Resource Control – A Risk Based Performance Management Tool for Nigeria’s Economic Progress

Firstly I would like to define Resource Control as “the control and management of resources by the state or local governments from whose jurisdictions the resources are extracted” [2]. By resources I mean all resources not just crude oil. I would also like to describe resource control as ‘financial autonomy for states and local governments”. In the political parlance it would be best described as ‘fiscal federalism’.'

Next I would like to posit that if everyone had a proper understanding of Resource Control and of Risk Based Performance Management (RBPM), no one would argue against resource control in the Nigerian context.

The truth however is that due to a lack of understanding of the underlying principles “derivation and resource control has always been an emotive and vexed political issue in Nigeria since independence. In today’s terms the debate centres on how the Multi Billion Dollars Oil Revenue should be apportioned between the Oil Producing States and the Federal Government in Abuja? Add to this debate ethnicity, religion, perceived notions of marginalization, lack of alternative sources of hard currency, regionalism and you see what a controversial issue this is.” [1] This should not be the case however. In this post I will seek to look at this vexed issue in a technical, academic and professional way.

Given the current economic situation and the drastic drop in oil prices I believe that Nigeria is presented with a divine opportunity to re-visit the issue of resource control (financial autonomy, fiscal federalism; call it what you choose) as a way for solving many of our myriad issues. The time is opportune because the emotions the subject usually raises should be doused in this time of fallen oil prices, with longer term prospects of low prices for the foreseeable future, fortuitously de-emphasizing crude oil as the sole resource.

Let us start by identifying a few of the many Nigeria’s resources for which resource control is advocated. In addition to crude oil, Nigeria is abundantly blessed with agricultural resources, forest resources and mineral resources. Every one of the seven hundred and seventy four (774) Local Government Areas in Nigeria has at least two to three principal resources  in commercial quantities, many have seven or more, some as many as sixteen and a few have as many as twenty. Any single one of these resources if properly developed and harnessed is capable of making the local government area self-sustaining and economically viable.  Local governments with fifteen or more resources have the ability to become major contributors to GDP and foreign exchange earnings. A partial listing of the resources in commercial quantities state by state is attempted for illustration purposes.

In alphabetical order we have Abia State: Has crude oil, several agricultural crops such as Oil Palm and Raffia palm, livestock, and several minerals such as; glass sand, shale, bentonite clay, limestone, rock salt, phosphate rock, kaolin, gypsum, laterite, clay, granite, black marble, marble and lignite.  With these resources Abia State was able to generate internally revenue of only N13.35bn in 2015 up 7.33% from 2014. Its monthly FAAC allocation in December 2015 was N2.66bn and its annual wage bill is about N30bn, which is more than double its internally generated revenue. In 2015 Abia state was one of the states owing worker’s salaries according to the Nigerian Labour Congress (NLC). Abuja FCT: Has several agricultural crops including groundnut, livestock, and several minerals such as; granite, marble, galena, laterite, tantalite, wolframite, tin ore, clay, dolomite, mica and clay. With these resources Abuja FCT did not record any internally generated revenue. Adamawa State Has several agricultural crops including groundnuts, livestock, fisheries, and several minerals such as;  trona, salt, baryte, granite, clay, coal, gypsum, limestone, uranium, kaolin, ilmenite, watron, magnesite and marble. With these resources Adamawa State was able to generate internally revenue of only N4.45bn in 2015 down 12.19% from 2014. Its monthly FAAC allocation in December 2015 was N2.51bn and its annual wage bill is about N23bn, which is nearly ten times its internally generated revenue. [3][4][5][6]

Akwa Ibom State: Has several agricultural crops including oil palm, coconuts and raffia palm, livestock, fish, crude oil, natural gas, and several minerals such as;  clay, rock salt, silica sand and limestone. With these resources Akwa Ibom State was able to generate internally revenue of N14.79bn only in 2015 down 5.99% from 2014. Its monthly FAAC allocation in December 2015 was N10.8bn and its annual wage bill is about N33.2bn which is more than twice its internally generated revenue. In 2015 Akwa Ibom state was (inexplicably) one of the states owing worker’s salaries according to the NLC. Anambra State: Has several agricultural crops including oil palm and raffia palm, fisheries, and several minerals such as; iron ore, clay, kaolin, crude oil, sandstone, lignite, natural gas, pyrite, iron stone and sandstone.  With these resources Anambra State was able to generate internally revenue of N14.79bn in 2015 up 29.32% from 2014 and more than double the corresponding figure in 2012. Its monthly FAAC allocation in December 2015 was N2.58bn and its annual wage bill is about N16.3bn which is just slightly more than it’s internally generated revenue. [3][4][5][6]

Bauchi State:  Has many agricultural crops including Groundnuts and Gum Arabic, Livestock, Fish, and many minerals such as; Kaolin, Gypsum, Cassiterite, Galena, Clay, Tantalite, Iron Ore, Gemstone, Sphalerite, Muscovite, Quartz, Columbite, Baryte, Tungsten, Rutile, Copper, Zinc, Zircon, Talc, Silica sand, Glass sand, Monazite, Feldspar, Ilemnite, Tantalum, Trona, Mica, Granite, Laterite, Graphite, Tin, Monozonite, Limonite and Wolframite. Lead, Agate, Coal, and Calcophrytes.  With these resources mostly untapped Bauchi State was able to generate internally revenue of N5.39bn only in 2015 up 10.2 % from 2014. Its monthly FAAC allocation in December 2015 was N2.98bn and its annual wage bill is about N26bn which is more than five times its internally generated revenue. In 2015 Bauchi State was one of the states owing worker’s salaries according to the NLC.  Bayelsa State: Has several agricultural crops including Oil Palm, and Raffia palm, Livestock, Fish, Seafood, Crude Oil, Natural Gas, Salt, Timber, Cane wood and very few minerals such as Silica Sand.  With most of the state’s resources tapped by the federal government Bayelsa State was able to generate internally revenue of N8.71bn only in 2015 down 25,76% from 2014. Its monthly FAAC allocation in December 2015 was N6.48bn and its annual wage bill is about N48bn which is more than seven times its internally generated revenue. Benue State: Has many agricultural crops including Groundnuts and Oil Palm, Livestock, Poultry, Fish, and several minerals such as; Lead, Brine, Zinc Ore, Silica Sand, Clay, Coal, Bentonite, Anhydrous Calcium, Sulphate, Glass Sand, Baryte, Limestone, Feldspar, Gypsum, Kaolin, Wolframite, Ilemnite, Bauxite, Shale, Mica, Granite, Galena and Lead. With these resources mostly untapped Benue State was able to generate internally revenue of N7.63bn in 2015 down 8.55 % from 2014. Its monthly FAAC allocation in December 2015 was N2.82bn and its annual wage bill is about N34.8bn which is more than four times its internally generated revenue. Borno State:  Has many agricultural crops including Groundnuts, Cotton and Gum Arabic, Livestock, Fish, and several minerals such as; Salt, Sapphire, Silica Sand, Quartz, Mica, Granite, iron Ore, Alluvial Gold, Magnesite, Uranium, Feldspar, Topaz, Nepheline, Aquamarine, Kaolin, Gypsum, Limestone, Bentonite, Trona, Potash, Laterite, Uranium, Fuller’s earth and Diatomite. In the case of Borno State the security situation has not helped matters but despite this, the state was able to generate internally, revenue of N3.53bn in 2015 up 21.8 % from 2014. Its monthly FAAC allocation in December 2015 was N3.05bn and its annual wage bill is about N20.7bn which is more than five times its internally generated revenue. [3][4][5][6]

