Obazee declare his assets immediately to the appropriate government office where interested public can have access to the information to see whether his legitimate sources of income over the years objectively explain his declared wealth.

If the government is truly serious about getting things right at this time, then we must do as other markets have done, namely, prove that the auditor can also be audited. Now, who really regulates the FRC?

Olu Abiodun