Data relating to fiscal discipline, transparency in public
administration, if adequately disclosed are indicative of conscious
public administration. This is an issue that perturbs all well meaning
researchers when describing scenarios in the transition country such as
Nigeria. This study forces a reflection upon a FRA case study
implemented in the Brazilian environment which was institutionalized and
through the exercise of power, inculcated the control culture, thereby
reducing abusive spending that used to be in detriment of government
2 PROBLEM STATEMENT AND RESEARCH QUESTIONS
In the Nigerian public administration context, prolonged military
rule and rarely challenged and unchanged actors maintained powers in the
hands of few people. These people were influenced by so-called
contractors whose projects generated over-spending or abusive
dispensation of government projects that in turn accumulated
inadmissible state debts. Also, there are cases of the rewarding of the
cronies, this case sincerely enables the said contractors to execute
projects the way they want it in the detriment of the public without
being brought to law.
How then is the Nigerian Constitution prepared to guide against
this abuse of the public scarce resources apparently reflected in the
budget? According to NBNP (2006), in some cases, government agencies
like the Economic and Financial Crime Commission (EFCC), and the Code of
Conduct Bureau publish reports of their investigations but since certain
public officials are immune of criminal prosecution, the agencies are
handicapped. Even though the Constitution assigns roles and
responsibilities to the different arms of government in the budgetary
process, it does not clarify the role of the various departments in the
executive in budget preparation and implementation. This may be
partially unfounded if one says that the conceptual and legal framework
for transparency is lacking. Therefore, what shows public management
efficiency on one hand, may signal a lack of effectiveness,
enforceability and accountability on the other hand. As such, based on
the aforementioned, we raise the following questions: a) How does the
FRA serve as a surveillance tool to provide for the nonchalant attitude
of some public administrators that results in Fiscal irresponsibility?
b) How does the FRA measure administrative rascality for spending above
the revenue in all spheres of the governments? c) What is the control
repercussion on the progression of the debts of the municipal or state
government? and d) How can the experience (Fiscal Responsibility Act) in
Brazil be benchmarked?
3.1 Information Asymmetry in Nigerian Public Administration, any
It would be wise this time to meditate on the question of the need
for homework first before we talk of institutionalization of control
through FRA, taking some stands from a research work presented by Apampa
& Oni (2005). They mentioned that the main problem of management in
public administration in Nigeria is information asymmetry. Thus, one
would say that it is a starting point for putting control into place in
Nigerian public administration. In so far, same authors evidenced that:
a) macro-economic objectives and projections are rarely circulated
to agencies of government and are not made available before budget
approval, but rather published after the budget;
b) The fiscal policy objectives and strategies contained in the
budget do not include information on how the government intends to
attain these strategies;
c) No mechanism that consolidates comprehensive information of
fiscal activities of local, state and national governments.
d) Information on extra-budget activities is not available so this
makes it easy for government to overshoot projections;
e) Civil society participation in the budget process is weak and
the capacity to interact with the public does not exist as information
to create this link is never made available.
f) The data in planning, research and statistics departments of
various government agencies are not accessible or available;
g) Not all off-budget funds are open to public audit because they
fall outside the mandate of the Auditor General.
3.2 Data about the Local Government and State Debts in Nigeria
In the past, corruption in Nigeria has led to government distrust,
corroded federal allocations from its efficient dispensation. Moreover,
it prejudiced the budgetary compliance and reduction of faith by fellow
In other words, inefficient public management which inherited
unquestioned planning tools resulted to what President Yar'Adua
called 'empty treasury' phenomenon. He continued, "If
what I have been hearing from some states is correct, it would seem some
of you (Governors) may spend the next four years managing debt. Such a
situation is unacceptable" Allafrica (2007).
3.3 Attempt to Implement a Fiscal Responsibility Bill
We are not unique persons to be concerned about accountability in
the Nigerian public administration. In 2004 an attempt was driven
towards introduction of the bill. It was by then named the fiscal
responsibility bill. The bill which was first initiated by the former
Minister of Finance Ngozi Okonjo Iweala, was very much welcome however,
due to time space the project was not taken ahead. She left the
government when the ideal was under maturity.
