Introduction

Due to the urgent need to address the almost overwhelming rate of financial crimes in both the private and public sector in Nigeria, which led to the classification of the country as a non-compliant nation by the Financial Action Task Force (FATF), and the listing of the country by Transparency International as the 2nd most corrupt nation in the world, the topic chosen by the Institute is very apt and timely. I am indeed delighted that our institute is bringing this topic to the front burner duly sensitizing all professionals to an issue that should naturally top our agenda.

A crime is committed whenever there is a violation of law in a particular jurisdiction. When the crime results in undue financial gain by the perpetrators to the detriment of another or the society at large, then it is classified as economic and financial crime. Curiously the gain is often less than the loss for the loss has a multiplier effect that makes it far more in excess of whatever the fraudster may have gained. The gain diminishes in value and sometimes becomes a monument of pain and agony to the society.

The Nigerian government literarily declared war on economic and financial crimes when it established by an act of the National Assembly, the Economic and Financial Crimes Commission (EFCC) with the function of investigating all financial crimes including advance fee fraud, money laundering, counterfeiting, illegal charge transfer, futures market fraud, fraudulent encashment of negotiable instruments, computer credit card fraud, contract scam and other financial crimes including terrorism.

The Nigerian public sector has been for the past 40 years a well oiled engine of corruption, a maze of confusion for the uninitiated and a cesspit of evil. According to Mrs. Oby Ezekwesili, who is the Senior Special assistant to the President and Head of Budget Monitoring and Price Intelligence Unit, the ruling class “failed because they replaced vision, policy and strategy, which should be the thrust of every leadership with transactions (contract award and other mundane money related activities)”. She further said that “The truth is that through a deliberate derogation of rules and procedures, enthronement of discretionary practices, aversion to openness and competition, abandonment of basic skills and competencies in determining cost of government contracts, the political and technocratic elite have over the years colluded with both foreign and local contractors to ruin the possibilities we had of using our estimated over $300 billion of oil proceeds in all of thirty years to build our nation into a developed economy.

Simply defined Due Process is following all the correct legal procedure. The Due Process office seeks to restore fiscal transparency, enforce strict compliance to rules and procedure, promote a culture of effectiveness and efficiency in costing, prioritization and execution of budget expenditure. The office will enforce strict adherence to project planning and procurement. The office presently known as the “Due Process office” is actually the Budget Monitoring and Price Intelligence Unit (BMPIU) established under the office of the Principal Secretary to the President in June 2003. It is run as an operationally independent body and is staffed by professionals in project management, construction and procurement.
The goal of the Due Process Office is to ensure full compliance with laid down guidelines and procedures for the procurement of capital and minor capital projects as well associated goods and services.

The objectives of the Due Process Office are:
• To harmonize existing government policies/practices and update same on public procurement.
• To determine whether or not Due Process has been observed in the procurement of services   and contracts.
• To introduce more honesty, accountability and transparency into the procurement process.
• To establish and update pricing standards and benchmarks for all supplies to government.
• To monitor the implementation of projects during execution with a view to providing   information on performance, output and compliance with specification and targets.
• To ensure that only projects which have been budgeted for are admitted for execution
• The Due Process Office operates in a Regulatory, Certification, Monitoring, Training and   Advisory functions

Regulatory functions are:

• To regulate and set standards, including the enforcement of harmonized bidding and tender    documents.
• To formulate the general policies and guidelines related to public sector procurement.
• To develop, update and maintain a related system wide database and technology.
• To undertake procurement research and survey in order to determine information needs and    project costing.
• To enforce professional ethics and sanction erring officers and professionals.
• The Certification functions are:

The unit will certify all federal-wide procurements under the following guidelines:
• Resident Due Process Team Certification for projects below =N=50 million.
• Full Due Process Certification for projects above =N=50 million at various stages such as   “contract award certificate” and “payment certificate”.

The Monitoring functions are:
• To supervise the implementation of established procurement policies.
•To monitor the prices of tendered items
• To perform procurement audits
• To undertake the monitoring of capital projects that have exceeded 50% of contract sum   before release of further funds.
• To document all projects at award and completion stages and publish same in designated    journals

Training and Advisory Functions are:
• To co-ordinate relevant training programmes for institutional capacity building.
• To embark on regular public enlightenment programmes so as to sensitize various stakeholders    involved in procurement.
• To interact with Government and parastatal officials, National Assembly members, consultants    and relevant professional bodies so as to educate them on all aspects of the work of the Due    Process Office.

