Revenue pilfering: Curtailing MDAs’ excesses

With sizeable number of organisations still withholding large chunk of revenue surplus, thereby denying the Federal Government funds required for key projects, there is need for such agencies to remain closely on the watch list so as to check pilfering. Abdulwahab Isa write s

 

The current perception about some Federal Government’s ministries, departments and agencies (MDAs) is not palatable. They are still being perceived as being irredeemably indulging in massive undercutting of Federal Government’s revenue, thereby remitting insignificant fraction into Consolidated Revenue Fund (CFR) account.

The Federal Government is said to be losing huge funds in billions of naira through sharp practices of the MDAs.

There are over 924 MDAs operating in Nigeria with negligible number remitting substantial portion of their operating surplus revenue into the CRF account. Interestingly too, a few have demonstrated sincerity by surpassing their targets.

The Joint Admission and Matriculation Board (JAMB) is a good example of the government agency remitting revenue above its threshold.

A recent financial audit report from the table of the Office of the Auditor General of Federation (OAGF) was laced with infractions committed by revenue generating MDAs.

Two years ago, the exercise also passed same verdict, revealing that over N450 billion outstanding and recoverable operating surpluses were in the vault of 17 agencies.

 

Prevailing sharp practices

The 2016 audited financial report submitted to the National Assembly by the Auditor General of the Federation, Mr. Anthony Ayine, reeled out various infractions committed by MDAs.

A few examples of the very many infractions by high profile revenue generating MDAs suffice at this juncture.

The AGF report cited discrepancies in the revenue figures by two revenue generating agencies – Department of Petroleum Resources (DPR) and Federal Inland Revenue Service (FIRS).

The report alleged overpayment of cost collection. Specifically, it revealed that both FIRS and DPR were paid a whopping N837.082 billion as cost of revenue collection.

“Our examination of the Accountant-General’s transcript and FAAC figures revealed that the FIRS and DPR were over paid cost of collection in the month August 2016 amounting to N305.93 million and N531.17 million respectively.

It was observed that what was captured in the Accountant-General’s transcript as payments for the month of August for FIRS and DPR as cost of collection differed from what FAAC approved in its file. It is expected that only figures approved by FAAC are to be paid by the Accountant- General of the Federation. The difference resulted in overpayments of N837.09 million by the Accountant-General to the two collecting agencies, “ audit report noted.

Similarly, the report faulted the joint venture (JV) cash calls (funds injected into joint ventures by the NNPC on behalf of the federation) declaring that the process was mired in obfuscation as they could not be well accounted for in the books of the OAGF and FAAC.

On JV, it said: “These funds are obtained out of revenue accruing to the federation that would otherwise have been paid onto the Federation Account for allocation to the three tiers of government. Firstly, it is unclear how and where the asset values of these investments in joint ventures on behalf of the federation are determined and reported. Secondly, from the analysis and review of the revenue and account documents presented by the Crude Oil Marketing Department (COMD) of the NNPC in respect of sales of crude oil and gas and payment of JV cash call funding, it was observed that only a marginal sum was returned as revenue from export of crude oil and gas revenue inflows to the federation account for year January to December, 2016.

“From the total receipts by NNPC of $2.40 million from export sales of crude oil and gas for the year, a total amount of $2.35 million was paid out to fund JV cash calls, leaving only US$72.88 million, which was paid into the Federation Account. It should be noted that the above JV cash calls deducted from the proceeds from export oil and gas sales did not include an amount of N355,173,305,887.21 also paid from the receipts from domestic crude oil sales as JV cash calls.”

The report also claimed there were up to five versions of signed financial statements submitted to it by MDAs, which indicated inherent challenge with the first-time adoption of accrual IPSAS.

Other offences of the agencies include non–remittance and under-remittance of operating surpluses due to the CRF account, operating without an approved budget, overstating of budget and spending above budgeted amount, under reporting of revenues, making payments without invoices and absence of payment receipts.

