A few weeks ago, several national dailies carried a striking headline: “Auditor-General’s Report Indicts NNPC Over Non-Remittance of ₦12bn.” According to the Auditor-General of the Federation, the Nigerian National Petroleum Company Limited (NNPC Ltd.) failed to remit 20 percent of its 2020 operating surplus, amounting to ₦12.721 billion, into the government’s general reserve fund, a clear violation of Section 22(1) of the Fiscal Responsibility Act (FRA) of 2007. The Act mandates all public corporations to establish a general reserve fund and remit 20 percent of their surplus annually.
This finding, contained in the Auditor-General’s latest 808-page annual report submitted to the National Assembly, raises serious governance concerns about NNPC’s transition from a public corporation to a limited liability company and what that means for fiscal oversight and transparency.
Unfortunately, financial irregularities and misconduct are not isolated to the energy sector. Over the years, numerous government agencies, parastatals, and public institutions have been implicated in unethical practices that include embezzlement, diversion of public assets, ghost workers, contract inflation, over- and under-invoicing, misappropriation of funds, conflict of interest, and outright fraud. These activities continue to undermine public trust and weaken governance structures.
Understanding financial irregularities and misconduct
Financial irregularities and misdemeanours refer to the unauthorised, unethical, or illegal use of public funds, assets, or infrastructure for personal or group benefit. Such actions compromise the integrity of public institutions and deprive citizens of essential services and development opportunities.
Effects of financial misconduct
The consequences are far-reaching. Financial irregularities lead to loss of public funds and liquidity crises. They weaken the credibility of financial reporting, undermine the rule of law, and erode public confidence in government institutions. Left unchecked, they fuel governance failure, reduce investor confidence, and contribute to poverty and underdevelopment.
These negative effects are not limited to the public sector; private companies, not-for-profit organisations, and government-owned enterprises are equally vulnerable when internal controls are weak.
The way forward
Addressing financial irregularities requires comprehensive and well-coordinated strategies. These include:
Extensive public enlightenment campaigns
Strong internal control systems across institutions
Strict adherence to budgeting processes and financial regulations
Reinforcement of accountability and transparency practices
Strengthening anti-corruption agencies such as the EFCC, ICPC, and Code of Conduct Bureau
Regular training and retraining of public officials, especially in financial management
Encouraging whistleblowing culture
Adoption of the NOCLAR principle (Non-Compliance with Laws and Regulations)
Enactment and enforcement of laws governing public financial management
At the centre of all these reforms is public sector audit, an indispensable mechanism for promoting responsible financial stewardship.
What is a public sector audit?
Public sector audit is the independent and detailed examination of government financial statements and their supporting documents. It is carried out by an independent auditor to determine whether the statements present a true and fair view of the entity’s financial activities and to evaluate compliance with applicable laws and regulations.
Types of public sector audit
Public sector audits may take any of the following forms:
1. Compliance audit
This review checks whether government agencies have adhered to relevant laws, regulations, and enabling statutes governing their operations. It is also known as a regulatory audit.
2. Financial statement audit
This audit assesses whether an organisation’s financial statements are prepared in accordance with approved accounting standards and reflect a true and fair view of its financial position.
3. Value-for-Money (VFM) audit
Also known as the 3Es audit—Economy, Efficiency, and Effectiveness—this review examines whether public resources have been acquired appropriately, utilised efficiently, and applied to achieve intended outcomes.
Benefits of public sector audit
When properly executed, public sector audits provide significant benefits:
Detection and prevention of fraud and financial misconduct
Assurance of strict compliance with rules and regulations
Improvement in the accuracy, completeness, and validity of financial records
Enhanced transparency and accountability among public officials
Increased public trust and confidence in government operations
Strengthening the credibility of financial statements for stakeholders
Serving as a deterrent against corruption and unethical practices
Ultimately, a robust audit system promotes good governance and ensures that public resources are used for the collective good.
Dr. Kingsley Ndubueze Ayozie, FCTI, FCA, Public Affairs Analyst and Chartered Accountant, writes from Lagos.
