ICPC System Study Review of Budget Implementation

The Commission as part of its statutory mandate has in the past few years been conducting systems study and review of ministries and organisations in the federal public service (MDAs). The overall objective of a system review is reform of the systems and procedures of public agencies with a view to identifying and eliminating, preventing, blocking and obstructing opportunities for corruption.

To achieve this, the exercise targets detecting areas of vulnerabilities, actual weaknesses, leakages and corruption risks and to recommend ways of strengthening these systems and removing the discretionary gaps and such opportunities for both individual and institutional malfeasance on our public resources. In addition, the review also targets shoring up public resources for the government and make them available for utilisation in delivering good governance and the dividends of our democratic processes. Often, these system study review leads to a full-blown investigation of egregious anomalies or enforcement measures like asset recovery and prosecution.

In 2019 ICPC reviewed 208 agencies of government that are funded from the Federal Treasury and came up with outstanding results which included the discovery of N31.8bn personnel cost surpluses for 2017 and 2018, and misapplication of N19.8bn and N9.2bn from Personnel Cost and Capital Fund respectively. Consequent on these findings N42bn unspent surplus allocations for Personnel Cost for 2019 alone was blocked from possible abuse and pilfering mostly from health and some educational institutions. This implies that if we had covered the entire civil service structure of all MDAs the figures would be staggering.

In 2020 we extended the review with more focus on Health and  Education sectors which touch the lives of ordinary citizens and are critical to meeting any of the internationally recognized development goals but is a major headache to budget execution. In addition, we commenced a review of  Educational Institutions indicted in the 2017 Auditor-General’s Annual Audit

Report for a wider range of financial infractions. A number of investigations are on-going on this as we have instituted a mechanism for continuous review of current and subsequent Annual Audit Reports.

In December 2019 the Federal Government launched the Open Treasury  Portal [OTP] onto which all payments from N5m and above by MDAs are uploaded for the purpose of transparency and public scrutiny. We immediately began studying payment data on the Portal again with a focus on educational and health institutions. While at it, the issue of payments of feeding allowance to federal unity secondary schools was thrown up and we had to carry out further investigations on expenditure on meal subsidy releases that remained constant despite the lockdown during which schools were closed and students away at home. In response to our findings, the government set up the Transparency Portal  Quality Assurance and Compliance Committee with ICPC as a member. The  Committee now scrutinizes payments on the portal and periodically sends lists of agencies with a serious infraction for further review and sometimes investigation and enforcement action. In the spirit of collaboration, we report  back our findings on cases of fraud or unaccounted for funds a number of which  investigations are ongoing. The review is carried out on month by month transactions and is therefore an ongoing exercise and despite confronting erring ministries and MDAs with federal circulars prohibiting these activities, the  infractions continue thus stronger measures on the part of government and anti corruption agencies are inevitable. A summary of our findings on these activities and our achievements and recommendations follow.

The Systems Study and Review focused on Personnel Cost allocation and  Capital Development Fund for 2017 – 2020. In general, our findings showed that there was budget manipulation by most MDAs which resulted in MDAs receiving both appropriation and releases beyond their actual needs. While these  surpluses were open to the risk of being misappropriated as is tradition

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sometime at the end of the year, the funds tied down for non-existent personnel deprived government and indeed needy MDAs of much needed funds to apply  to other critical but underfunded areas, especially overhead and capital  development. This tended to make budget execution problematic for  government at harsh economic times. While our review and the IPPIS takeover  of the salary payment has helped to reduce these incidents, the mop up of  balances immediately after the payment of salary at the end of every month had  to be activated with the cooperation of the Ministry of Finance and Office of  Accountant General of the Federation.

In addition to the above infraction on Personnel Cost allocation, we found  that quite a substantial part of the Personnel Cost Budget was expended on  matters not related to Personnel Cost. These expenditure types included DTA and estacode, electricity, water and sewage bills, procurement of diesel and  stationery, payment of transport allowance and flight fares, payment of wages  for outsourced services and ad hoc (locum, visiting and at times illegal  employees), as well as illegal allowances.