Continuing we have Cross River State: Has many agricultural crops including; Oil Palm, Groundnuts and Raffia Palm, Livestock, Fish, and several minerals such as; Salt, Coal, Limestone, Tourmaline, Glass sand,  Crude oil, Natural Gas, Tin Ore, Mica, Ilemnite, Kaolin, Clay, Sharp Sand, Quartz, Granite, Spring Water, Muscovite, Galena, Zinc, Gold, Uranium and Baryte. With these resources mostly untapped Cross River State generated internal revenue of N13.57bn in 2015 down 16.01% % from 2014. Its monthly FAAC allocation in December 2015 was N2.53bn and its annual wage bill is about N22bn which is more than one and a half times its internally generated revenue. In 2015 Cross River state was one of the states owing worker’s salaries according to the NLC.  [3][4][5][6]

Delta State: Has several agricultural crops including Oil Palm, Groundnuts and Raffia Palm, Livestock, Fish, Salt, Crude Oil, Natural Gas, and several minerals such as; Lignite, Kaolin, Laterite, Gravel, Silica Sand, Laterite Clay, River Sand and Granite.  With these resources mostly untapped Delta State generated internal revenue of N40.81bn in 2015 down 4.93% % from 2014. Its monthly FAAC allocation in December 2015 was N9.286bn and its annual wage bill is about N85.2bn which is more than double its internally generated revenue. Ebonyi State: Has several agricultural crops including Oil Palm, Rice, Groundnut and Raffia Palm, Livestock, Fish, and several minerals such as; Salt, Limestone, Lead, Zinc, Gypsum, Marble, Granite, Galena, Laterite, Feldspar, Quartz, Pyrite, Black marble, Clay, Bentonite, Lead and Shale. With these resources mostly untapped Ebonyi State generated internal revenue of N11.03bn in 2014 data for 2015 is not available. Its monthly FAAC allocation in December 2015 was N2.55bn and its annual wage bill is about N16.8bn which is about one and a half times its internally generated revenue.  Edo State: : Has several agricultural crops including Oil Palm, Rice, Rubber and Raffia Palm, Livestock, Fish, and several minerals such as; Salt, Limestone, Dolomite, Kaolin, Feldspar, Clay and Marble. With these resources mostly untapped Edo State generated internal revenue of N19.12bn in 2015 up 10.95% % from 2014. Its monthly FAAC allocation in December 2015 was N3.18bn and its annual wage bill is about N28bn which is more than one and a half times its internally generated revenue. Ekiti State: Has several agricultural crops including Oil Palm, Cocoa, Raffia Palm, Rice, Livestock, and several minerals such as;  Charnockite, Clay, Kaolin, Quartz, Granite, Mica, Gemstone, Lignite, Limestone, Feldspar, Tin Ore, Bauxite, Tantalite, Columbite and Cassiterite. With these resources mostly untapped Ekiti State generated internal revenue of N3.29bn in 2015 down 4.99% % from 2014. Its monthly FAAC allocation in December 2015 was N2.58bn and its annual wage bill is about N24bn which is more than seven times its internally generated revenue. In 2015 Ekiti state was one of the states owing worker’s salaries according to the NLC. Enugu State: Has several agricultural crops including Oil palm, Yam, Rice and Raffia palm, Livestock, Fish, and several minerals such as;  Iron ore, Clay, Kaolin, Coal, laterite, Silica, Copper, Bauxite, Crude Oil, Natural Gas, and Glass stone. With these resources mostly untapped Enugu State generated internal revenue of N18.08bn in 2015 down 6.47% % from 2014. Its monthly FAAC allocation in December 2015 was N2.53bn and its annual wage bill is about N62.4bn which is more than three times its internally generated revenue.  [3][4][5][6]

Gombe State: Has many agricultural crops including; Groundnuts, Soybean, Maize and Rice, Livestock, Fish, and several minerals such as; Kaolin, Gypsum, Granite, Bentonite Clay, Coal, Baryte and Limestone. With these resources mostly untapped Gombe State generated internal revenue of N4.78bn in 2015 down 8.61% from 2014. Its monthly FAAC allocation in December 2015 was N2.34bn and its annual wage bill is about N14.4bn which is three times its internally generated revenue. Imo State: Has crude oil, several agricultural crops including Cassava, Oil palm, Raffia Palm, Rubber and Rice, Livestock, Fish, and several minerals such as; Bentonite Clay, Kaolin, Limestone and Zinc Ore. With these resources mostly untapped Imo State generated internal revenue of N4.57bn in 2015 down 48.3% % from 2014. Its monthly FAAC allocation in December 2015 was N2.89bn and its annual wage bill is about N22.8bn which is more than four times its internally generated revenue. In 2015 Imo state was one of the states owing worker’s salaries according to the NLC.  Jigawa State: Has many agricultural crops including; Groundnuts, Soybean, Tomato, Wheat, Gum Arabic, Maize and Rice, Livestock, Fish, and several minerals such as; Kaolin, Clay, Iron ore, Quartz, marble, Silica Sand, Potash,  Granite, Glass stone, Limestone, talc. With these resources mostly untapped Jigawa State generated internal revenue of N5.08bn in 2015 down 23.46% from 2014. Its monthly FAAC allocation in December 2015 was N2.81bn and its annual wage bill is about N33.5bn which is more than six times its internally generated revenue. In 2015 Jigawa state was one of the states owing worker’s salaries according to the NLC. Kaduna State: Has many agricultural crops including; Groundnuts, Soybean, Tomato, Sugar Cane, Wheat, Maize, Cotton and Rice, Livestock, Fish, Timber, and several minerals such as; Kaolin, Clay, Salt, Zircon, Silmanite, Graphite, Manganese, Quarry Sand, Ferrous Oxide, Granite, Smoky Quartz, Quartz, Columbite, Tin Ore, Cassiterite, Gemstones, Limonite and Talc. With these resources mostly untapped Kaduna State generated internal revenue of N11.53bn in 2015 down 10.8% from 2014. Its monthly FAAC allocation in December 2015 was N3.29bn and its annual wage bill is about N27.4bn which is more than twice its internally generated revenue. Kano State: Has many agricultural crops  including; Groundnuts, Soybean, Tomato, Pepper, Sugar Cane, Wheat, Maize, Cotton and Rice, Livestock, Fish, Timber, many minerals such as: Clay, Zircon, Silmanite, Graphite, Kaolin, Manganese, Quarry Sand, Ferrous Oxide, Granite,  Smoky Quartz, Quartz, Columbite, Tin Ore, Cassiterite, Gemstones, Limonite, Lead, Zinc, Monazite, Laterite, Silica Sand, Rhyolite, Copper, Gold and Talc. With these resources mostly untapped Kano State generated internal revenue of N13.61bn in 2015 down 0.3% from 2014. Its monthly FAAC allocation in December 2015 was N4.11bn and its annual wage bill is about N36bn which is nearly three times its internally generated revenue. In 2015 Kano state was one of the states owing worker’s salaries according to the NLC.  Katsina State: Has many agricultural crops  including; Groundnuts, Soybean, Tomato, Pepper, Onion, Sugar Cane, Wheat, Maize, Cotton, Gum Arabic,  and Rice, Livestock, Hides and Skin, Fish, Timber, many minerals such as: Clay, Zircon, Silmanite, Graphite, Kaolin, Manganese, Quarry Sand, Ferrous Oxide, Granite,  Smoky Quartz, Quartz, Columbite, Tin Ore, Cassiterite, Gemstones, Limonite, Lead, Zinc, Monazite, Laterite, Silica Sand, Rhyolite, Copper, Gold, Amethyst, Tourmaline, Feldspar, Precious stones, Aquamarine, Emerald, Chromite, Topaz, Mica, Glass Sand and Talc.  With these resources mostly untapped Katsina State generated internal revenue of N5.79bn in 2015 down 7.46 % from 2014. Its monthly FAAC allocation in December 2015 was N3.12bn and its annual wage bill is about N14.4bn which is more than twice its internally generated revenue. In 2015 Katsina state was one of the states owing worker’s salaries according to the NLC. [3][4][5][6]

