AN ASSESSMENT OF THE APPLICATION OF FINANCIAL MANAGEMENT TECHNIQUES IN GOVERNMENT AGENCIES (A CASE STUDY OF KEBBI STATE WATER BOARD)

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

A well performing government agency is considered to be a prerequisite for the economic and democratic performance of countries. Recent government agency reforms have been attempted in individual countries to achieve a better performing public sector. As such, the organization of the public sector in OECD countries has been subject to some major trends and shifts during the last 20 years (Pollitt and Bouckaert, 2012,  Hesse and Toonen, 2015,  Halligan, 2017). New Public Management (NPM) is the best known example of these reforms and led to several changes of the public sector in many countries. New Public Management was a reaction to correct the irretrievable failures and moral bankruptcy of the ‘old’ public management (Hood, 2011; Keating, 2009). More in particular, New Public Management formed an answer to the lack of result and customer orientedness of public organizations that delivered services to the public or implemented policy (Verhoest et al., 2013). According to New Public Management doctrines public sector performance can be improved by importing concepts, tools and values from the private sector. Public sector organizations should be offered more managerial autonomy while being controlled by the government on the basis of results. By doing so public sector organizations are believed to be more likely to apply private-sector styles of management techniques, to be more customer-oriented and will be more likely accountable for results, leading to a higher efficiency and a better performing public sector organization. Therefore, one of the central arguments of government agencies is that more managerial autonomy may enhance the use of private-sector style management techniques by public sector organizations only under the condition of result control. This argument is based on principal-agent theory and asserts that because of goal incongruence (or conflict) and information asymmetry between the agency and its political principals, there is a considerable risk of opportunistic behavior by the agency (Pratt and Zeckhauser, 2011). Opportunism can take the form of adverse selection, moral hazard, and, in policy settings, can lead to a subversive or deviant policy implementation by the agent (Waterman and Meier, 2014). Following this line of reasoning, public managers of autonomous public sector organizations will have no incentives to use management techniques within their own organizations. On the contrary, management techniques may enhance the information for the political principal about potential shirking or deviant behavior of the agency. The concept of management techniques is however very heterogeneous, and captures a large variety of techniques. Sets of management techniques are frequently referred to as management systems or management capacity. Based upon literature (Pollitt, 2009; Ingraham et al., 2011; Flynn, 2017; Verhoest et al., 2010) four management subsystems can be distinguished: financial management, performance management, human resource management, and quality management. For each of these subsystems a number of techniques are proclaimed as good practice by government agency literature (Naschold, 2009; Pollitt, 2009). In this study, we focus on financial management. Whereby, following Verhoest et al. (2010), internal result-based allocation of resources to organizational units and the development of a cost-calculation system are considered to be representative for the use of financial management techniques within public sector organizations. Public financial management is the most important component in managing the internal components’ function of the new public management (Adamolekum, 1999; Hughes, 2003; Greener, 2013). Any government activity needs money in order to operate, and the ability to raise money and to spend it (financing and expenditure management) is what distinguishes the institutions of government with other parts of the society. After the financial administrations under many governments have been reorganized, public financial management, under new public management, have followed three main themes; promoting result-oriented management, introducing an accrual-based management accounting system, and the use of market-oriented mechanisms (Christensen and Laegreid, 2013). Therefore, the study examines an assessment of the application of financial management techniques in government agencies (a case study of Kebbi State water board).

1.2. STATEMENT OF PROBLEM

A major macroeconomic objective of every nation is to achieve efficient allocation of resources as well as stabilization of the business cycles. In the last two decades, Nigeria has initiated and implemented series of economic policies to assist in the better management of her economy. Parts of these reforms were aimed at improving the quality of the nation’s Public Financial Management (PFM) systems. PFM is a critical instrument in the implementation of economic policy, and it works by influencing the allocation and use of public resources through the budget and overall fiscal policy (Prakash and Cabezon, 2012). A well-functioning PFM system would provide the assurance that the funds released through revenue generation and appropriation processes as well as from debt forgiveness (cancelation) mechanism would be productively used in a transparent and effective manner. A well-functioning PFM system would also improve the use of aid as well as overall budget performance, and thus contribute to macroeconomic stability and growth. But there has not been proper application of financial management techniques in government agencies. Understanding the institutional constraints associated with the nation’s public financial management systems would provide the basis for informed economic policy. Hence the study examines an assessment of the application of financial management techniques in government agencies (a case study of Kebbi State water board).

1.3. AIMS OF THE STUDY

The major aim of the study is to examine an assessment of the application of financial management techniques in government agencies (a case study of Kebbi State water board). Other specific objectives of the study include;

1. To examine the financial management in government agencies in Nigeria.
2. To examine the stages and objectives of financial management in government agencies in Nigeria.
3. To examine the impact of application of financial management techniques on government agencies in Nigeria.
4. To examine financial management reforms in Nigeria.
5. To examine the relationship between application of financial management techniques and government agencies in Nigeria
6. To examine the application of financial management techniques in government agencies.

1.4. RESEARCH QUESTIONS

1. What is the financial management in government agencies in Nigeria?
2. What are the stages and objectives of financial management in government agencies in Nigeria?
3. What is the impact of application of financial management techniques on government agencies in Nigeria?
4. What are financial management reforms in Nigeria?
5. What is the relationship between application of financial management techniques and government agencies in Nigeria?
6. What is the application of financial management techniques in government agencies?

1.5 RESEARCH HYPOTHESES

Hypothesis 1

H0: There are is no significant impact of application of financial management techniques on government agencies in Nigeria.

H1: There is a significant impact of application of financial management techniques on government agencies in Nigeria.

Hypothesis 2

H0: There is no significant relationship between application of financial management techniques and government agencies in Nigeria.

H1: There is a significant relationship between application of financial management techniques and government agencies in Nigeria.

1.6. SIGNIFICANCE OF THE STUDY

The study will be of profound benefits because the financial function has become imperative to any organisation for assessment therefore this research work will be of importance to Kebbi State water board to identify and proffer solution to their problem financially. This study would also be of immense benefit to students and scholars who are interested in developing further studies on the subject matter.

1.7 SCOPE AND LIMITATION OF THE STUDY

The study is restricted to an assessment of the application of financial management techniques in government agencies (a case study of Kebbi State water board).

LIMITATION OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 OPERATIONAL DEFINITION OF TERMS

 Government:  is the system or group of people governing an organized community, often a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. 

Financial Management: means planning, organizing, directing and controlling the financial resources of the firm.