Why is local government finance important? Is the most asked questions that requires a good detailed answer. The funds of local government councils are administered by the councils’ main officers. Financial management is concerned with the effective use of finances. It is a means of periodically displaying and determining the financial situation of the government or business.
Financial management may be thought of as a cycle of actions, as depicted in Figure 1. The goal of this activity cycle is to guarantee that resources are allocated and managed in such a way that they have the most positive influence on overall service objectives.
What is the control measure available in Nigeria local government finance
The handling of available financial resources is frequently a major cause of worry. In general, a variety of ways to effective financial management are accessible. However, the technique to be used must take into account the unique character of the project, its surroundings, goal, and the audience it is intended to serve.
This is because adopting the “wrong” or “unpopular” technique for a specific project might entirely derail the effort.
The following are some of the ways and control measure available in Nigeria local government finance;
Use of Audit alarm
A preventative approach of warning the proper authorities or the public about unauthorized financial transactions or misappropriations that might result in the loss of money or income intended for a project is called an audit alarm. A member of the executive or the general public can sound the audit alert.
This is often carried out whenever there is a suspicion of fraud in the handling of monies intended for public benefit. Every time an audit alert is raised, a full-scale audit exercise is often conducted to determine the scope of the fraud or irregularity. This procedure acts as a warning as a matter of prudence for those in charge of the money.
The frequent audit process enhances the beneficial work of audit alarm. An internal check on financial management is more or less a practice that may be considered a method via the use of audit. To make sure that the statement of account as recorded gives a truthful and fair perspective of all the transactions as throughout the investigation period, the books of accounts should be regularly and independently examined by qualified auditors who have been appointed.
The usage and management of money would be sane, prudent, and ethical if accounts were routinely audited.
The Use of Budget
In the system of municipal government, using a budget has a long history. The goal of budgetary control is to ensure that the financial management plan established with the board of management is carried out.
Control is achieved by keeping track of expenses before and after the commitment to avoid under- or overspending. A budget that is used wisely will help with successful financial management.
A budget is an activity plan that has been stated in monetary terms; such plans are frequently brief, generally lasting one year. When adopted, the budget becomes a mandate to generate the funds and make the expenditures specified therein.
Use of Rational Approach
One common paradigm for making decisions is the logical method. It is typically used in situations when effective and efficient resource allocation is required. Within the financial management community, the rational strategy is frequently referred to as “The Modern Financial Resources Allocation and Control Model.” Following are the requirements for using a logical approach for effective financial management:
- Determining the resources that are available;
- Selecting the goals for which the resources will be used;
- The identification of alternate courses of action for the accomplishment of goals;
- A comparison of the different strategies for achieving the goal(s);
- Establishing standards for making decisions;
- The distribution of resources;
- The establishment of necessary or essential performance evaluation, control measures, and feedback mechanisms;
To create budget projections, many businesses use the incremental budgeting technique.
The allocation and control of an organization’s financial resources are changed or adjusted gradually as part of an incremental approach to financial management in order to accomplish the intended goals.
Only small or gradual alterations or adjustments are necessary to fully operationalize a system of financial management and control once it has been adopted.
The incremental method starts with the budget for the current year and makes modifications to it in order to arrive at the budget for the next year. Sometimes the modification procedure is known as rolling forward an existing budget.
How does the chairman of a particular local government control the finance of the local government?
A local government chairman in Nigeria is constitutionally elected into power and also has a lot of both internal and external controls when it comes to finance. A chief executive officer of a local local government is in charge and also the chief accountant of the day-to-day running of government. He has the control backed by the constitution to control the finance of the local government.
Relationship between financial control and bank reconciliation
In order to prevent and identify fraud, bank reconciliations are a crucial internal control tool. By explaining the discrepancies between the cash balances in the accounting record and the bank balance position as stated in the bank statement, they also assist in the identification of accounting and banking problems.
The relationship between financial control and bank reconciliation is not far from financial audits and controls. it helps to identify any financial gaps or discrepancies and should be performed internally at least once a month and once per year by an external auditor.
The financial control measure available in Nigeria local government finance management plays great impact in tackling mismanagement of resources and abuse of power by Nigeria local government administrators. The above listed measures are backed up by the constitution the established the local government councils.