A couple of weeks ago, a striking report in one of our national dailies revealed “how contractors absconded with substantial sums of money while abandoning a significant number of federal government projects.” This report was credited to BudgIT.
Globally, the public sector, in contrast to the private sector, continues to experience gross financial mismanagement, leakages, and wastages of collective resources. There is a prevailing perception that national resources are akin to a “national cake”—where individuals, when in need, simply take as much as they desire without permission, even setting aside extra for future use or for generations yet unborn. Another contributing factor to this mindset is the belief that government or public enterprises belong to no one in particular, thus fostering lower expectations of transparency and accountability compared to the private sector.
Strengthening public financial management and addressing the incidences of financial misconduct, gross mismanagement, wastages, and leakages within the public sector require well-thought-out and calculated strategies. These include investigative exercises, parliamentary oversight through the Public Accounts Committee (PAC), whistleblowing mechanisms, independent audits, budgetary control, effective financial reporting mechanisms, adoption of internal check systems, promotion of internal auditing frameworks, application of the NOCLAR (Non-Compliance with Laws and Regulations) principle, implementation of robust internal control mechanisms, segregation of duties control, and most importantly, the establishment of the Audit Alarm Committee, which is the main focus of this discussion.
Where legally backed and accepted, the audit alarm system serves as a mechanism to report financial irregularities to those in leadership positions. The committee is tasked with identifying and addressing critical issues such as financial impropriety within the system, deficiencies in revenue collection and payment processes, wastage of public funds, and financial leakages that undermine the effective utilisation of public resources. The public has a right to know whether public funds are being spent effectively, and this committee ensures that financial governance is upheld.
The Audit Alarm Committee is established under the provisions of Section 35, No. 48 of the Civil Service Reforms Act of 1988. It is mandated to raise awareness and sanction any government or public official suspected of engaging in financial misconduct. Notably, the committee is chaired by the Auditor General of the Federation or the respective state. Essentially, an “audit alarm” functions as a reporting mechanism, aligning with Deni Elliot’s definition of an action taken by an agent to bring purported illegal or unethical behaviour to the attention of relevant authorities, often bypassing conventional reporting channels.
“Strengthening public financial management and addressing the incidences of financial misconduct, gross mismanagement, wastages, and leakages within the public sector require well-thought-out and calculated strategies.”
The Audit Alarm Committee plays a crucial role in promoting accountability, transparency, and good governance among public officials. Its effectiveness is contingent upon strong institutional support to ensure that audit alarms raised within the public sector are scrutinised and deliberated upon. The committee also works to prevent fraudulent or irregular payments, particularly those under investigation, thereby reinforcing the integrity of financial transactions. By ensuring responsible management of national resources, the committee enhances public trust and confidence. Additionally, it has the authority to recommend sanctions or punitive measures against officers found culpable, in accordance with established guidelines.
Further reinforcing its mandate, the committee maintains direct access to the presidency through the president’s representative on audit alarm matters. It is also empowered to notify the Public Accounts Committee (PAC) of significant audit alarms and serious pre-payment audit queries for which accounting officers of ministries, departments, and agencies (MDAs) are responsible.
Read also: How financial illiteracy fuels rising fraud losses
Despite its merits, the Audit Alarm Committee faces several challenges. One major issue is the collusion between accounting officers and facilitators, which undermines the effectiveness of financial oversight and accountability measures. Additionally, individuals raising audit alarms often face threats to their lives and job security, deterring whistleblowing efforts. There are also challenges in clearly defining what constitutes an “irregular payment” within the public financial system. Confidentiality concerns further complicate the situation, as ensuring the protection of sensitive financial information within the public sector remains a significant hurdle. Bureaucratic bottlenecks also impede the swift resolution of audit-related issues, as rigid administrative structures and hierarchical reporting chains slow down corrective actions.
The establishment and effective functioning of the Audit Alarm Committee remain critical in addressing financial irregularities within the public sector. While challenges exist, overcoming these hurdles through policy reforms and institutional strengthening will enhance financial accountability and governance in Nigeria.
Dr Kingsley Ndubueze Ayozie, FCTI, FCA, is a Public Affairs Analyst and Chartered Accountant. He writes from Lagos.
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