Other breaches committed by identified agencies are over payment of staff salaries and abuse of personnel grants and payroll fraud and exaggeration of payroll costs among others.Repeatedly, the Federal Government has expressed concern over the malpractice by MDAs. It frowned at the act, promising severe sanctions. Regrettably, no MDA has been punished for violating provisions of Fiscal Responsibility Act.

Last week, Minister of Finance, Mrs. Kemi Adeosun, called for a review of the Fiscal Responsibility Act to allow for stiff sanction of defaulting MDAs.

She spoke in Abuja during the launch of technical workshop on the Operating Surplus Calculation Template, organised by the Fiscal Responsibility Commission (FRC).She suggested the need to put cost of collection and other incentives in place to encourage MDAs meet their targets. The minister, in addition, mooted the idea of increasing revenue targets for chief executives of MDAs, thereby linking their tenures to the performance in revenue generation and remittance of surplus.

She was represented at the occasion by the Secretary, Presidential Initiative on Continuous Audit, Dikwa Kyari.

She lamented that for over two decades, no MDA had met its 50 per cent target.

“We have to extend these discussions beyond the template to see why we are not meeting the target. In the last two decades, none of the MDAs have met 50 per cent of their target. There is need for the review of Fiscal Responsibility Act to provide for sanctions, to provide for incentives so that at least there will be an improvement,” she said.

“There is need to sanction defaulters, maybe by way of denying them promotion or encourage them by giving them some incentives. The FRC should take it up as one of the key issues so that at the end of the day there is incentive for those who have performed and sanction for those who have defaulted in meeting their targets.”

The minister frowned at the use of public funds meant for financing the budget in supporting private interests such as political parties and charity organisations by the MDAs.

“Most of these MDA’s go outside the confines of their mandate to donate to political parties and charity organisations and give zero balance as surplus. We came up with this template to specifically find out what are the experiences being perpetrated outside the confines of the mandate,” the minister explained.

“We cannot accommodate a situation whereby you are given a mandate as an MDA and you go outside your mandate to give out money while your mandate is to finance the budget. Over the years, government has been borrowing to finance the capital, we cannot continue like this. There is need for us to change the way and manner in which we are collecting revenue to finance for our budget.

“There must be a law in place to allow the Fiscal Responsibility Commission to go into the MDAs to look at their books, to find out how much have they generated, how much they have spent, how much is due to government. If for any reason there is default, there must be a sanction.”

Solution That the Federal Government is losing greater portion of her revenue to underhand dealings across MDAs is not new. Something needs to be done to minimise revenue this malaise. The earlier a solution is evolved to deal with it, the better for the economy. A new template for remitting revenue to consolidated revenue account by FRC must be put in place. The Government must show commitment to sanction erring MDAs.

Acting Chairman of FRC), Victor Muruako, gave insight into the new template last week.

He said the template was a means to deal with the unwholesome practice and potential dangers of low independent revenue, block all loopholes endangering revenue collection and to further improve on the over N1.4 trillion so far remitted to the into the CRF since 2009.

According to him, the move is targeted at ensuring MDAs remit all surpluses that would be useful for the government to develop the country without impeding on the operation of the agencies.

“It is already in use and there won’t be excuses on the path of the 122 companies and MDAs,” he said. “We expect them to use it; to understand it and then apply it to ensure their financial statements and end of year financial records would definitely not include those things that will be included because before this time, there have been cases of some expenditures that cannot be allowed.

“We expect to block all the loopholes to ensure that as much services as possible are made to government so that at the end of the day, the 80 per cent will be remitted to government and 20 per cent will be retained,” said FRC boss.

 

Last line

The Federal Government must act beyond the mere handing of threats to erring MDAs that undercut revenue. It should punish CEOs of such organisations to serve as a deterrent to others. The heavy domestic borrowing to fund budget deficit is needless if the government can get hold of 80 per cent of revenue generated by MDAs.

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