Kebbi State: Has many agricultural crops including; Groundnuts, Soybean, Cotton, Tomato, Onion, Pepper, Gum Arabic, Pepper, Maize and Rice, Livestock, and several minerals such as; Kaolin, Bauxite, Gold, Clay, Manganese, Magnesite, Mica, Feldspar, Iron Ore and Quartz. With these resources mostly untapped Kebbi State generated internal revenue of N3.59bn in 2015 down 6.73% from 2014. Its monthly FAAC allocation in December 2015 was N2.61bn and its annual wage bill is about N12bn which is more than three times its internally generated revenue. Kogi State: Has many agricultural crops including Groundnuts, Rice, Maize, Soybean and Oil Palm, Livestock, Fish, Poultry,  and several minerals such as; Limestone, Quartz, Marble, Dolomite, Iron Ore, Coal, Gemstones, Crude Oil, Ornamental stone,  Talc, Cassiterite, Mica, Kaolin, Granite, Columbite, Tantalite, Feldspar, Phosphate and Gold. With these resources mostly untapped Kogi State generated internal revenue of N6.77bn in 2015 down 3.05 % from 2014. Its monthly FAAC allocation in December 2015 was N2.72bn and its annual wage bill is about N14.4bn which is more than twice its internally generated revenue. In 2015 Kogi state was one of the states owing worker’s salaries according to the NLC.[3][4][5][6]

 Kwara State: Has many agricultural crops including Groundnuts, Rice, Maize, Soybean, Coffee bean, Tobacco and Oil Palm, Livestock, Fish, Poultry, and several minerals such as; Clay, Kaolin, Feldspar, Dolomite, Marble, Quartz and Granite. With these resources mostly untapped Kwara State generated internal revenue of N7.18bn in 2015 down 73.57 % from 2014. Its monthly FAAC allocation in December 2015 was N2.27bn and its annual wage bill is about N11bn which is more than one and a half times its internally generated revenue. Lagos State: Has several agricultural crops including Oil Palm, Coconut, Raffia Palm, Rubber, Rice and Soybean, Livestock, Fish, Seafood, Timber, and few minerals such as;  Clay, Gravel, Sharp sand, Laterite, Silica and Bitumen. Lagos state as the former administrative capital of Nigeria and the current commercial capital is host to a myriad of companies and businesses. There is therefore more exploitation of resources attracting masses of workers and attracting the population of over 20 million. With effective Personal Income Tax collection and management Lagos State generated internal revenue of N268.22bn in 2015 down 2.96 % from 2014. Lagos state has a commendable policy that worker’s salaries should not exceed 30% of internally generated revenues, if workers want an increase in salaries then they need to increase IGR. This is an example of risk based performance management. Its monthly FAAC allocation in December 2015 was N8.26bn and its annual wage bill is about N76.5bn which is less than a third of its internally generated revenue which gives it sufficient revenue to pay salaries and embark upon capital projects. It is worthy of note that the adversity it faced, of Local Government Funds withheld by the Obasanjo administration in 2004 {over the creation of Local Council Development Areas (LCDA’s)} was an impetus to drive tax management and internally generated revenues to new heights. This is also an argument in favour of financial autonomy. When states cannot look outward for revenue, they would by necessity look inwards. Necessity is always the mother of invention. [3][4][5][6]

 Nassarawa State: Has several agricultural crops including Groundnut, Maize and Rice , Livestock, Fish, and several minerals such as; Gemstones, Cassiterite, Beryl, Clay, Topaz, Sapphire, Granite, Emerald, Baryte, Salt, Silica sand, Galena, Amethyst, Glass sand, Coal, Limestone, Iron Ore, Marble and Monazite. With these resources mostly untapped Nassarawa State generated internal revenue of N4.28bn in 2015 up 4.59% from 2014. Its monthly FAAC allocation in December 2015 was N2.28bn and its annual wage bill is about N24bn which is nearly five times its internally generated revenue. Niger State: Has several agricultural crops including Groundnut, Maize, Soybean and Rice, Livestock, Fish, and many minerals such as; Kaolin, Limestone, Granite, Clay, Silica, Gold, Glass sand, Granite, Graphite, Talc, Feldspar, Galena, Copper, Columbite, Marble, Iron Ore, Glass sand, Asbestos, Quartz, Gemstone, Tourmaline, Manganese, Kyanite and Mica.  With these resources mostly untapped Niger State generated internal revenue of N5.97bn in 2015 up 3.98% from 2014. Its monthly FAAC allocation in December 2015 was N2.91bn and its annual wage bill is about N31.2bn which is more than five times its internally generated revenue.[3][4][5][6]

Ogun State: Has several agricultural crops including Oil Palm, Raffia Palm, Maize, Rice, Cocoa and Soybean, Livestock, Fish and several  minerals such as;  Clay, Kaolin, Feldspar, Gemstones, Quartz, Granite, Mica, Silica, Glass sand, Gypsum, Limestone, Phosphate, Red Clay and Tar sand. With the efforts made by Ogun State to woo investors and companies to tap into its resources, it generated internal revenue of N34.59bn in 2015 up 48.42% from 2014. Its monthly FAAC allocation in December 2015 was N2.43bn and its annual wage bill is about N108bn which is more than twice its internally generated revenue. In 2015 Ogun state was one of the states owing worker’s salaries according to the NLC, however the Ogun state government refutes this claim. Ondo State: Has several agricultural crops including Oil Palm, Raffia Palm, Coffee bean, Maize, Rice and Soybean, Livestock, Fish, Gmelina Pine and several minerals such as; Granite, Clay, Gabbro, Charnockite, Quartz, Crude Oil, Tar, Salt, Glass Sand, Limestone and Coal. With these resources mostly untapped, Ondo State generated internal revenue of N10.09bn in 2015 down 16.05 % from 2014. Its monthly FAAC allocation in December 2015 was N3.58bn and its annual wage bill is about N48bn which is more than four times its internally generated revenue. In 2015 Ondo state was one of the states owing worker’s salaries according to the NLC. [3][4][5][6]

