CRITICAL ANALYSIS OF VALUE FOR MONEY AUDIT IN PUBLIC SECTOR
1.1 BACKGROUND OF THE STUDY
Auditing has existed as long as man has been required to account for their transactions. A famous example is in St. Mathew’s Gospel (Chapter 25) when the rich man went on a journey and delivered his goods to a servant to look after them while he was away. On his return, he asked each of these servants to account for the goods with which he had been entrusted.
In the ancient ages, great land owners would not manage their own land, but would appoint stewards to manage their own land for them. The account of these land owners were checked by having them called out by those who gave them to those in authority (land owners) for hearing otherwise called stewardship accounting.
Auditing can be defined as the process of an independent examination of vouchers, internal control system and financial statements of an organization by a person or a group of persons called auditors so that the auditors can form and express opinion whether the vouchers, internal control system and financial statement, give a true and fair view of the organization.
Auditing is carried in both the public and private sectors. In the case of public sector, there are two foremost types of audit that are carried out namely: Regulatory audit and financial audit and the third type is value for money (VFM) audit which is yet to be fully integrated in most part of the world.
According to Bechberger (2007), it is observed in the past decades that in order to fight global corruption and strengthening transparency and accountability in public sector organization across the world, public sector organizations are now under pressure from the public to integrate value for money principles in their management practices.
Value for money according to National Audit Office (2007) means providing a service or a product in a way which is economical efficient and effective. Value for money audit is therefore, the type of audit that is used to asses the value for money system in any organization. It is an independent examination of the criteria (economy, efficiency and effectiveness) for the value for money to confirm that the organizations available resources are used wholly, necessarily, reasonably and exclusively so as to maximize progress towards the chosen objective.
1.2 STATEMENT OF PROBLEM
The research work “The critical analysis of value of money audit (VFM) and public sector performance in Enugu State centers on the major problems facing value for money audit in Enugu which includes:-
a. Problem of inconsistency in public sector objectives as a result of political and economic instability.
b. Diversity in accounting records or lack of uniformity in accounting records system among public sector organization.
c. The problem of cash basis rather than actual basis in public sector accounting.
d. The problem of insufficient emphasis of accounting and stewardship in public sector organization.
e. Inadequate implementation of laws in Nigeria.
1.3 OBJECTIVE OF STUDY
The main objective of the study is to analyze the effects of value for money audit on public sector organization while the specific objectives are:-
a. To ascertain the problem of inconsistency in public sector objectives which is as a result of political and economic instability.
b. To examine the problem of diversity in accounting system in public sector organization in Enugu State.
c. To determine the problem of using cash basis of accounting in public sector organization.
d. To ascertain the problem of insufficient emphasis on accountability and stewardship in public sector organization.
e. To investigate the problem of inadequate implementation of laws in public sector organization in Enugu State.
1.4 RESEARCH HYPOTHESIS
In order to achieve the objectives of this research study, the following hypothesis was formulated.
Null Hypothesis (Ho)
There is no significant relationship between economic and political instability and performance of public sector organization in Enugu State.
Alternative Hypothesis (Hi)
There is a significant relationship between economic and political instability and performance of public sector organization in Enugu State.
Null Hypothesis (Ho)
There is no significant relationship between cash basis of accounting and performance of public sector organization in Enugu State.
Alternative Hypothesis (Hi)
There is a significant relationship between cash basis of accounting and performance of public sector organization in Enugu State.
Null hypothesis (Ho)
Inadequate implementation of law had no effect on performance of public sector organization in Enugu State.
Alternative hypothesis (Hi)
Inadequate implementation of laws has been effect on performance of public sector organization in Enugu State.
1.5 RESEARCH QUESTIONS
1. To what extent does the inconsistency in public sector objectives which is as a result of political and economic instability affect performance of public sector organization in Enugu State?
2. How does the diversity in accounting records or lack of uniformity in accounting records affect the public sector organization in Enugu State?
3. Could the problem of the use of cash basis rather than accrual basis accounting affect public sector organization in Enugu State?
4. To what extent does the insufficient emphasis on accountability and stewardship affect public sector organization?
1.6 SIGNIFICANCE OF STUDY
This research therefore aims that value for money audit will be relevant in the public sector because of the special needs for government organizations to demonstrate their accountability and their regards for economy, effectively in the use of public funds and other resources. Value for money auditing is particularly appropriate for any organization whose activities cannot be judged solely by their contribution profit.
a. Budgeting and budgeting control
b. The development of management information system necessary to plan, cooperate and control an organization.
c. Human resources management (that is planning procurement appraisal) construction procurement and utilization of physical asset such as property, plant and equipment.
1.7 SCOPE OF STUDY
This work is restricted to Enugu State Water Co-operation; this work will enlighten them on how to achieve their goals with a minimum cost.
1.8 LIMITATION OF STUDY
The limitations involved in the course of this research includes hostility and non co-operation on part of executive respondent unwilling to disclose their necessary and vital information or document which they felt it will be detrimental to their business. Also the financial implication was very high and this imposed certain restrictions. The constraint of time was also a limiting factor as one the areas of interest were not covered as they would have been adequate.
1.9 DEFINITION OF TERMS
Value for money: Providing a service for a product in way that is economical, efficient and effective.