For Capital Development Fund, review established huge expenditure on  both personnel and overhead related items thus frustrating government’s  capacity for infrastructural development. Again, that the budgeting system for  Capital Fund had shifted heavily to overhead related activities such as  empowerments, sensitizations, trainings, etc thus reducing the visibility of  government assets and infrastructural projects commensurate with the value of  capital appropriation. Further, some agencies of government engaged in  massive capital project implementation through direct labour with attendant  implication for corruption and loss of project quality and tax revenues.

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Summary of Findings from Fifty-One (51) Health Sector Institutions  i. Padding of nominal rolls including inclusion of outsourced staff. ii. Warrant releases in excess of actual personnel cost needs. iii. In adequate budgetary overhead allocation.

iv. Inadequate or non-budgetary allocation for outsourced services. v. Widespread misuse of Personnel Cost allocation on non-personnel  related expenditure especially on outsourced services (4.5bn). vi. Unspent excess balances despite abuses and misuse (N4.86bn). vii. Fraudulent diversion by role players of funds through manipulation of  account numbers of beneficiaries on the GIFMIS Platform.

viii. REMITA payment system not allowing for the matching of account  numbers with account names and thus making fraud easy.

ix. Inordinate balance staffing levels between Teaching Hospitals and  Federal Medical Centres.

Summary of Findings on Educational Institutions/Review of Auditor General’s 2017 Annual Report

We note that a number of MDAs complained that the Audit Teams did not do  exit briefing and thus deprived them of opportunity of providing responses to  issues raised against them. ICPC also found that many MDAs defended the  indictments before both the MoF and PAC of the National Assembly thus  substantially reducing the indictments. However, many still remained on  misapplication of funds which could not be explained. A summary of the  indictments from the Auditor-General’s report are listed below.

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Summary of General Findings on the Open Treasury Portal (OTP) 

We began a pilot review of the Open Treasury Portal in April 2020 covering  January to March in the first instance. Examples of infractions found are – i. Payment of advances beyond approved limit of N200,000 (scope here  N5m and above) to individuals’ accounts; 

ii. Advances for projects paid into project accountants’ personal accounts  with commercial banks. 

iii. Payments to individual staff/accountants for disbursement to ad hoc  employees/outsourced services and other employees (say those on  transfer to the MDAs who were yet to be captured/not on the agencies’  GIFMIS Platform). 

iv. Payment to project officers/accountants to pay casual/onsite employees  who are employed for short periods and cannot be registered on the  platform. 

v. Payment to contractors/Vendors who were not on the GIFMIS Platform  through staff and/or third parties. 

vi. Payments to staff for procurement of welfare and palliatives for staff.  vii. Payment to staff of funds meant for loans to different empowerment  beneficiary types. 

viii. Cash payments for staff DTA, Transport, collation of results and the  like for personnel of paramilitary services under the Ministry of  Interior for promotion exercise, etc.  

ix. Payment of funds as logistics and training fees for empowerment,  trainee stipends, and trainers’ fees paid from Personnel Cost. 

x. MDAs having problems with GIFMIS Platforms and finding it difficult  to pay third party deductions and thus the third parties requested that  their payments be made into nominated personal accounts of  individuals.

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xi. In order to circumvent the rule, some MDAs had many payments  below the N5m threshold such as multiple payments of N4.9m, N4.8m  ostensibly (in our view) that such transaction will not be captured and  uploaded on the OTP. 

xii. Most officers interrogated during the review complained that most of  the beneficiaries of the payment (staff or government agency) are not  listed on the GIFMIS platform, consequently such funds are paid to  project accountant (PA) for onward transmission to the actual  beneficiaries. 

xiii. Payment between Government agencies through GIFMIS is not  possible at the moment, therefore payments were made to PAs and  other officers’ accounts for onward transmission to the Agencies  account. 

xiv. Delay in procurement process leading to advancing staff funds to  procure the items that are urgently required, delay of which could  result in the mop up of the funds and cause harm to the organization. 

xv. Review of the maximum limit of personal advances beyond  N200,000.00. 

xvi. MDAs transfer funds from TSA to Sub-TSA accounts for the purpose  of making payments the kind of which enables advances beyond  approved limits, project funds, payments to third parties and possible  abuses. 

xvii. Uploading of payments to the Portal is done some times without or  with inadequate description which defeats the transparency component  of the policy. However, since it is not done by the MDAs, the  appropriate Agency should be directed to improve on the process.  Expenditure on the Sub-TSA are not viewable on the platforms and  therefore hidden from public view and regulatory/law enforcement  review.

