THE IMPACT OF EFFECTIVE INTERNAL CONTROL ON THE REVENUE GENERATION OF LOCAL GOVERNMENT COUNCILS

Introduction

1.1 Background To The Study

The most serious problem which local governments are facing now is inadequate funding. They (local government) cannot function properly as the third tier of government if it is not provided with adequate funds.

Local governments as a result of their status as subordinate governments depend on the state and central government for their funds. Local governments in developing nations like Nigeria are not given viable sources of independent revenue.

If local governments are to achieve their objectives, they should be well funded through internally and externally generated revenue which must be managed effectively. Revenue generation in Ankpa local government area is principally derived from tax imposition and tax is a compulsory levy imposed by government on individuals for various legitimate functions in the local government. (Olaoye, 2008), tax is a necessary ingredient for civilization. History has shown that man has to pay tax in one form or the other that can either be cash or in kind, initially to his chieftain and later on a form of organized government (Ojo, 2003).

No administration can be effective, unless it enjoys some measures of financial independence. Local governments has been developed over a number of years. Historically, the development of direct taxation even in the nation at large can be traced down to pre-colonial period under this period, community tax were levied on communities (Rabiu, 2004). Some other means of which the local government can generate revenue internally are;

Market taxes, and levies excluding any market where state finance is involved, bicycle, truck canoes, wheel barrow and cart fees, other than a mechanical propelled truck, on and off liquor license fees, slaughter slab fees, marriage, birth and death registration fees, signboard and advertisement permit fees etc.

Inspite of the above sources of revenue, the local government is still facing varieties of difficulties to source adequate revenue from federal, state and the internally generated revenue, such problems are wheel to the smooth running of local government administration.

They are the dishonesty on the part of officers collecting the revenues, such as cases of collecting the revenues, such as cases of printing receipts by the officers had been the major problem in releasing the expected revenues.

The machinery put in place for the collection of the revenue is very inadequate hence, most governments may not be able to collect at all which pose a lot of problem for the smooth running of the local government administration.

1.2 Statement Of Problems

Local government in Nigeria today are confronted with the problem of ineffectiveness as per internal generation of revenue which emanated from the following;

1. Embezzlement and fraud on the part of revenue collectors which is now the order of the day
2. Poor handling (management) of local government funds either individually or collectively.
3. Insufficient mechanism to solve the problem of finance generation by the local government.

One of the major problems of local government is the inability to determine an appropriate means of generating revenue

1.3 Objectives Of The Study

The aim of the research work is to access the effectiveness for internal revenue generation in Nigeria economy, using Ankpa local government area as a case study.

1. To study the uses of this revenue in the area as well as offering possible recommendations on how to overcome these problems and increase the revenue generation in the local government area.
2. To provide an insight into general attitude of people in the area towards generating revenue and the problems being encountered in revenue collection.
3. To provide necessary resources information for students research centre and institutions for further research work.
4. The researcher’s project would be useful to other researchers on similar topic as a guide towards ascertainment of their objectives.
5. To study and address the procedures for executing project in local government.

1.4 Significance Of Study

The significance of this study is to throw more light on the effectiveness of each local government to generate fund internally. Presently many local government in Nigeria are facing acute shortage of finance.

This problem is exercised even in Ankpa local government area. Many local government chairmen cannot pay the salary of their staff not to talk of embarking on meaningful projects that can have direct bearing on the life of the common people at the grassroot level.

The significance of this research work is to discourage the idea of local government depending only on the central government for everything. For any local government in any state in Nigeria that cannot generate fund internally to augment grants they are getting from the federal government would find it difficult to meet the effectiveness of the rural dwellers.

Although, the local government that is always at the way of the central government would be like beggar and it is said that a beggar has no choice. Therefore, for local governments to have enough financial background, there is need for generating fund internally.

There are a lot of challenges on our local government chairmen for not have been able to achieve much, despite the fact that the central government is giving the due of which they have not find a suitable solution or answer to.

The aim of this research work is not far reaching pressure but as an eye opener to the local government administrators who are facing the difficulty in running the administration of their local government effectively. They should be able to engage themselves in business such as local government supermarkets, mass transit, bookshop and pharmaceutical centre etc. this will enable them to generate fund that would keep the government functioning and stop depending on federal government solely.

The local government will also be able to execute some of their capital funding from the federal government and employment would set in.

Since the local government keep on increasing as Nigeria population increasing, it is very wrong for every one to think that central government can provide everything which is impossible for central government without internally generated revenue which is the answer to the problem from local government area.

1.5 Research Questions

Based on the statement of the objective of study, the researcher is out to answer the following broad questions.

1. What are the procedures for executing project in the local government
2. Are the local government fund utilized effectively
3. How many projects had local government executed in the past
4. What are the sources of revenue generation in local government
5. Does the local government have resources of finance?

The objectives of fiscal relations among units in a federation are;

1. To consist with nationally agreed income distribution goals
2. To minimize administrative cost and thereby, economize on scarce criteria.
3. To incorporate mechanisms to support public infrastructure development and its appropriate financing
4. To ensure that the macro economic management policies of central government are not undermined or compromised
5. To increased that economy of sub-national government by incorporating incentives for them to mobilize revenue of their own.

1.6 Scope And Limitations Of The Study

The constraints encountered by the researcher includes financial, time hazard and poor response from the respondents who were to answer the questionnaires was roughly handled, poorly answered with poor clarity.

1.7 Definition Of Terms

Finance:

These are the resources (money) used for a business or an activity and even projects. Finance is very important for the smooth running of any organization. As important as blood is to human body, that is how important finance is to the administration of the local government. So it is the life wire of the local government be that without it, nothing or no programme and project can be implemented.

Revenue:

The term revenue referred to the particular money which the local government receives from tax or from an organization.

We can term it to mean the money which enters the local governments account either on daily basis, monthly or yearly.

Revenue can either be internally generated in the local government. The ones which the local government generates by itself is regard as internally generated revenue, while those that comes from either the state on the federal government or through gift and donations are regard as externally generated revenue.

Control:

This is the power that is been exercised by some body or group of individuals to cause something to happen the way he or she went it to be.

According to Johnson (1991), defined control as the process by which managers ensure that resources are obtained and used effectively in accomplishment of a goal.

According to Henry Fayol, Control in conformity with plan adopted, and the instructions issued or principles established.

Internal:

This has to do with happenings within. i.e. when something is happening or existing inside the local government or (organization) without any interference from outside the environment.

Internal Control:

This are the mechanisms set up in within the local government to monitor the various operations in the local government or an organization.

Revenue Generation:

These are the various ways in which local governments or organizational sources their income. Local government can either generate their income internally or externally.

Revenue generation is a very important tool to every organization or local government, because this determines its survival.

Fund:

The term ‘’fund’’ can be defined, as the amount of money or resources which has been made available for particular progrmmes or projects in the local government or organization.