Recently, there have been reported incidences of financial irregularities and misdemeanours cutting across varied governmental sectors globally. Ironically, these ugly incidences have taken on a devastating dimension of late, often encapsulating varied degrees of unethical and unwholesome acts such as embezzlement, theft of public properties or assets, payment to ghost workers, over-invoicing, under-invoicing, contract inflation, mismanagement of public funds, abuse of public office, conflict of interest matters, misappropriation of assets, fraud and fraudulent activities, and, above all, bribery and corruption.
One wonders the reasons and motives behind these wrongful acts, evidenced across some government quarters, agencies, public institutions, and state-owned organisations. Religious centres and not-for-profit organisations are also not far behind in the long list of affected entities. Aside from the above-mentioned bodies, other areas negatively affected may include private companies, public companies, government parastatals, corporations and agencies, government institutions, and charitable organisations, to mention a few.
What then are public financial irregularities and misdemeanours? It can be viewed as the totality of unapproved, unhealthy, and/or misappropriated public funds, assets, and infrastructure jointly owned by the entire populace, either by an individual or a group.
Read also: Exterminating fraud and fraudulent activities via the forensic audit approach
Impact:
Records show that financial irregularities and misdemeanours within the public sector often result in serious negative implications, such as financial loss or dwindling liquidity in extreme cases. Additionally, these negative implications could further undermine the integrity of the system alongside its reporting process, which certainly will lead to the erosion of public trust. In some quarters, it could lead to a compromise in the rule of law, and if not urgently addressed, could lead to issues of bad governance on the part of the governing body or entity, as the case may be.
Measures:
It is pertinent to state that combating or tackling public financial irregularities and misdemeanours requires a well-articulated and thought-out strategy that includes but is not limited to public enlightenment campaigns, effective and efficient internal control measures, upholding the principle of accountability and transparency across the board, strict adherence to budget and budgetary provisions, setting up anti-corruption agencies like EFCC, ICPC, and CCB, organising training and retraining programs for public officials, especially on financial management issues, engaging in whistleblowing, adoption of the NOCLAR principle, promulgating laws related to public financial management, and, above all, conducting an “independent audit” exercise, which will form the bedrock in addressing public financial irregularities and misdemeanours.
Meaning:
An independent audit can be defined as a detailed examination and evaluation of either an entity’s or government’s financial statements alongside its supporting documents by an independent auditor in order to enhance the credibility of the examined financial statements. An independent audit exercise could take the shape of a compliance audit, financial statement audit, operational audit, or information technology (IT) audit.
Compliance audit: A form of audit exercise carried out to ascertain whether internal control measures and other regulations affecting the entity’s line of business or government activities have been duly complied with.
Financial statement audit: This audit determines whether the overall financial statement is presented fairly in accordance with specified guidelines or criteria.
Operational audit: This involves a holistic review of an organisation’s activities, or a part of them, in relation to the efficient and effective use of resources.
Information Technology (IT) audit: An audit that focuses on the process of collecting and evaluating evidence of an organisation’s information systems, practices, and operations. This can also be seen as the examination of controls within an IT infrastructure.
Benefits:
Depending on the nature or structure of the independent audit being undertaken, there are possible gains that are likely to manifest if properly executed. These include the detection or uncovering of fraud and fraudulent activities being perpetrated within the system. Additionally, it will give credence to the issue of strict adherence to laid-down rules and regulations, further guaranteeing that all of the entity’s transactions are properly recorded, complete, accurate, and valid. Transparency and accountability on the part of public handlers will also be greatly enhanced and promoted.
The conduct of an independent audit on the financial records of either the government or organisations will boost public trust, increase credibility ratings, and serve as a deterrent to committing fraud and similar offences.
No doubt, at the end of it all, the public financial statement will receive some level of credibility, especially in the eyes of the diverse users of financial statements.
Kingsley Ndubueze Ayozie-FCTI, FCA a Public Affairs Analyst cum Chartered Accountant by profession writes from Lagos.
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