Osun State: Has several agricultural crops including Oil Palm, Raffia Palm, Coconut, Cocoa, Maize, Rice, Cotton, Coffee bean, Sunflower and Soybean, Livestock, Fish, Timber, Bamboo and several  minerals such as;  Gold, Laterite, Sand, Gravel, Talc, Feldspar, Kaolin, Aquamarine, Mica, Granite, Quartz, Clay, Dolomite and Beryl. With these resources mostly untapped, Osun State generated internal revenue of N8.07bn in 2015 down 5.46 % from 2014. Its monthly FAAC allocation in December 2015 was N2.38bn and its annual wage bill is about N22.8bn which is more than twice its internally generated revenue. In 2015 Osun state was one of the states owing worker’s salaries according to the NLC Oyo State: Has several agricultural crops including Oil Palm, Date Palm, Coconut, Cocoa, Maize, Cotton, Tobacco and Soybean, Livestock, Timber, Bamboo and several  minerals such as;  Tantalum, Laterite, Iron Ore, Quartz, Kaolin, Silmanite, Iron Ore, Granite, Marble, Limestone, Tourmaline, Aquamarine, Feldspar, Talc and Dolomite. With these resources mostly untapped Oyo State generated internal revenue of N15.66bn in 2015 down 4.11 % from 2014. Its monthly FAAC allocation in December 2015 was N3.01bn and its annual wage bill is about N49bn which is more than three times its internally generated revenue. In 2015 Oyo state was one of the states owing worker’s salaries according to the NLC.[3][4][5][6]

Plateau State: Has several agricultural crops including; Groundnuts, Tomato, Maize, Wheat and Rice, Livestock, and several minerals such as; Columbite, Monazite, Zircon, Kaolin, Dolomite, Limonite, Cassiterite, Gemstones and Clay. With these resources mostly untapped Plateau State generated internal revenue of N6.93bn in 2015 down 19.42 % from 2014. Its monthly FAAC allocation in December 2015 was N2.60bn and its annual wage bill is about N20.7bn which is more than three times its internally generated revenue. In 2015 Plateau state was one of the states owing worker’s salaries according to the NLC. Rivers State: Has several agricultural crops including Coconut, Oil Palm, Rubber and Raffia palm, Livestock, Fish, Seafood, Crude Oil, Natural Gas, Salt, Timber, Cane wood and few minerals such as Silica Sand, Glass sand and Clay. With these resources and a burgeoning upstream and downstream oil industry attracting associated oil service companies Rivers State generated internal revenue of N82.10bn in 2015 down 8.54 % from 2014. Its monthly FAAC allocation in December 2015 was N7.71bn and its annual wage bill is about N96bn which is N14bn more than its internally generated revenue. Surprisingly in 2015 Rivers state was one of the states owing worker’s salaries according to the NLC.  Sokoto State: Has many agricultural crops including; Groundnuts,  Tomato, Onion, Pepper, Gum Arabic, Pepper, Wheat, Maize and Rice, Livestock, and several minerals such as; Silica, Clay, Kaolin, Bauxite, Gold, Gypsum, Limestone, Hides and Skin, Phosphate, Salt and Feldspar. With these resources mostly untapped, Sokoto State generated internal revenue of N6.22bn in 2015 up 9.75% from 2014. Its monthly FAAC allocation in December 2015 was N2.75bn and its annual wage bill is about N16.8bn which is more than twice its internally generated revenue. [3][4][5][6]

Taraba State: Has several agricultural crops including; Groundnuts Cotton, Rice, Soybean, Feldspar, Quartz, Muscovite, Tourmaline, Tantalite, Cassiterite, Columbite, Graphite, Muscovite, Sapphire, Zircon, Baryte, Limestone, Galena, Gypsum,  Glassy Quartz, Tamarind, Magnesite, Bauxite, Pyrite, Garnet, Zinc, Lead and Salt. With these resources mostly untapped Taraba State generated internal revenue of N4.15bn in 2015 up 8.57 % from 2014. Its monthly FAAC allocation in December 2015 was N2.39bn and its annual wage bill is about N21.6bn which is more than five times its internally generated revenue.  Yobe State: Has many agricultural crops including Groundnuts, Rice, Tomato, Maize, Wheat,  and Gum Arabic, Livestock, Fish, and several minerals such as; Salt, Trona, Potash, Shale, Clay, Silica, Diatomite, Mica, Epsomite, Gypsum, Kaolin, Limestone, Tamarind, Bentonite, Marl, Quartz, Granite and Laterite. With these resources mostly untapped, Yobe State generated internal revenue of N2.25bn in 2015 down 36.53 % from 2014. Its monthly FAAC allocation in December 2015 was N2.44bn and its annual wage bill is about N18bn which is more than six times its internally generated revenue. Zamfara State: Has several agricultural crops including; Groundnuts, Maize and Rice, Livestock, Fish, and several solid minerals. With these resources mostly untapped Zamfara State generated internal revenue of N2.74bn in 2015 down 14.88 % from 2014. Its monthly FAAC allocation in December 2015 was N2.50bn and its annual wage bill is about N13.2bn which is more than four times its internally generated revenue. In 2015 Zamfara state was one of the states owing worker’s salaries according to the NLC.[3][4][5][6]

Given the plethora of resources spread across the states of Nigeria there is no reason for states to be so poor as to owe wages. It is necessary to interrogate the numerous cases of states not generating enough internally to pay salaries. Only one state is currently able to pay salaries from internally generated resources namely; Lagos State. The next state to hit that mark will probably be Anambra State which is currently covering 90% of its wages from internally generated revenue (IGR) and is growing IGR at the current rate of 29.32% having doubled IGR between 2012 and 2016.

The implication of the low revenue generation by the states is that most of them can barely sustain themselves without recourse to monthly federal subventions. Most states have had to take short-term bank loans to settle wages whenever there were delays or reductions in the monthly disbursements by the Federation Accounts Allocation Committee (FAAC). This is unsustainable.

Mr Dauda Garuba, coordinator of the Revenue Watch Institute and a revenue advocate while speaking to The Daily Trust Newspaper some time in 2013 said; “the state governments are simply too lazy to generate revenues internally because of the oil money they receive from Abuja every month. Because of the oil revenue they collect monthly, state governors are no longer serious in making money for their states.” Garuba described the situation whereby states depend heavily on federal subventions as unfortunate because each state has the potential to sustain itself. “It is unfortunate that the governors, particularly in the North abandoned agriculture. Every state has the potential to be self-sufficient only if the chief executive knows what he is doing,” he said. Mr Garuba’s position buttresses the point that people, organizations, states and nations do what they are rewarded for. If states and local governments are rewarded for doing nothing by receiving allocations then there is no incentive to industry, innovation and performance.

This paper seeks to expound the view that the laziness, lack of foresight, absence of endeavor and drive noted by Garuba can be corrected and reversed (very quickly) and State governors and Local Government Chairmen can become revenue earners if given financial autonomy. If you want to change behavior very quickly then change the performance measurement and reward system. Let the system reward people for the risks they take. With financial autonomy and resource control they would literally have to bake the cake using the resources available to them and pay taxes to the state and federal government as applicable. This would be a complete reversal of the current situation where many of them sit with arms folded waiting for a piece of the cake baked centrally with resources from other states to be sent down to them. This view is buttressed by studies in risk based performance management.