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xviii. That until the circular from Accountant General in June 2020 it was not  illegal. 

xix. Only disbursement of money from the transit account for purposes  other than foreign transactions 

OTP – Payments Without Description  

i. Payment without description and narration: this deprives the public of  adequate information on payments and thus frustrating the purpose of the  Portal. 

ii. Secret nature of operations necessitating limited narration of payments  both on PVs, GIFMIS and Portal  

iii. In the main, payment vouchers and on the GIFMIS Platform contain full  narratives or description. 

iv. It is GIFMIS Officials’ responsibility to upload payments from the  Platform to the Portal and as such MDAs are not to blame. 

v. Description of payment on the PVs capture the content from contract  award letters as they are, sometimes inadequately so. 

vi. Problem of consolidation of several PVs into one by Federal Pay Officers  for FGCs thus creating issues of appropriate description. 

Our review of payments on Federal Unity Schools threw up a number of  findings. Our preliminary investigations showed that meal subsidy released to schools before and during lockdown were used for several other purposes of  recurrent nature in addition to procurement of food supplies during school  sessions and settlement of outstanding obligations. Consequent on our exposure  of the matter, the Government withheld or reduced releases to the FGCs from  June 2020 thus saving N6.1B that the Schools argue should cancel out any  recoveries that ICPC might have directed. The figures are still being reconciled  while the observations on the general payment systems and financial 

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management in the sector will be forwarded to the Ministry and the Schools for  reaction or any possible defence before a final report is made. 

Summary of ICPC Achievements  

Pursuant to our operations and findings, the following achievements were  recorded: 

(a) Funds Retained/Restrained 

Analysis of IPPIS transactions of MDAs restrained further diversion of third  party funds (PAYE Tax etc). A total of N220m Tax was diverted by some  MDAs within 2018 to 2020 among other third party deductions like  Cooperative and Union Dues, this was restrained and the funds were retained  within the system when IPPIS was alerted on the leakages. This was achieved  through two basic steps: 

i. The first step taken by IPPIS is the initiation and conclusion of third  party deductions within the same time by role players (Initiator,  Approver and Finalizer) to stem editing and manipulation by the  MDAs. Hitherto, the GIFMIS payment batches for third party were  initiated for a week before conclusion of payment exposing it to  editing and manipulation by MDAs’ Role Players. 

ii. The second step taken by GIFMIS was the deactivation of MDAs’  Role Players from performing personnel related transactions on  GIFMIS, consequently all personnel budget lines (Salary, Non Regular Allowance, Pension, NHIS etc) of IPPIS MDAs were  blocked. 

(b) Funds Mop-Up 

Part of the outcome from 2019 System Study and Review of the Commission is  the mopping up of N42b (Personnel Cost) in 2019 and N147b in 2020 

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respectively. The Hon. Minister of Finance through findings of the Commission  of the wrong application of Personnel Cost on Overhead and Capital item issued  a negative Warrant to mop up excess cash available in the Personnel Cost of the  MDAs to forestall further misapplication of funds. Similar Warrant was issued  in 2020 totaling N147b which was a huge savings to Government. The Year  2020 has been a challenging year with the devastating effect of COVID-19  leading to low revenue, low crude sales, low economic activities and recession  among others, hence the importance of blocking leakages and wastages within  the system. 