3.4 New Paradigm on Imbibing Fiscal Behaviour
Globalized businesses, stimulated by the Multinational Companies
(MNC) transferred their management technologies to the transition
economies as a way of contributing to efficiency which in one way or the
other have been copied by the national companies. Thus, in order that
these companies would operate so as to meet up targets, the public
administrators would have to do their part, in other words, reduce
taxes. This so far has not been counter-balanced in return for tax paid
by infrastructure as a result of immature fiscal behaviour.
The Fiscal Responsibility Act therefore, is meant to redirect
governments at all levels to imbibe a fiscal behaviour that will promote
prudence and sound financial management in the system. Prudence in the
sense that public managers use the public money as if they are using
their personal monies, by contracting debts when they know that they
would have revenue to offset their bills and not think of living it for
the forthcoming regime.
3.5 Institutionalisation of Control through FRA
Institutions consist of cognitive, normative and regulative
structures and activities that provide stability and meaning to social
behavior. Institutions are transported by various carriers--cultures,
structures and routines--and they operate at multiple levels of
jurisdiction. The cognitive elements include widely held beliefs and
taken-for-granted assumptions that provide a framework for everyday
The normative elements incorporate habits and informally sanctioned
social obligations including rulings of legislatures and enforcement
mechanisms of the regulatory agencies. (Scott, p. 33, 2001). According
to empirical study published by (Imoniana, 2006) there is no rules of
thumbs for the customization of control systems. Therefore, considering
different cultures and control environments, this does not as yet being
given solutions. Thus, best practice such as ISO (2000) would serve as
control and surveillance tool and force actors to be cultured for the
world standard. Additionally, the success case implemented by the
Federal Republic of Brazil if taken as a benchmark would direct Nigeria
in the way to resolving a problem that retards economic development.
4 RESEARCH METHODOLOGY
The methodology chosen for the study was a case study
interpretative one. It has an element of interventionist approach into
the public administration in Nigeria by adopting the Brazilian FRA.
According to Godoy (1995) the strategy of case study is adopted to
give answers to research questions of which there are no much
possibilities of control on the phenomenon studied.
In consonance to this approach Yin (1990) states that to use the
case study approach, certain items must be elaborated so as to sustain
the direction for the investigation process, they are: research
questions, study presuppositions, unit of analysis, linking data to
presuppositions and criteria for interpretation of data.
Yet according to Walsham (1993): ... Interpretative methods of
research start from the position that our knowledge of reality,
including the domain of human action, is a social construction by human
5 CASE OF BRAZILIAN FISCAL RESPONSIBILITY ACT
The advent of the Responsibility Act No 101/2000, enforced
mechanism that permit other spheres of the government to monitor and
give punitive measures on the Mayors, Governors and President, who
commit fiscal irresponsibility. This emerges another control strategy to
manage increase in revenues for the local governments not to talk of
stabilization of expenditures.
As per Moura Neto & Palombo (2006) responsibility in the public
management means action plan and transparency which envisages
equilibrium in the public accounts through compliance with targets and
expected results between expenditures and revenue and the obedience to
the limits and the stipulated conditions to renounce revenue so as to
make expenses and indebtedness by assuming debts, thus generate credit
operations, guarantees, etc.
The FRA contains a set of rules with the core objective of
committing all tiers of government to a well-defined and structured
economic regime which would ensure economic growth and maintain economic
stability. It entails: a) Institutionalizing sound and prudent
management of public resources; b) Ensuring better coordination of
fiscal affairs among the federal, states and local governments; c) Full
transparency and accountability in the management of public resources;
d) Making government spending fully cost effective.
5.1 Basic Structure of the Brazilian Fiscal Responsibility Act
The responsibility act sets out a general framework for budgetary
planning, execution and reporting that is applicable to all levels of
government. Through consultations with states and councils, the FRA set
general targets and limits for selected fiscal indicators for all tiers
of the government administration with specific sanctions for
non-compliance, Brazil (2000).
The basis on which FRA is anchored is four fold, being: Planning;
Transparency; Control; and Accountability. (i) Planning--in that all
should be budgeted for, and all payments appear as scheduled, (ii)
Transparency--in that it should appear black and white in the records,
and the systems used have to provide for dissemination of such
information to the general public in a timely manner through the
egovernment. (iii) Control--internal control procedures that provide for
checks and balances and monitoring procedures and at the end, leaves an
audit trail. (iv) Accountability Answers the question concerning who is
responsible, or better say, how is it accounted for by the public
managers based on the Law.