Risk-Based Performance Management (RBPM) is a strategic execution methodology, developed to enable entities (be they corporations, local governments, states or federations) to sustain strategy execution by integrating business strategy, performance and risk management. Core to Risk Based Performance Management (RPBM) is the understanding of ‘risk appetite’ and how the entity can operate “within appetite”. Building on existing and widely deployed methodologies, namely the Balanced Scorecard and COSO framework, Risk-Based Performance Management is a proven response to the performance and risk challenges presented in today’s

business environment.

Resource Control or Financial Autonomy inherent in a true fiscal federalism encourages local governments and states to own their choices, actions, inactions and decisions. They can pursue performance based objectives with the confidence that they are backed by the necessary resources. They are motivated to take the risks within their risk appetite and reap any associated rewards. They are motivated away from laziness and idleness because the direct link between actions taken and rewards received will take away any excuse for inaction. Taking performance management and risk management to the lowest level of government i.e. Local governments is the way to go. All the 774 local governments of Nigeria are endowed with resources to self-supporting extents. A reference to Investment Opportunities for Job Creation in Nigeria by FIIRO will give comprehensive guidance as to resources available in each local government and the applicable technology available to exploit those resources. What is missing is the impetus to exploit them, the necessity to take risk and the assurance that rewards will come to the successful risk taker, which financial autonomy will provide. Local governments should be given the responsibility for generating their own revenues and autonomy over resources in their local governments. A certain percentage of the revenues should be retained by themselves say 70% and 30% remitted to the state as taxes. The states having aggregated all taxes form local governments should retain a certain percentage say 60% for statewide capital programs, recurrent expenses, equalization fund to be shared to all local governments on the basis of population and then remit taxes of say 40% to the federal government. Government being closer to the people will be easier to hold accountable.

This concept is not new to Nigeria it was practiced in the past when the regional Marketing Boards held sway. The British colonial government established the Marketing Boards in Nigeria at the end of the Second World War in the 1940s. The Cocoa Marketing Board was set up in 1947, while the Groundnut, Cotton and Palm Produce Marketing Boards were established in 1949. The boards were established primarily to stabilize Nigerian producers` prices in order to eliminate the seasonal price fluctuations of the export produce. Other reasons were to provide funds for regional governments and economic development of the production areas and scientific research in agriculture; improvement of the quality of the crops through the grading system; and putting to an end a series of producer protests. [7]

This model was successful to a very great extent as the three regions developed comfortably from the proceeds of their resources; Palm Oil in the east, Groundnuts and Cotton in the north and Cocoa in the west. Those were the days of the groundnut pyramids which have since disappeared because of the scrapping of resource control.

                                                                         

References

1.      The Resource Control Movement in Nigeria by John Iyobhebhe

2.      Resource Control in Nigeria by Henrik2009

3.      Investment Opportunities for Job Creation by FIIRO

4.      Internally Generated Revenue at State Level in 2015 by National Bureau of Statistics.

5.      List of seventeen states owing worker’s salaries in Nigeria by Naijacamp.com

6.      Facts about Nigeria 35 out of 36 States cannot pay their Bills  by Grassroot development initiative.

7.      A Critique of the Establishment of the Marketing Boards in Nigeria in the 1940s by   D.O. Iweze

PwC's FORENSIC REPORT ON NNPC – A JOB WELL DONE

The PwC report on the investigative forensic investigation into allegations of unremitted funds into the Federation Account by NNPC, recently released by the Office of the Auditor-General of the Federation has generated a lot of discussion.  A key component of the interest has been the caveat included by PwC in its report, and the impact that it might have on the applicability of the findings in the report.

I have read some of the comments in the papers challenging the manner of reporting by PwC and the inclusion of the caveat.  I had initially dismissed some of these articles as being largely pedestrian and lacking in depth until I realized that some the writers have quoted “reliable sources” including in some cases senior partners in small and medium firms of auditors (SMP's). Could these partners in some of these small and medium firms of accountants then be this ignorant or was this a deliberate attempt to misinform the public? We know that the big four firms are sometimes seen as unequal competition. Either way, these comments are capable of undermining our noble profession that we have worked so hard to build. Hence as a seasoned accountant having trained with PwC myself years back and now running my own practice, I feel constrained to educate the public as well as my fellow accountants on certain basic reporting concepts provided by the International Federation of Accountants in its various publications.

What PwC stated in its report
PwC stated in its report that “the procedures we performed did not constitute an examination or a review in accordance with generally accepted auditing standards or attestation standards. Accordingly, we provide no opinion, attestation or other form of assurance with respect to our work or the information upon which our work was based.”

What is an Opinion, Attestation, Assurance?
According to the International Framework for Assurance Engagements contained in the International Federation of Accountants (IFAC) Handbook of International Quality Control, Auditing, Review, Volume II 2014 Edition Volume II (which is available to all accountants) an assurance engagement is one where a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject against criteria. The framework specifies that five elements exhibited by assurance engagements as three party relationship, a subject matter, criteria, evidence and an assurance report.  There are two forms of assurance engagements  based on the form of conclusions. Firstly a limited assurance engagement in which the accountant expresses his conclusion in the negative form for example  “Based on our work described in this report, nothing has come to our attention that causes us to believe that internal control is not effective, in all material respects, based on XYZ criteria”. Limited assurance is used for example in review engagements such as review of interim financial information. The second form is a reasonable assurance engagement in which the accountant asserts his conclusion in a positive form for example “In our opinion internal control is effective, in all material respects, based on XYZ criteria..” The Audit opinion is included in an Audit report.

IFACs Assurance Engagements other than Audits or Reviews of Historical Financial Information, defines Attestation engagements as an assurance engagement in which a party other than the practitioner measures or evaluates the underlying subject matter against the criteria.

Why I think NNPC did not contract PwC to provide Assurance 
An accountant cannot provide assurance until all five elements that I have enumerated above are present. From just a casual review of the report, I can conclude that a three party relationship (1.Practitioner:PwC, 2. Responsible party:NNPC, 3. Intended user:Auditor General's office),  existed and that there is a definite subject matter (Crude Oil revenues generated by the NNPC). I’m certain though that NNPC would have struggled to provide a clear criteria to PwC. For engagements reporting on compliance, relevant criteria would be things like applicable laws, regulations and contracts, those criteria have to exhibit all characteristics of; relevance, completeness, reliability, neutrality and understandability. From the PwC report, I can see NPDC did not provide access neither was Kerosene subsidy regulation clearly available. Limitations around access to NPDC would have limited the ability to generate complete reliable evidence so I can readily see why NNPC could not have contracted an Assurance engagement with PwC as they could not guarantee the presence of all five elements of Assurance engagements.


Why structuring the investigation as Forensic Audit makes sense
The free online business dictionary that I regularly use defines Forensic Audit as “The application of accounting methods to the tracking and collection of forensic evidence, usually for use in the investigation and prosecution of criminal acts such as embezzlement or fraud. It is also called forensic accounting.

