The frequent theft of public funds is mainstream in Africa, with Nigeria being one of the top nations to suffer from the negative impact of the corrupt practice.
Nigeria has lost hundreds of billions of dollars in the past 50 years to public looting, with the most recent fraud cases being the Petroleum Trust Fund =N=25 billion Naira case in 2011, the =N=17 billion Naira police pension case of 2017, the $6.8 billion dollars fuel subsidy case of 2012, the case of the missing $20 billion made from the sale of Nigeria’s crude oil between 2011 and 2012, and in the distant past, the $2.8 billion dollars missing oil money of 1977.
These diverse times in Nigeria’s history has shown how poorly the Nigerian government has tried to solve the problem of public theft, which has gone on to affect the standard of living of the people living in the country and the global image of Nigeria as a nation many years down the line and counting.
For a nation or government organisation that wants to solve the problem of public theft/fraud within its confines, it’s key to identify and understand the types of fraud risks before structuring solutions to fix them. Some of them are:
See Also: Why African Nations Are Poor, And Others Are Wealthy
1). Contractor Fraud Indicators
Contractor fraud is one of the common ways public funds are diverted to the organisation employees, friends, political allies, family members, and much more.
Different indicators and scenarios that play out in identifying a looming or existing contractor fraud are:
- Contractors that have no real office address, but are awarded contracts.
- Contractors whose office address is the same as an employee of the government parastatal, family member, or mutual business associate affiliated to the key employees awarding the contract.
- A very short interval in the time a contractor is paid for a contract for a certain amount and the time the contractor donates almost the same amount of money to a political ally, cause, or event.
- Payments that are made to the contractors by wire transfer instead of issued cheques because cheques may need to be submitted to a higher authority for approval.
- When any form of payments to the contractor is made without the standard approval process.
- When a contractor is paid upfront for a service or product to be rendered or delivered.
- When a contractor has a very close relationship with the local officials or employees of the organisation.
2). Procurement Fraud Indicators
This type of fraud is similar to the contractor fraud but is carried out on an immensely larger scale.
Different indicators and scenarios that play out in identifying a looming or existing procurement fraud are:
- When the finally won and awarded bid is far higher than the budgeted cost.
- When 80% of the bidding companies have never executed a similar project before, indicating that they may just be shell companies brought in to supplement the contract bidding process.
- When the bidding process is not advertised but kept private.
- When a contractor is awarded multiple contracts within one bidding process, without the sub-contracts been awarded to other capable independent organisations.
- When one or a very few contractors are constantly winning most types of related contracts across different government parastatals.
- When the number of recorded submitted bids are extremely small, in relation to how public the request for proposals was advertised.
- When contracts are awarded without a bidding process.
- When government parastatals fail to show records of bid histories and related documentation.
- When a contract is not awarded to the company with the lowest bid, without a reasonable explanation.
See Also: How To Make A Country Rich With The Right Trade Policy
3). Payroll Fraud Indicators
Payroll fraud has been a part of many government organisations since Nigeria’s independence, and they take so many forms ranging from ghost employees to nepotism, and much more.
Different indicators and scenarios that play out in identifying a looming or existing payroll fraud are:
- Less populated office premise in comparison to the total number of registered employees.
- Too many existing or former employees being related to current employees.
- Poor/inefficient unverifiable procedures for physical verification of current and terminated employees.
- Various employees sharing the same salary account.
- When salaries/cheques are mailed to the employees’ mailboxes instead of them picking it up at the accountant’s office.
- When multiple employees are sharing the same home address that is not an official staff quarter.
- When family & friends report only to each other at the office.
- Poor measures to ensure employees cannot sign-in for each other when they get to work.
4). Financial Fraud Indicators
While similar to the previously mentioned fraud indicators, financial fraud indicators are usually more direct and easy to spot when studied a little more.
Different indicators and scenarios that play out in identifying a looming or existing financial fraud are:
- When order issuing departments and accounts department do not arrive at the same figures at the close of work. For instance, the pharmacy department giving a client an order invoice of 5,000 Naira, only for the accounts to record that the patient paid only 4,000 Naira because that’s what they claim the patient got clearance from the pharmacy for.
- When expenses recorded in a department are unrelated to the department’s needs.
- When the record books or financial reports are incomplete or suddenly go missing.
- When the organisation’s activities are digitised but are suddenly using manual methods for extended periods of time due to the supposed inability to troubleshoot the problem early on.
- When too many large, round-figure volume transactions are manually documented.
- When current transactions entered into the ledger are back-dated.
- When there are too many bank accounts rather than ledger reports to show how transactions have been documented.
- When there are undocumented transfers from the organisation’s bank account.
- When the revert time for documents requested for audit or verification purposes begins to take too long.
See Also: How To Diversify The Nigerian Economy Successfully For Growth
5). General Fraud Indicators
While contractor, procurement, payroll, and financial fraud are the major fraud sources in organisations, there are still other general fraud indicators that should never be overlooked, as they’re still loopholes for the loss of revenues.
Different indicators and scenarios that play out in identifying a looming or existing fraud are:
- When employees work unusually longer/extra hours that they’re not paid for, especially when at times when people are not around.
- When there are little to no safety measures for critical organisation assets like materials, cash, supplies, etc.
- When the leadership ignores procedures required to get things done right.
- When there’s a high number of lawsuits filed against the organisation.