The actions for which plans have been draw require for transparency
and it is guided by the Law of Budgetary Directives (LBD). In general
terms, it establishes the rules for the elaboration of the budget,
fiscal targets in which revenues and expenditures are specified
including the results in a primary and nominal values stated and in the
final analysis debt statement for the period. This directives provides
for the review of the previous year forecasts that include its
estimations and compensations and also provision for fiscal renounces
and a little margin for expansion of emergency expenses.
In terms of actions to renounce revenues by the governors, the FRA
has in its Article 14 an indication that, all concession or amplified
benefits must be accompanied by an estimation of its impacts covering
three year period on financial budget, and must be in agreement with at
least one of the following conditions: a) will not affect the fiscal
targets already stipulated in the LBD; or b) is accompanied with the
compensatory measures by means of increase in revenue, resulting from
increase in taxes, elevation on basis of calculation of the current tax
and or creation of new taxes.
The act provides for a limit of the creation and maintenance of
expenditures. An item of great characteristics in a transition economy
is the sum relating to employee payroll or other employee expenses. In
case of Brazil, the limit for employee expenses is 50% of the Gross
Revenue (Current) on the federal level and 60% on the state and
municipal levels. However, in the case of a lesser value in relation to
the previous year, the governors are authorized to increase the current
spending by 10%.
Another important feature of the FRA is, it fixed a limit for the
stock of debt as a percentage of the Current Net Revenue for every
sphere of the government, and also as applied to every government entity
all over the federation with their maximum limit. While we mention the
ceilings and or excess of spending in the government departments, the
Federal, State and Municipal governments are prohibited to realize any
credit or funding operations internal or externally.
As in Figure 1 below, the construction of the State Budget takes
into consideration the FRA as supported by the Budgetary Law (BL) which
establishes priorities for the regime.
[FIGURE 1 OMITTED]
In this diagram we would observe that for any item to feature in
the budget it has to be a problem (electoral promises), say curbing
sexually transmitted diseases (Gonorrhea), in this case, the Public
Manager responsible for the program should be the Minister of Health in
the Federal level. All actions taken (implemented, returns) are within
the knowledge of this manager. This program thus, receives budgetary
allocations and during its implementation it receives a control and
monitoring procedures from the Law of Budgetary Directives (LBD) which
is elaborated on annual basis. This in turn is a breakdown of the Medium
Term Expenditure Framework (MTEF) which is a Pluriannual Plan that is
elaborated every four years. Normally, the government coming into power
submits it for appreciation as soon as it is voted in by the end of
November, so that it could be discussed by the Congress and be voted.
This should be operational by January when the regime starts since it
would be the basis for spending. In the State level Governor and
legislators of the state also have to pass a balanced budget, the same
happens on the municipal level when budgets are passed, all take into
consideration the FRA.
[FIGURE 2 OMITTED]
If we take for example the yet the Ministry of Health as in our
analogy, in Figure 2--there is a Budgetary proposal submitted to de
Secretary of Economics and Planning (that consolidates all budgetary
proposals) for the Government of Sao Paulo State, for the Secretary of
Health in the year 2005. In this case, it has as a Budgetary Unit to
implement a government Programme for production of cheap medicines for
the poor. It is important to note that indicator that would be used to
monitor this programme is the quantity of medicines produced and
according to the said proposal the target is 3.000,000,000 units and the
amount budgeted is R$ 142,761,751.00
Therefore, all allocations would be recorded into this account,
procurements, expenses, salaries, etc. It is important to observe that
the public administrators who manages the Budgetary Unit (Cost Center or
Call it Result Center) have certain liberty to control their allocations
in such a way that all approvals heads towards the compliance of the
5.2 The use of Information Technology
The brain behind the successful implementation of the Brazilian FRA
is the SIAFEM systems. It is an Integrated System for State Financial
Administration, large governmental Management Control System developed
by the Brazilian Federal Data Processing Services Center (SERPRO) aimed
to enhance and also harmonize the control models for the recording of
accounting transactions, the budgetary execution, financial and property
management in an integrated format, thus reducing costs, increasing
transparency, efficiency, effectiveness in the management of public
resources. Enhances the availability of the government accounts,
accessible to all organizations, be it for internal control purposes,
external control, representatives from the House of Assemble or the
The system is based on the Federal Law no. 4.320, of 17th March
1964 that institute general procedures for the elaboration of financial
statements for the, budgetary, execution and control on the federal
level, the States and Municipalities. (Fazenda, 2007).