I found that the US Public Company Accounting Oversight Board (PCAOB) Strategic Advisory Group panel discussion observed in 2007 that “Although forensic audits may examine financial reporting and internal control matters, the objective of a forensic audit is not expressly articulated in an established set of standards. Rather, users of forensic audits (e.g., audit or special investigative committees, management, and regulators) establish their objectives on a case-by-case basis.”

It therefore makes sense to me that the probable reason the engagement was structured by the Auditor General as a Forensic Audit which is a type of Non assurance engagement was to give NNPC the flexibility to establish its objectives for the PwC Forensic Accountants as is expected in an investigation of this nature.

What were PwCs Terms of reference?
The report quotes the terms of reference per their engagement letter of  5th June  2014 as follows:
a) Analyse and comment on submissions made by various parties in respect of  alleged remittance shortfalls.
b) Analyse all submissions made by key stakeholders in relation to these unaccounted funds
c) Produce an independent forensic investigation report

Given the enormous findings by PwC in this report despite obvious constraints, my personal view is that PwC adequately discharged their duties under the terms of reference given to them. This exercise should not be a one- off, but should be done regularly by them every few years and at least once during every administration perhaps targeting other areas not investigated in the current exercise. Indeed a Public Company Accounting Oversight Board (PCAOB) in the US November 2006 paper posited the idea of regular forensic audit as a way to improve detection of fraud at public companies and enterprises.  Indeed the new administration should re-engage PwC with wider terms of reference and with unlimited access and if so desired commission an “assurance” engagement.

Fuss over the Caveat …Much ado over absolutely nothing…
Accountants are in fact required to include such caveats when reporting on non assurance engagements. International Framework for Assurance Engagements paragraph 15 on 'reports on non-assurance engagements', states that a practitioner reporting on an engagement that is not an assurance engagement within the scope of this Framework, clearly distinguishes that report from an assurance report. So as not to confuse users, a report that is not an assurance report avoids, for example:

• Implying compliance with the International Framework for Assurance Engagements, International Standards on Auditing, International Standards on Review Engagements and International Standards on Assurance Engagements.
• Inappropriately using the words “assurance,” “audit” or “review.”
• Including a statement that could reasonably be mistaken for a conclusion designed to enhance the degree of confidence of intended users about the outcome of the evaluation or measurement of a subject matter against criteria.

I am convinced that all responsible Accountants worldwide producing forensic audit reports or any other type of non assurance report are expected to (and presently actually do) include similar caveats so as not to misinform the public. This does not take anything away from the content, value and applicability of the report themselves but only protects users in compliance with IFAC provisions.


Conclusion
In conclusion and in line with the terms of reference, readers of the report should be asking

a) Did PwC analyse and comment on submissions made by various parties in respect of alleged remittance shortfalls? The answer is an obvious “Yes”
b) Did PwC analyse all submissions made by key stakeholders in relation to these unaccounted funds? The answer is an obvious “Yes”
c) Did PwC produce an independent forensic investigation report? The answer is an obvious “Yes”

Given the views communicated by some senior audit partners in some of these SMP's, I think this underscores the need for continuous education on accounting, auditing and reporting and I  have cause to thank God once again for my quality training and background.

I believe this piece lays to rest the matter of the caveat which is in my view, probably a deliberate, needless diversion of the unassuming public away from the core issues raised in the PwC report - Issues that along with the passage of the Petroleum Industry Bill (PIB) should be on the fore-front of everyone’s mind at this time of dwindling revenues.

By Ijeoma Rita Obu (FCA)
Managing Partner 
IRO & Partners Chartered Accountants
Lagos
www.iro-accountants.com

MANAGING THE RISK OF ENTERPRISE NIGERIA- WHAT JONATHAN AND BUHARI NEED TO KNOW

As the Nigerian elections draw near it is time to look beyond the election itself to governance in the next four years. A May 27^th 2013 article published by This Day Live on its website and titled "Ministerial score card towards May 29^th" examined the performance of the current government of President Goodluck Jonathan by evaluating the performance of his ministries under the ministers, who are responsible for delivering on his transformation agenda.

The writer rated the ministries using a qualitative rating scale; ranging from the best performance of 'Good' through 'Above Average', 'Average but promising', 'Average' to 'Below Average' and 'Poor'. Reproduced below in table form is the rating assessment. I have taken the liberty of assigning numerical scores to his rating scale to enable a quantitative assessment.

S/N	MINISTRY	GOOD	ABOVE AVERAGE	AVERAGE BUT PROMISING	AVERAGE	BELOW AVERAGE	POOR
	Score	6	5	4	3	2	1
1	Aviation	6
2	Defence		5
3	Interior						1
4	Finance		5
5	Transport		5
6	National Plann.				3
7	Petroleum		5
8	Power			4
9	Trade & Inv.		5
10	Environment				3
11	Culture & Tourism				3
12	FCT		5
13	Special Duties	Not Decided	Not Decided	Not Decided	Not Decided	Not Decided	Not Decided
14	Communications & Technology				3
15	Education					2
16	Justice		5
17	Niger Delta					2
18	Labour				3
19	Youth Development					2
20	Foreign Affairs		5
21	Works			4
22	Agriculture		5
23	Information		5
24	Sports			4
25	Lands & Urban				3
26	Police Affairs					2
27	Water Resources				3
28	Health				3
29	Mines & Steel					2
30	Science & Tech					2
	Total = 105	6	50	12	24	12	1

Total Score of 105

Maximum scores obtainable= 180

Scaled score =58.33%

The majority of citizens eyewitness opinions (5 out of 9 commentators as at 28^th Jan 2015) as recorded by commentators on the article on This Day's site was that the assessment was generally fair and comprehensive overall. There were a few disagreements as follows; 2 out of 9 commentators felt that Education deserved a higher score, 1 out of 9 commentators felt that Mines, steel and solid minerals deserved a higher score and 1 out of 9 commentators felt that only Aviation had done well. The general sentiment was that ministers performing below average without substantiated reasons should be dropped from the cabinet.

My questions are the following; if we accept that performance rating of the Jonathan administration was 58.33% as at May 2013, what was the target and on what basis is that measured and evaluated? Are citizens measuring government on the basis of agreed performance contracts and targets? Did the citizenry have some input in the choice of performance measures? Were quality of life indices included in the key performance measures for each ministry? What is the quality of objective setting? Is the evaluation in line with performance indices earlier set? More importantly what is the explanation for variances and MOST importantly what were the identified risk factors and what plans were put in place to manage the risk inherent in achieving our corporate objectives? As we all know, "anything that can prevent you from achieving your objectives is a risk that must be managed".

Reproduced below are the top 15 Key performance indicators as disclosed in the 2012 National Planning Commission (NPC) performance Monitoring Report

For the reason that anything that can prevent you from achieving your objectives is a risk that must be managed, I visited the website of the National Planning Commission to find out how performance and risk are measured and managed. I was particularly interested in the department of Monitoring and Evaluation to see what early warning signals they are monitoring and evaluating to determine when triggers for key Risk Indicators are being pulled.

My first discovery is that no where in the objects clause is the measurement, management, monitoring or evaluation of risk mentioned. I have reproduced the objects clause below.

"Monitoring and Evaluation

The purpose of this department is to improve the availability, quality and dissemination of government performance information for accountability and policy improvement purposes.