- When an organisation has been run by only one individual or group of people for 10 or more years.
- When part-time employees are prioritized over full-time employees.
- When there are rumours of corrupt practices.
- When the restrictions to be able to transfer money from the organisation’s bank accounts for the top management are little to none.
- When employees refuse to ever take leaves or time off from work and choose instead to remain overly dedicated.
- When non-official emails are used for official purposes.
From the above-listed fraud indicators in governments and even private organisations, creating a system that reduces the efficiency of fraud-related efforts is key to growing revenue and building up enough financial resources to facilitate economic development.
Some strong ways to frustrate fraudulent activities in government organisations are:
1). Digitize The Entire Workflow Of Every Government Organisation:
Digitizing the entire workflow means setting up a network-based environment or revenue management system where all the workflows regarding generating orders, making payments, generating receipts, recording data, and much more are all linked in one central system. When this is done, it ensures that every operation in the organisation is centralised, can be monitored remotely, and that the accounts can easily be reconciled since data is automatically recorded once an activity is done.
2). Make Use Of Blockchain Technology For 100% Transparency:
To understand what blockchain means, it is key to first know that a blockchain is a public growing list of records, called blocks, which are linked using cryptography. By design, data in a blockchain is resistant to modification, and so, any legitimate or illicit transaction can never be removed or modified.
When a transaction is recorded in a blockchain, the details of the transaction such as the price, asset, and ownership, are recorded, verified and settled within seconds. This process is 100% irreversible and is public knowledge. And so, it builds the ultimate transparency as while data cannot be changed, the person who instantiated any such transaction will be publicly seen and verified.
Every transaction on the blockchain is recorded and added in chronological order. So everyone’s activities are directly tracked in accordance with each other with no possibility of it being erased. Since the blockchain is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way, it is the most secure way to track activities in any government organisation.
Furthermore, the blockchain record’s authenticity can be verified by the entire community/organisation using the blockchain instead of a single centralized authority that could hide information.
While the blockchain technology was originally created as an accounting method for virtual currencies like Bitcoin, it is possible to digitize, program and insert any type of document or commercial application into the blockchain.
Some countries around the world like India are currently using blockchain to ensure full transparency across activities in government organisations.
See Also: How To Create 10 Million Jobs In The Nigerian Solid Minerals Industry
3). Multiple Key Unrelated Staff Members Should Have To Approve Cash Transactions And Amendments:
Whether the operations are run through a blockchain network or through the organisation’s normal computer network, every change that has to do with reversing a financial transaction or approving one should have to be confirmed by at least two key staff members with different roles in the organisation.
Every confirmation data should also be recorded, unmodifiable, and irreversible.
4). Provide An Easy And Highly Efficient Way For Employees To Report theft Or Fraud By Co-Workers:
There should be a system that makes the reporting of suspicious activities extremely easy. The access to the data on the reports should not be kept too private, as when a small circle controls information, it can easily be deleted or modified. The data on every report should be sent via a blockchain network so that it cannot be removed and can easily be verified in the event of an investigation.
See Also: How Nigeria Can Provide Security Of Investment For International Investors
5). Carry-Out Periodic Unannounced Informal Audits:
Unannounced audits at several intervals in a year should be carried out. The information on when such activity is to be done should be completely unannounced, and the audit team that is brought in to carry out the job should be a completely independent organisation with zero ties to either the parastatal in question or any staff members.
6). Build Up In-Depth Information On Every Employee, Office Holder, And More:
In-depth information on every employee should be gathered at the time of employment and long after employment. By doing this, it can be easy to decipher what employee is best for any given task or responsibility and also to determine which employees are most prone to corrupt/fraudulent practices. Some information to gather on employees and stakeholders and take keynote of are:
- A sudden devotion to work and working late even long after people have gone home.
- Lifestyles that are well above their salary levels.
- Their objections or agreeability to procedural changes related to financial, inventory, procurement, and supply issues.
- Their drug and alcohol usage levels.
- Their proneness to gambling, persistent borrowing or bad cheque writing.
- Their personal and official relationships with other employees.
- Having them declare their assets every 6 months.
- And much more.
By having in-depth information on the employees of any organisation, you can be able to determine who could be most likely involved in a certain legitimate or illicit activity going on in the organisation.
7). Prosecute Promptly:
There’s no better way to inspire fear and discipline than to prosecute guilty offenders as quickly as possible. When this is done, other people will tend to sit up quickly, lay low, and there’d be enough time to quickly beef up the security of the organisation with respect to fraud and revenue losses.
See Also: A Way To Solve Nigeria’s Electricity Problem And Drive The Growth Of Businesses
To Sum It Up
Theft of public funds is mainstream and will continue to create a bigger rot in the Nigerian economy if measures to control and prevent it are not implemented on an aggressive scale. If the Nigerian government will eventually curb fraudulent theft of resources from its confines, she must implement measures that don’t just go after guilty individuals, but that extremely frustrates the theft process and prosecutes guilty individuals.
About The Article
This is an opinion and analysis posted by Stan Edom, a Nigerian citizen and Editor In Chief of Startuptipsdaily.com.
The Opinion and Analysis section is committed to nation building efforts through empowering expert writers to air their views on the best ways to solve national issues and move nations forward.
If you’ll like to submit opinions and analysis like this to startuptipsdaily.com, please read the guidelines listed here.