As in the SIAFEM SYSTEM, it requires a decentralized browsing and a
direct recording of budgetary unit's transactions without other
users' interference. During implementation of the system some
officials became very dissatisfied with the new system because part of
their knowledge would be inscribed into the SIAFEM processes and they
would be left to carry out only unskilled routine tasks Humes &
Upon implementation of the system, data accounting entries were
made through the following documents: Appropriation Note (AN), Credit
Note (CN), Encumbrance Note (EN), Book-Keeping (BK), Programming for
Disbursement (PD), Bank Order (BO) and Receiving Note (RN) when entered
updates the SIAFEM directly.
It is imperative to note that all financial resources of diverse
origin are deposited into the State Account, Unique Account of the State
from which all monies for payment of expenses are withdrawn.
6 EMPIRICAL ANALYSIS
Therefore, as for reflection, four key analytical themes are
synthesized from our empirical work, and these are discussed as follows.
6.1 Matching of Budgetary Information with Execution and Control
In Nigeria the budget is classified by programme level line items.
Revenue is arranged by type and expenditure allocated by ministry or
department; and capital expenditure by sector and programmes. In Brazil
it is government programme that takes the lead, be it in case of revenue
allocation of type of disbursements and evidently the action programmes
for capital expenditures with its controls indicators given as a guide.
6.2 Impact of FRA on the revenue and debts of the States and Local
In order that one would visualize the detailed effects of the
Responsibility Act on the use of the federal and state allocations to
the municipalities of Brazil it is necessary to detail the accounting
and financial aspects of Income Tax, Service Tax, Property Tax, Rural
Taxes, etc. which is not the intent of this paper. Thus, in Table 1
below we bring the figures relating to the compliance of debt
In Brazil, the 27 states (including the Federal District) and 5,559
municipalities and together account for over one-third of total
government spending and revenue collection. States and municipalities
also account for almost 40 percent of the public sector's net debt
stock. Revenue mobilization capacity is concentrated in the more
prosperous states and municipalities of the South and Southeast, and
some equalization of expenditure capacity has been pursued through
mandated revenue sharing. Political and administrative decentralization
are also sizable. Each sub-national jurisdiction has its own
directly-elected legislature and executive branches, as well as an
independent judiciary. The federal government has limited control over
sub-national tax administration; budget formulation, execution, and
oversight; and wage and investment policies (Afonso & Mello, 2000)
Thus, analyzing the data about the relationships between
Consolidated Debts (CD) and Current Net Revenue (CNR) in the year 2000,
the Brazilian States were within the framing of the FRA in their debt
limits during the period. In 2001, twenty two states, and in 2002 and
2003 nineteen federal units presented indexes that were in compliance
with the legal rules.
6.3 Legitimization of the Actors
In this regards, legitimization of the actors through a
consolidated neo-cultural system whereby responsibility is established
and compromise determined may be the solution. So to say that lack of
compliance would be punished. That is, the legislatures would have to
take it upon themselves to enact the FRA bill of which if implemented
Nigerian will begin to trust themselves from the examples coming from
the government. Something important worth mentioning is, as different
from the Bill proposed by the Former Minister of Finance, that
concentrated on the Federal level, the Fiscal Responsibility Act (FRA)
impacts on the Federal, State and de Local Governments.
6.4 Capacity to implement FRA
In the Brazilian Case, implementation started from the National
Congress, by voting the Fiscal Responsibility Act. In effect, the
Federal budgets, States and Municipal budget were constructed following
the rules of the Act. Thereafter the budgetary execution also followed
the same suite.
Thus, one would expect that the same steps be benchmarked from the
Brazilian counterparts. What facilitates the implementing procedures is
the federal government style that also reins in Nigeria which is seen as
a positive factor.
