Financial Reporting Council (FRC) of Nigeria is currently struggling to meet its financial obligations due to poor funding from the Federal Government, BusinessDay can disclose.
The horde of activities hitherto witnessed around the rented Lagos and Abuja offices of FRC have whittled down, raising questions about the Federal Government’s commitment to truly empowering the Council to protect investors.
FRC is a Federal Government’s agency established by the Financial Reporting Council of Nigeria Act, No. 6, 2011. It is a parastatal under the supervision of the Federal Ministry of Industry, Trade and Investment.
Though the Daniel Asapokhai-led Council is yet to release its 2020 financial report, but the 2019 report seen by BusinessDay shows it closed the year with a deficit of N4.27million from a surplus of N183.7 million recorded in the year 2018.
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The FRC is responsible for, among other things, developing and publishing accounting and financial reporting standards to be observed in the preparation of financial statements of public entities in Nigeria; and for related matters.
The N668.92 million internally generated revenue (IGR) which the FRC recorded in 2019 represents a decline by 20.02 percent when compared to N836.35 million in 2018. Gross earnings of N792.95 million recorded by FRC in 2019 represents a decline by 12.42 percent compared to N905.41million in 2018.
The FRC annual report and accounts show that in 2013 its revenue was N1.18 billion out of which N1.11 billion was IGR while N72.2 million was government subvention. In 2014, the Council’s revenue was N971.15 million out of which N931.43 million was IGR while N27.38 million was subvention from the government.
The FRC reported N61.8 million deficit in 2014 while in 2013 it recorded surplus of N563.9 million. In 2015 and 2016, there was no government subvention to the FRC. Its IGR in 2016 was N1.47 billion from N514.03 million in 2015.
Though, in 2019 the Council got N109.84 million as government subvention, up from N50.144 million in 2018. In 2018, IGR was N836.35 million from N847.77 million IGR in 2017.
In 2017, President Muhammadu Buhari appointed Daniel Asapokhai as the executive secretary of the Council. Asapokhai replaced the then sacked Jim Obazee.
BusinessDay learnt that the shrinking IGR of The FRC compared to previous years is as a result of the current management’s belief that dishing out penalties to defaulting corporates and individuals – though could shore up IGR – is not the best option to build investors’ confidence in Africa’s largest economy. About 50 percent of IGR by then Obazee-led FRC was through penalties, our source noted.
The operating arms of the FRC are: Directorate of Accounting Standards – Private Sector, Directorate of Accounting Standards – Public Sector, Directorate of Auditing Practice Standards, Directorate of Actuarial Standards, Directorate of Valuation Standards, Directorate of Inspection and Monitoring, and Directorate of Corporate Governance.
It was learnt that in 2020 only about N40 million was given to FRC as subvention from Federal Government. Subvention is a financial support by the government to an institution.
Upon resumption in office, Asapokhai had approached the National Assembly (NASS) to see the possibility of accessing among other things the capital funding to secure a permanent office of the FRC.
The Council’s main objectives, as defined in the FRC Act, are to: protect investors and other stakeholders’ interest; give guidance on issues relating to financial reporting and corporate governance to professional, institutional and regulatory bodies in Nigeria; ensure good corporate governance practices in the public and private sectors of the Nigerian economy; and ensure accuracy and reliability of financial reports and corporate disclosures, pursuant to the various laws and regulations currently in existence in Nigeria.
It is also meant to harmonise activities of relevant professional and regulatory bodies relating to corporate governance and financial reporting; promote the highest standards among auditors and other professionals engaged in the financial reporting process; enhance the credibility of financial reporting; and improve the quality of accountancy and audit services, actuarial, valuation and corporate governance standards.
BusinessDay sources said the little or no subventions from the Federal Government has made the Financial Reporting Council (FRC) of Nigeria depend on 99 percent on its Internally Generated Revenue (IGR) to fund its operations.
The benefits of high-quality Financial Reporting are numerous; amongst which are: promoting private sector growth and reducing volatility in the economy by strengthening the country’s financial reporting architecture and reducing the risk of financial market crises together with the associated negative economic impact.
It also enhances local and foreign direct and portfolio investment as investors are better able to evaluate corporate prospects and make informed decisions resulting in access to capital at lower costs.
High-quality Financial Reporting facilitates the growth of small scale enterprises as their compliance with transparent reporting will provide easier access to credit; facilitates integration into global financial and capital markets; improves public sector fiscal discipline and enhancement of value for money, and generates employment opportunities.