(c) Circulars Issued 

Three Treasury Circulars were issued arising from the SSR conducted by the  Commission in 2019, they are: 

i. Federal Treasury Circular No. TRY.A7&B7/2020(OAGF/CAD/026/ V.111/525) dated 23rd June, 2020 titled: FINANCIAL GUIDELINES  ON OPERATION OF SPECIAL PROGRAMMES/PROJECT  ACCOUNTS IN MINISTRIES, DEPARTMENT AND AGENCIES  (MDAs). This circular warns against payment above threshold to staff in  the name of Project Accountants in violation of the FR. 

ii. Federal Treasury Circular No. TRY.A9&B9/2020(OAGF/CAD/026/ V.111/557) dated 6th October, 2020 titled: CONTINOUS RISING  PERSONNEL COST IN MINISTRIES, DEPARTMENTS AND  AGENCIES (MDAs). This circular warned against abuse and misuse of  Personnel Cost for Overhead and Capital related expenses against the  provision of the Appropriation Act. 

iii. Federal Government of Nigeria 2021 Personnel Cost Budget Call  Circular: Paragraph 2.2.1 specifically provided that MDAs should note  that “payment of salaries and allowance are for legitimate staff only.  Any unauthorised payments from personnel cost will attract 

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appropriate sanctions”. Therefore MDAs are required to validate the  payroll section from IPPIS. 

iv. Likewise in Paragraph 2.2.2 provides that no personnel cost provision  will be made in the 2021 budget for any servicing employee of the FGN  who is not captured in the IPPIS 

(d) Restricted Access to Personnel Cost Funds by MDAs 

This was seamlessly achieved through restriction placed on MDAs GIFMIS  Role Players in accessing the Personnel Cost by the OAGF which account for  massive savings in Year 2020. Note that access to this account by GIFMIS Role  Player is a major concern to the National Budget considering the fact that  Personnel Cost takes chunk of the recurrent budget through misapplication and  misappropriation of the funds.  

(e) Restriction of transfer from GIFMIS to Sub-TSA (on-going) 

Another leakage within the system is the transfer of funds from the GIFMIS  platform to MDAs’ SUB-TSA Account and Microfinance Banks. This was  observed largely with Tertiary Institutions before migration to IPPIS, basically  to warehouse the funds and secure them before closure. Such transfer include: 

i. Transfer to Naira Transit Account in disguise of foreign exchange ii. Transfer to SUB-TSA Operation Account 

iii. Transfer to Microfinance Banks in disguise of casual workers wage  among others 

If this restriction is achieved a substantial savings can be made in this regard in  line with Mr. President’s directives to block leakages amidst dwindling revenue  outlook. 

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(f) Reduction in the rate of infractions both in volumes & occurrence 

As a follow up to 2019 system study, selected online review were carried out  similarly in 2020 to reassess the level of compliance with recommendations  given in previous study, it was observe largely that some MDA refrained from  previous infractions. For instance misapplication of the Personnel Cost on burial  expenses, DTA, training, disengagement allowance, electricity bills etc were not  observed. Migration of almost all the MDAs to IPPIS also assisted in this  regards.  

(g) Strict Personnel Cost Budgeting 

Government is stricter in scrutiny of actual payroll cost budget of the federal  government through direct extraction of the nominal roll of MDAs from the  IPPIS database for the preparation of Budget 2021 Personnel Cost. This was  part of the observation made by ICPC in 2019 system study and review; that  MDAs padded their personnel cost proposal to access excess funds from  government far above their wages and salaries, since releases on this budget line  is actual, then misapplied them for non-personnel related expenditure. 

Further Recommendations by ICPC  

i. Unspent balances should be blocked and restrained/reversed  immediately salaries are paid to prevent misuse. 

ii. Prevent unauthorised editing of payroll information data on the GIFMIS  platform for MDAs until after payment has been concluded by granting  them view-only status. 

iii. Prevent inflation of nominal rolls by MDAs for the 2021 Budget and  beyond to eliminate surplus allocation and releases, and other resultant  infractions. 

iv. Withdraw MDAs’ access to non-regular, pension and NHIS lines on  GIFMIS and restrict same to IPPIS staff;

