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Fiscal Responsibility Act: Revenue remittance law MDAs not willing to obey

By on December 5, 2016

In the last five years, leakages in revenue generation and remittances have assumed an alarming dimension, thus requiring the attention of all relevant agencies of the government to find a workable solution to stem the ugly trend.

The quest for effective blockage of revenue leakages has become more pronounced with the oil slump and the increasing need for the government to deliver to provide social and economic infrastructure for accelerated development.

At the core of the efforts to plug revenue leakages is revenue transparency, which will increase accountability and reduce opportunities for corruption and potential waste of already decimated revenue.

While the principle of transparency requires openness in revenue generation with public availability of information on budget preparation and execution, the lack of transparency and accountability in revenue can indeed exacerbate poor governance, corruption, fraud and general low productivity.

According to figures released by the Fiscal Responsibility Commission, over N1tn has been lost in the last seven years to non-remittance of operating surpluses alone by revenue generating agencies of government.

The Acting Chairman, FRC, Mr. Victor Muruako, who confirmed this while speaking at a sensitisation workshop on continuous audit, noted that the commission had caused the sum of N380bn to be remitted to the Consolidated Revenue Fund.

He lamented the level of abuse of the Fiscal Responsibility Act of 2007. According to him, the Act stipulates that any government agency that generates revenue must remit 80 per cent of its operating surplus to the Consolidated Revenue Fund account.

Sections 21 and 22 of the Fiscal Responsibility Act 2007specifically states that government corporations and agencies shall, not later than six months from the commencement of the Act and every three financial years thereafter and not later than the end of the second quarter of every year, cause to be prepared and submitted to the finance minister their schedule estimates of revenue and expenditure for the next three financial years.

It said each of the bodies referred to in subsection (1) of this section should submit to the finance minister not later than the end of August in each financial year an annual budget derived from the estimates submitted in pursuance of subsection (1) of this section; and projected operating surplus, which should be prepared in line with acceptable accounting practices.

Muruako lamented that most of the agencies of government preferred not to obey the law and as such were using all forms of accounting techniques to short-change the government.

According to him, some chief executives of the agencies in their bid to avoid remittance, even go as far as submitting two financial statements of their agencies to the government.

He claimed that while one account was usually submitted to the Office of the Accountant General of the Federation, another version would be submitted to the FRC.

In order to address this, he said a new template that would guide revenue generating agencies in computing their operating surpluses would soon be released by the commission.

He said the template, which would be released by the government in the next few weeks after it must have been approved by the Minister of Finance, Mrs. Kemi Adeosun, would stop the level of abuse of the Fiscal Responsibility Act by government agencies.

Muruako said, “In the next few weeks, and with the approval of the Minister of Finance, we will be releasing a formal template for calculating operating surpluses.

“This will help us check the level of abuse of the FRA because we have discovered that many agencies are not complying with the law. We have also discovered that some MDAs produce two accounting statements; one for the Accountant General of the Federation and the other for the FRC.

“So we are partnering the AGF and the Ministry of Finance to ensure that only one set of account is produced and this will help us block loopholes in remittance.”

He said there was a need for more disclosures particularly on expenditure items in the audited financial records of agencies of government, noting that revenue targets should be based on revenue generating capacity of the agencies.

To check the abuse, the finance ministry said a committee headed by the Accountant General of the Federation, Alhaji Ahmed Idris, had critically reviewed the accounting statements of the agencies and discovered that they actually under-remitted the sum of N450bn operating surplus to the treasury.

The committee is to reconcile the operating surpluses of 31 revenue-generating agencies of government for the period 2010-2015.

The agencies are the Central Bank of Nigeria, Petroleum Technology Development Fund, National Agency for Food and Drug Administration and Control, Nigerian Television Authority, and the Securities and Exchange Commission, among others.

The finance ministry further stated that some of the agencies had incurred huge expenses on overseas training and medicals, and huge expenses on behalf of supervisory ministries and other organs of government involved in oversight or regulatory functions without appropriate approval.

It listed other infractions to include payment of salaries and allowances to staff and board members, governing councils, and commissions, which were outside or above the amount approved by the Revenue Mobilisation and Fiscal Allocation Commission and the National Salaries, Income and Wages Commission.

The violations also involved unacceptable expenses incurred on donations, sponsorships; unfavourable contracts signed for revenue collection by a third party; granting of staff loans that had not been repaid as well as sale and transfer of assets to board members, among others.

According to the finance ministry, the overall effect of these practices is that operating surpluses of the agencies are lower than they should have been.

The development has made the Minister of Finance, Adeosun, to direct the AGF to issue a circular that would limit allowable expenses that could be spent as part of measures to ensure that these agencies face strict monitoring.

This development is part of the resolve of the finance minister to ensure that leakages are tackled.

Commenting on the under-remittances of revenue to the treasury, the Lead Director, Centre for Social Justice, Eze Onyekpere, said the agency had released a report that studied how Ministries, Departments and Agencies of government had complied with the provisions of the Fiscal Responsibility Act.

In the report, he said, a total of 16 MDAs were studied in the survey with the ministry of environment coming tops on the index with 69.36 per cent.

This was followed by Ministry of Lands and Housing (67.62 per cent); Works (67.49 per cent); Mines and Steel (66.86 per cent); and Ministry of Agriculture and Rural Development (66.65 per cent).

The report said while none of the agencies could score up to 70 per cent, they were able to cross the 66 per cent minimum benchmark, which was the accepted level of fiscal responsibility in the MDAs.

However, Onyekpere said about 11 ministries in the study scored below the 66 per cent benchmark for fiscal responsibility.

For instance, the Ministry of Health, according to the report, recorded the least score of 39.08 per cent on the index; while women affairs and finance ministries with 52.14 per cent and 55.59 per cent followed, respectively.

The report also stated, “The final scores of the fiscal responsibility index show that there are still lots of work to be done in every MDA. None of the MDA could make it to 70 per cent of scores. There is every need for improvement across the MDAs, whether at the top or at the area of the index.

“This is important because sound fiscal policy and its attendant fiscal responsibility can have important long-run effects on the health of the Nigerian economy through its desired impact on not only national saving but also on the growth of productivity.”

 

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