The functions are as follows:

Develop and maintain a framework to support the monitoring, evaluation and reporting of government performance at the national and sub-national levels, in line with the national development goals and objectives; Monitor and evaluate government performance at sectoral level (to measure performance of government policies in each sector of the economy), institutional level (to measure performance of government institutions) and program level (to evaluate the effectiveness and impact of public programs); Develop and publish the Nigeria Country Report as the primary medium for the dissemination of performance information; Develop evaluation capacities across government at the federal and state levels to ensure that the quality, results, and

impact of programs and expenditure can be measured at reasonable cost;Collaborate with MDA's to develop results-focused, key performance indicators and clearly defined performance targets upon

which progress will be measured; Develop the data management system for the National M&E system, including data collection tools, identification of data sources, frequency of data collection and data transmission plan;"

I then reviewed the most recent National Planning Commission Performance Monitoring Report available on the website being that for 2012 to see how risk was reported. To my surprise again, in no section of the report was risk management addressed. To their credit, section 4 analysed the key strategic goals and the enabling conditions identifying KPI's but without identifying potential risk events and developing KRI's for them.

Risk management is an essential tool in tackling the uncertainty associated with any enterprise. Entities be they corporate organisations or nation states have always practiced some form of risk management, implicitly or explicitly. Enterprise Nigeria must be practicing some form of risk management, but it is clearly unstructured , not systematic, not holistic, not properly linked to performance and not integrated properly across policies and across Ministries, Departments and Agencies responsible for governance.

Nigerians are known to be very good at planning but not so good at implementation. From my review and analysis it would appear that Nigeria's main problem is a failure to Manage Risk Enterprise-wide and systematically..

MY RECOMMENDATION

Whoever wins this election should improve on the progress already made and the good work already done to date. This improvement should be by incorporating into NPC's object clause the enterprise-wide management of risk for Nigeria. Nigeria should deploy an Enterprise-wide Risk Management (ERM) framework and structure complete with three lines of defence. Ministries and ministers should also inherit Key Risk Indicators (KRI's) in addition to KPI's, which their performance should be measured against. If this is done we will have better achievement of targets and risks adequately mitigated, be they political risks, macro-economic risks, security risks, environmental risks, legal risks, social risks, financial risks, or regulatory risks et cetera,will would be routinely and properly managed preventing unwelcome surprises.

Author

Ijeoma Rita Obu, FCA, FIMC is the Managing Partner of Ijeoma Rita Obu & Co. (Chartered Accountants) and the CEO of Clement Ashley Consulting. For comments questions or enquiries regarding this article please send mail to robu@clementashleyconsulting.org or post a comment on her blog riskmanagementandperformance.blogspot.com

Bank of Industry (BOI) appoints Clement Ashley Consulting as approved Business Development Support Provider (BDSP) in the Zonal category

In a bid to address challenge of access to credit for SMEs, and to hasten the credit delivery process, the Bank of  Industry (BOI) has signed service agreements, engaging 122 Business Development Service Providers (BDSPs) to increase SMEs’ capacity to apply for and secure financing from the Bank.

Speaking at the event, the Managing Director/CEO, Bank of Industry, Mr. Rasheed Olaoluwa stated that this move had become imperative because even though SMEs  account for over 90% of the companies in Nigeria, account for half of the nation’s GDP, and provides employment for more than 30% of its populace, many SMEs have not been able to attract funding because of poorly packaged and non-bankable business plans and proposals submitted to secure funds.

He added that this strategic partnership with BDSPs was in furtherance of the Bank’s core mandate “of providing long-term financial and business support services to large, medium and small projects”. He also pointed out that this would also help the Bank fulfill its obligations towards the success of the National Enterprise Development Programme (NEDEP), of which the Bank is a key stakeholder.

Mr. Olaoluwa revealed that the selection process that brought about the 122 BDSP firms was rigorous and that the selected companies were placed in three categories, based on their capacity and preferred areas of coverage. BDSPs with a national coverage totalled 28, regional coverage BDSPs were 74 (of which Clement Ashley Consulting is one of the seventy four, and covering the South West, South South and South East zones), while state-focused BDSPs were 20 in number. "

If you are located in the South West, South South and South East Regions and wish to make any enquiries about access to funding please send mail to robu@clementashleyconsulting.org

Best Regards
The Business Development Team
Clement Ashley Consulting
017925490, 08080642478

Managing the Risks of Recruiting

Introduction

On the 15^th of March 2014, the Nigerian Immigration Service (NIS) carried out a pre-recruitment aptitude test nationwide. Over 500,000 (five hundred thousand) job seekers were attending these tests to compete for less than 5,000 (five thousand) vacancies. This means that the ratio of applicants to jobs was more than 100 to 1. At this test there were stampedes at several centres and as at the last count eighteen young Nigerians had lost their lives with scores wounded. Several others lost their lives in traffic accidents on the way to and way from the test venues. I surmise that there is a better way for the Government to recruit while managing the risks of recruitment.

The unfortunate stampede which led to the deaths of several job candidates seeking to join the Nigerian Immigration Service, is a tragedy on many levels and an avoidable one at that.

Firstly it is a tragedy for the families of the young men and women who died. Families that were hoping for these young people to come home with good news of a successful interview not to be called to identify their loved ones in the morgue.

It is also a tragedy for the image of Nigeria. The most populous country in Africa with the now (re-based) largest economy in Africa. It should not be seen to be failing to provide sufficient opportunities for our young people to be gainfully employed. The sheer number of candidates in the stadia was astounding and clearly indicates that a lot more needs to be done to create jobs for our school leavers. More importantly for the subject of this paper is the fact that the exercise was conducted without any regard for risk management.

I was moved while watching the news of this sad event to hear a traumatised victim asking why in this modern times the recruitment was done in such a manner. This is a question that is no doubt being asked up and down the country and lessons need to be learned.

Problem Statement

In the past government agencies and the Nigerian military and paramilitary services have seemingly held the view that candidates need to be seen to be screened. Note that I use the word screened (not interviewed). Following from this logic; to screen 500,000 you need to see 500,000 physically. The problem is that seeing 500,000 persons at the same time is a big risk. Asking 500,000 person to physically appear which involves travel even if not on the same day also involves huge risks. These are risks that the recruiter should manage and mitigate and not pass on to the hapless job seeker. The attitude of the Nigerian Immigration Service and its “recruitment consultant” seems to be “please come at your own risk”.

Previous Options

At this last screening and recruitment exercise the Nigerian Immigration Service actually used an online platform to receive applications and collect the application fee. After this the candidates were required to report at various stadia for written aptitude tests. The question is; “why stop the use of technology at application collection?” Why not use the online platform to organize online testing.