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v. Direct the application of the Bank Verification Number (BVN) as a  requirement in populating the Personnel Cost Budget Template and  IPPIS data to eliminate any fraudulent payments. 

vi. Filter repetitions of names of Medical/Education Sector personnel that  feature in regular (pensionable) and non-regular (non-pensionable)  nominal rolls for budget purposes, e.g. locum, contract staff, etc. 

vii. Reform REMITA payment system to provide matching of account name  with number for all payments; 

viii. Direct Banks to ensure that account names and numbers match before  completing payment. 

ix. Admit ‘outsourced services’ as a budget head for Hospitals and  Education institutions, and regularly cashback same to enable them  appropriately draw funds therefrom and end diversion of Personnel Cost  to that causes. 

x. Clarify and agree with institutions status of ALL their receipts  identifying those that are IGR and those that are not and provide them  template for remittance into the consolidated revenue fund; 

xi. Conduct a staffing audit especially for educational and health  Institutions in order to establish actual staffing and staffing needs based  on volume of work and appropriately right-size for cost efficiency. 

xii. Distribution of federal regulatory circulars via both hard and soft copies  to MDAs to ensure full circulation and remove the lame defence of  ignorance of those regulations. 

xiii. Audit teams from Auditor General for the Federation should ensure exit  briefing with MDAs at the end of the audit visit to reduce issues  reported as infractions.  

xiv. DFAs and DIAs should be advised of the schedules of the audit exercise  and strategize ahead in order to be able to respond fully with all  documents necessary at the time of the visit.

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xv. MDAs should be advised to issue financial reports on time to enable  completion of annual audit and publishing of result on time. Sanctions  should be introduced for inordinate delays. 

xvi. Government should avoid late releases of budget allocation, especially  at the end of the year as the practice raises opportunity for frenzied  expenditure, circumvention of procedure, fraud and corruption.  Appropriated funds should be released in time to allow for strict compliance with the procurement procedure. Otherwise deferred till following fiscal year as the government is a continuum. 

Conclusion  

The infractions established in the course of our several SSRs constitute the risks  and building blocks for the inefficient public expenditure and pervasive  corruption that bedevil our public finance. The continuity of these infractions  challenges our professed political will to deal with impunity characterised by  disobedience of laws and regulations. This is an existential threat to the nation and it has already negatively impacted stability and development because funds appropriated for major infrastructure and development projects are simply diverted or mismanaged the same way thus diminishing the hope of the people and the plans and programs of government. It starts with those of us in this room. This impunity cannot continue ad infinitum. Nigeria cannot and will not  survive it. We are at a turning point with a global pandemic whose end is  uncertain, reduced public revenue but escalating citizen expectation, youth restiveness, insecurity and lack of or decaying critical infrastructure. In all of  this government is striving to put money in the right place for the benefit of the  people. The least we can do is to ensure that the expectations of the government and the people are met and we get value for money. 

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We believe that infractions can no longer be ignored or excused on the pedestal of everyone is doing it. ICPC is already investigating and prosecuting a number of egregious cases and we will escalate that position. We have got to the point  where we will prosecute without discrimination public officers found with any,  including the simplest of infractions, so that we entrench zero tolerance for  budget execution inefficiency which breeds corruption.  

DFAs and DIAs are by training professionals of the highest quality of knowledge in the sector, and by your level of authority capable of enforcing compliance with these rules down the line. The country should no longer slide  into poverty if only you will be firm and refuse to tolerate culpability from  anyone starting with yourselves. If this system is to be sanitized and scarce  Government resources is to do more with less you have to play your leadership role.  

We ask you all to work with us and commit to policing the system and driving  this sanitization and reformation of the system to enable government meet its  obligations to the public. It begins with you not with anyone else. We are ready  to support anyone with challenge and to uphold the transparency and integrity  of our systems and processes. We owe it to ourselves and we owe it to our children and the future of our nation. The ICPC will continue to collaborate with all critical stakeholders towards entrenching integrity in the polity and in public finance management and governance particularly. 

Prof. Owasanoye is the Chairman, Independent Corrupt Practices and Other Related Offences Commission  (ICPC)