Notwithstanding the legal basis which has to be developed, the IT
& IS infrastructure looks ripe enough to house system such as SIAFEM
integrated system implemented in Brazil to back government at all tiers
to assist in in-building monitoring, control procedures and control
6.5 Remarks on questions posed
How does the FRA serve as a surveillance tool to provide for the
nonchalant attitude of some public administrators that results in Fiscal
irresponsibility? With FRA, there is always someone responsible for
every transaction (according to the Responsibility Act) imputed into the
internal control system and is propagated to all sorts of financial
How does the FRA measure administrative rascality for spending
above the revenue in all spheres of the governments? There are punitive
measures for noncompliance of the act. They are stringent measures
hailing from loss of mandate to confiscation of personal properties. In
general, to the extent harm has been made to the public coffins.
What is the repercussion of control on the progression of the debts
of the municipal or state government? The repercussion is a great remedy
to issues concerning public administrators who make debts for others to
pay. Thus, lack of trust on the public administrator in the
municipalities that are normally close to the populace becomes thing of
the past. This brings a sense of belonging to the public, the investor
gains security and the intending ones gaining confidence in the public
and the society at large.
Can the experience (Fiscal Responsibility Act) in Brazil be
benchmarked? No doubt about that! Brazil went through a similar
environment where people were looting the federal coffins. With the
implementation of the FRA accountability is being call to place and one
(in the federal, state and municipal level) can always prosecute any
public official who misuse his office in detriment of the general
As far as in democratic transition economy in which one would
expect that the executive decisions acts in the direction of social
influence, involving societal voice, accountability reform, enhance
fiscal responsibility, propagate social control and sensitize the
population as regards internal and external controls, in order not to
act contrary to the legislatures, the leaders have to give example, need
to take the lead in the compliance with the rules and regulations.
The Brazilian FRA enacted in February 2000 was implemented in such
a form that it establishes norms that orientates and bettered the fiscal
responsibility and the management of public resources. Within its
control mechanisms were contemplated steady increase in revenues to
match a continuing creation of expenditures not to mention fiscal
renounce of expenses, stabilization of employee expenses and debt
Fiscal Responsibility Act when implemented would discipline public
administrators at all levels therefore, this discipline would directly
reflect upon the culture of the society that no doubt would begin to
reflect on all data that sums up Nigerian classification in Transparency
International systems, therefore, it would be able to compete with
countries with a reduced risk level arising from administrative
Finally, if we signal that what remains unaddressed is the
political determination, but considering the political scenarios and
trends at a glance, one would risk mentioning that the former government
has laid a good foundation for FRA implementation. We imagine that the
destiny of the country is in the hands of the legislatures and with the
hope given by the new government; one is expected that Nigerian has a
fertile land to implement such Act.
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Joshua Onome Imoniana, Universidade Presbiteriana Mackenzie, Sao
Maria Thereza Pompa Antunes, Universidade Presbiteriana Mackenzie,
Sao Paulo, Brazil
Luiz Carlos Jacob Perera, Universidade Presbiteriana Mackenzie, Sao
Fabiano Guasti Lima, Universidade de Sao Paulo, Ribeirao Preto,
Dr. Joshua Onome Imoniana earned his Ph.D. at Universidade de Sao
Paulo, Brazil in 1992. Currently he is a professor of Control Auditing
and Management of Information Systems of the Pos-Graduation Program in
Accountability Science at Universidade Presbiteriana Mackenzie in Sao
Dra. Maria Thereza Pompa Antunes earned her Ph.D at Universidade de
Sao Paulo, Brazil, in 2004. Currently she is a professor of Methodology
and Financial Analysis in the PhD Accounting Program at the Universidade
Presbiteriana Mackenzie, Sao Paulo, Brazil, where she also serves as
Chair of the PhD Accounting Program.
Dr. Luiz Carlos Jacob Perera earned his Ph.D. at Universidade de
Sao Paulo, Brazil in 1998 and did his postdoctoral work at Universite
Pierre Mendes France, in Grenoble, France. Currently he is a professor
of Capital Markets and Financial Instruments of the Pos-Graduation
Program in Accountability Science at Universidade Presbiteriana
Mackenzie in Sao Paulo, Brazil.
Dr. Fabiano Guasti Lima earned his Ph.D. at University of Sao
Paulo, Brazil, in 2004. Currently he is a professor of Risk Models in
Finance and Accountability at Universiadede Sao Paulo, Campus Ribeirao