Clement Ashley Consulting's Solution

1. Use an online platform to collect applications- this saves time, manages the risks of travel as well as missing or misplaced applications as well as the risk of wrong recording of names and other candidate details. Also aids data mining and shortlisting.
2. Abolish the practice of collecting application processing fees from candidates responding to your job advert. This is not only unethical but abolishment also removes the risk of exploitation as well as profit induced risky practices and a risk prone mindset such as “the more the merrier”
3. Use online aptitude and job knowledge tests to screen and shortlist for further screening, this addresses the risk of looking further at persons who lack the basic knowledge and intelligence for the job. It also addresses the risk of travel, queuing and crowd control. Any concerns about the sanctity of online test can be addressed by Information Security methodologies.
4. Use online psychometric and personality tests to screen and shortlist for further screening and/or interview. This addresses the risk of looking further at persons with the wrong personality or mindset. It also addresses the risk of travel, queuing and crowd control and saves the time of the interviewers.
5. Use a recruitment software application to move candidates application down the recruitment funnel from one stage to another this saves time and money (the cost of personnel) and the need for physical file carrying with the attendant risk of manipulation.
6. Only invite candidates for final interview when the ratio is down to less than or equal to: five candidates per vacancy,, anything more than that is unreasonable.
7. Only carry out medical or other physical tests during or after the interview, if a pre-condition for employment then combine with final interview to minimize travel, cost of examination and queuing.

Clement Ashley Consulting recommends that job seekers be treated with respect. As part of quality control this proposed recruitment methodology should be audited regularly for compliance.

Benefit 1

Using this approach recruitment is faster. Marking of scripts that could take weeks will be accomplished instantaneously.

Benefit 2

Using this approach recruitment is cheaper. Only a few hands will be necessary to manage an automated recruitment process.

Benefit 3

Using this approach recruitment will be less risky for the applicants as travel, queuing and the need for crowd management will be reduced or eliminated.

Benefit 4

Using this approach the recruitment process will be transparent leading to more credibility for government agencies or other large scale recruiting organisations.

Summary

Technology based recruitment in the 21^st Century is a minimum standard requirement for large scale recruitments. Anyone reading this, will be forgiven for wondering why this paper is necessary.

Managing the Risk Within: Employee Fraud Prevention and Detection

Introduction

Fraud costs American businesses, large and small, a ton of money each year. In fact, according to the McGladrey report The Threat Within: Employee Fraud Detection and Prevention, fraud took a huge toll on American businesses, to the tune of nearly $1 trillion dollars, last year. The problem only seems to be worsening with the volatility of the economy. That’s why it’s so important to focus on prevention rather than trying to recover losses after the fact.

In Nigeria where data and statistics are scarce one can safely assume that Nigerian business are losing much more than that. In the last couple of years we have seen departments, units and entire businesses close down due to employee fraud and unethical behaviour. A few cases can illustrate this. A hospital had to close its laboratory because the laboratory technicians were no longer doing the hospitals work but were taking in 'unrecorded' work from other hospitals for a fee that the staff privately pocketed. Patients of the hospital who were used to a 3 day return appointment were now having to wait 3 weeks, meanwhile the lab was always stocked out of required materials previously purchased, and still unused, as far as the records showed.

The hospital could not cope and decided to close the laboratory. It laid off all the workers and now send their work to laboratories abroad.

You may have heard of workers diverting their employers goods in containers, diverting tankers of petroleum products or selling the employers goods worth hundreds of thousands of Naira without issuing official receipts. We have even heard of a case where all the fish in a fish farm mysteriously disappeared just before harvest. The list of such worker related fraudulent behaviour is endless. The Great American Insurance group who provide business crime Insurance coverage in the US, say that “Employee fraud costs companies a surprisingly large percentage of their gross revenues. With some employee fraud schemes spanning years, the results can be devastating to a company's operations and its financial results.”

Small businesses are even more vulnerable to employee theft because they lack the level of internal control and security that larger businesses often have in place. For these reasons, you need to work now to come up with an effective method for deterring employee fraud and theft.

Problem Statement

In the past we could rely on young people to learn ethics at home, re-enforced by schools and canonized by churches, mosques and religious institutions. This is no longer the case. Little Johnny the son of a reverend pastor and a teacher mother, 'hears' his father preach that stealing is a sin. He then 'sees' the same father dip his hands into the offering bucket. He listens to his mother teach that stealing is wrong but then he sees her bring home exercise books and pencils form the school for his private use at home. Johnny gets to university and his lecturers are not in class because they are busy running their private businesses during school hours. In fact some of his lecturers engage him to run errands for their business when his class should be holding. He obliges so that he can get a pass mark when exams for which they are not being prepared, come up, as they must.

Having passed through these experiences the grown up John graduates and because of his high IQ he passes your recruitment test and is offered a job. John who is about to resume at your company is the same person that switches on his TV set at home to see that some leader; political, corporate, religious or social has just been indicted for committing economic crimes. While the case is still on, he sees this same person receive national awards and traditional titles in recognition of his 'contributions' to his community and nation.

This is the practical lesson in 'ethics' that John has learned.

Previous Options

In many organizations, 'on-boarding' or 'induction' is all about getting the new employee to learn the ropes as fast as possible. The company trusts that their list of do's and don'ts as contained in the staff handbook is sufficient to guide the new employee as far as what is acceptable behaviour to the organisation is concerned. To make assurance doubly sure the new employee is asked to sign a copy of the staff handbook to acknowledge that he has read and understood the contents of the handbook. The company is satisfied that this aspect of his induction has been taken care of and they now concentrate on the 'business' of doing business itself.

Clement Ashley Consulting's Solution

1. Require Employees to Take Vacation
2. Train Managers and Employees to Spot Fraud
3. Implement Internal Control Systems
4. Create a System of Internal Audits
5. Conduct Background Checks on New Employees
6. Invest in Business Crime Insurance e.g. Fidelity bonds
7. Encourage anonymous whistle-blowing
8. Train Employees on Employee Work Ethics and Responsibility

Clement Ashley Consulting recommends that as part of induction, new personnel be taken through a course on 'employee work ethics and employee responsibility' in the context of the organizations operations. Having facilitated this kind of training before, we are sometimes shocked during pre-case quizzes at what employees ignorantly defend as acceptable behaviour, when practical case studies are being handled in workshops and training classes. These practical case studies give the employer the opportunity to work through myths and wrong beliefs and replace wrong values with the right ones.

We believe that this should not be a one-off exercise. At least once every two years all staff should have a refresher on workplace ethics with an emphasis on the discussion of industry specific case studies to reveal any new mendacious thoughts and beliefs, and nip them in the bud.

When training on work ethics for staff is combined with adequate internal controls, segregation of duties, independent audit and examination as well as a well designed reward and compensation scheme that is tied to performance management and appraisals, the company stands to attain competitive advantage over its peers who do not properly address the issue of employee work ethics.

Benefit 1

Using this approach training is focused is on corporate goals and objectives, providing the best possible environment for achieving them.

Benefit 2

Using this approach you will be able to identify any wrong interpretations of what is ethical and hence prevent unethical behaviour

Benefit 3

Using this approach you are able to build a core of ethical staff who can resist a 'renegade thinker'. It is well known fact that collusion can override the best of controls. Wide spread training on ethics for all staff, reduces the risk of collusion.

Benefit 4

Using this approach you are able to reduce operational losses due to employee related unethical activities. Training on employee work ethics pays for itself many times over in reduced operational losses.

Summary

Training your staff on employee work ethics and employee responsibility is something that can give your organisation competitive advantage. As everyone knows when something becomes scarce it becomes a source of value. With widespread corruption and unethical behaviour as the order of the day. Your organisation will reap enormous benefits form having an ethical workforce.