IMPACT OF VALUE FOR MONEY AUDIT ON THE EFFICIENCY OF PUBLIC SECTOR ECONOMY: A CASE STUDY OF FEDERAL MINISTRY OF FINANCE

IMPACT OF VALUE FOR MONEY AUDIT ON THE EFFICIENCY OF PUBLIC SECTOR ECONOMY: A CASE STUDY OF FEDERAL MINISTRY OF FINANCE

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CHAPTER ONE

1.0   INTRODUCTION

1.1   BACKGROUND OF STUDY

Value for money audit, according to Okwoli (2004) is “a systematic evaluation of the methodologies employed in the execution of programmes, projects, and activities with the objectives of confirming whether the stated objectives of the programmes, projects, and activities were actually achieved and at what cost”.

According to him, this method of audit has evolved over time and been found to be the best approach to confirming whether managers of resources are applying best practices in the use and application of resources. He maintains that the best practices in this respect will be the extent to which the managers apply economically and efficiently the resources made available and how the expected results are being achieved. In effect, therefore, while the need to achieve stated results is of primary importance, the curtailment of waste and extravagance makes the results more realistic.

Oshisami (2002) Value for Money Audit determines whether the entity is acquiring, managing or utilizing its resources (staff, buildings, spaces, materials, etc) in an economic and efficient manner and the causes of any inefficiencies or uneconomical practices.

Oshisami (2002) went further to state that it involves an inquiry into whether in carrying out its responsibilities; the organization gives adequate consideration to optimal acquisition, procedures and practices, safe keeping of its assets, money and minimum expenditure of effort.

Value for money audit has been found to be particularly useful in public sector where measurement of results achieved by public sector organizations is more subjective than in the private sector in the private sector, measurement of the success of an enterprise is a function of the profit of such an enterprise. Its continuous existence depends entirely on the ability of the enterprises to make profit without which it will fold up. Whereas the private sector enterprises endeavour to make profit in order to continue to remain in business. This particular urge is not very prevalent in public sector.

Public sector enterprises are set up specifically to address various problems, some social, while some are economic. However, profit motive is not usually the main objective of setting up such bodies. Even though many of such enterprises are not strictly set up as profit-making organizations, it is expected that they should not contribute an undue burden to the Government.

The managers in the civil service are usually provided with resources in the form of men, materials, money for the purpose of achieving stated objectives. How far these objectives are achieved depends on how these resources are utilized. Public service is a trust. It is therefore highly obligatory for any one, entrusted with such responsibility to exercise utmost prudence in the utilization of given resources and to ensure that the expected results are achieved.

1.2   STATEMENT OF THE PROBLEM

The study on impact of value for money audit on the efficiency of public sector economy came about as a result inability to make available a well-articulated organizational structure with a unified chain of command and well-delegated authorities to achieve value for money which might give room for adequate internal control system. Difficulty in changing from the practice of old custodianship to the contemporary value for money thereby leading to the need for a reorientation of the public sector staff. Finally, most of the research has been carried out value for money audit but not even a single research has been carried out on impact of value for money audit on the efficiency of public sector economy.

1.3      RESEARCH QUESTIONS

The study came up with research questions so as to ascertain the above stated objectives of the study. The research questions for the study are:

1.          What is the effect of value for money audit on public sector economy?

2.          What is the relationship between value for money audit and public sector economy?

3.          To what extent to which the implementation of value for money auditing has affected public sector economy?

1.4   AIMS AND OBJECTIVES OF STUDY

The aim of the study is to determine the impact of value or money audit on the efficiency of public sector economy. Other specific objectives of the study include:

1.          to determine the effect of value for money audit on public sector economy.

2.          to determine the relationship between value for money audit and public sector economy.

3.          to determine the extent to which the implementation of value for money auditing has affected public sector economy.

1.5   STATEMENT OF RESEARCH HYPOTHESIS

Hypothesis 1

H0: there is no significantrelationship between value for money audit and public sector economy

H1: there is significantrelationship between value for money audit and public sector economy

Hypothesis 2

H0: value for money audit has no significant effect on the public sector economy

H1: value for money audit has significant effect on the public sector economy

Hypothesis 3

H0: the implementation of value for money auditing has not affected public sector economy

H0: the implementation of value for money auditing has affected public sector economy

1.6   SIGNIFICANCE OF STUDY

The study on the impact of value for money audit on the efficiency of public sector economy will be of immense benefit to the entire federal ministry of finance in the sense that it will make the value of money to be easily imbibed, it will also enable the ministry to reward individuals who conform to the ethics of value of money and penalize those who undercut the ethics. However, the rules and regulations should be clearly defined and communicated to the operatives before it is used for their assessments. Finally the study will contribute to the body of existing literature and knowledge in this field of study and provide a basis for further research.

1.7   SCOPE AND LIMITATION OF STUDY

The study on impact of value for money audit on the efficiency of public sector economy is limited to federal ministry of finance.

Limitation of study

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview) and also the researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8   DEFINITION OF TERMS

Impact:The action of one object coming forcibly into contact with another.

Value:The regard that something is held to deserve; the importance, worth, or usefulness of something.

Money:Is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country.

Audit:An official inspection of an organization's accounts, typically by an independent body.

Efficiency:       The state or quality of being efficient.      

Public Sector:The part of an economy that is controlled by the state.

Economy: The state of a country or region in terms of the production and consumption of goods and services and the supply of money.


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