The guidelines for implementation of Due Process Certification of Contract provides a plan for the implementation of the Capital Budget. In summary the guideline directs that:

• Contracts below N1.0million shall be approved by the Permanent Secretary/Chief Executive of   such government units.
• Contracts over N1.0million but below N50.0million shall be approved by a Resident Due Process   Team (RDPT).
• Contracts above N50.0million shall be processed in accordance with Government guidelines   and approved by the Ministerial Tenders Board before being forwarded to BMPIU to obtain a
  Due Process Certificate. When this certificate is obtained, the project would be forwarded to   the federal Executive Council for approval before an award can be made.

The procedures for the Due Process Review include the provision of the following requirements:
• The Project Policy file
• Tender Returns
• Tender Evaluation report
• Contract Award Letter and Agreement
• Original Contract Bills of Quantities (if any)
• Contract Drawings (if any)
• Other Contract Documents
• Financial Summary and Statements
• Progress Reports
• Variation Requests and Variation Orders arising
• Interim Valuation and Certificates

The procedure naturally include meetings with all parties to the transaction with the Due Process Office, setting out of draft reports, organization of right of reply meetings and granting or denial of certification.

This entire process flows with the following support policies to ensure an efficient, responsible, transparent and fraud free procurement regime:
Government Departments should not embark on new projects when there is the problem of funding the existing ones.

A stock take of capital project portfolio of all Government departments.
Procurement planning as a major instrument
Project feasibility and design as fundamental requirement.
Technically competent and integrity conscious officials in government departments to be in charge of procurement planning.

No selective tendering arrangements qualify.
Unadvertised projects do not qualify.

What then is the role of the Professional in financial crimes and due process in the public sector?

The professional, and for emphasis the Chartered Accountant already has a broad knowledge of the principles and practice standards of accounting. Either in management, general accounting, public accounting, internal audit, cost and management accountant or tax practitioner the chartered accountant is encouraged to keep abreast of the principles, practices and standards of the profession.

There is a new and fast developing associated Accounting discipline known as Forensic Accounting. Forensic Accounting is the application of financial skills and an investigative mentality to unresolved issues, conducted within the context of the rules of evidence. As a discipline, it encompasses financial expertise, fraud knowledge and a strong knowledge and understanding of business reality and the working of the legal system. Its development has been primarily achieved through on the job training, as well as experience with investigating officers and legal counseling.

The CA who is now a Forensic Accountant can assist with regulatory compliance at all levels, not just in the public sector but by assuring that government units, businesses and, in some instances, individuals are complying with applicable legislation.

Most fraud situations are well hidden under the veneer of apparent compliance with procedure and adherence to controls. The CA must however be fully aware that procedures can be breached and controls are vulnerable to human ingenuity. Therefore the CA must be able to review each scenario with a level of investigative curiosity that, if a crime has occurred, may disclose indicators of fraud.

This is the time for a new mind set that expects the CA to exercise maximum investigative competency.

At every level of operation, the CA must have a big picture mind set. Internal audit tests and control and procedural tests must be expanded and review efforts must also complement such tests.

The Due Process operational format as can be seen above is all about strengthening controls in the Public Sector. There is no doubt that the importance of internal control built into procedures, practices and standards have been finally properly recognized.

As a result of the broadened requirements, accountants in the public sector, regulatory examiners and internal auditors should devote more time to reviewing and evaluating internal control systems and the internal check requirements built into them.

We must ask:

• How good in theory are the systems of internal control as established in procedure and   standards?
• Are the personnel working in any activity or function properly trained relative to the internal   control requirements, including the specific objectives of such systems relative to their work   environment?

• Do the system of internal control in fact, not theory, hold the perceived risks in   any work   environment to the levels considered acceptable to management?
• Are the levels of acceptable risk in line with reasonable objective or are they found, on the   basis of risk assessment, to be excessively loose in any work environment? What   enhancements are needed?
• Are the controls in place excessive and therefore too costly relative to the risks, as determined from the reviews in any work environment? If so determine what revisions to the internal control systems are warranted to reduce those costs and bring them in line with an appropriate level of risk control?

Our profession has indeed evolved to the point that it can be of service to business management, law enforcement authorities, and the legal profession including the courts. How broad is the utilization? I do not know. But I know that within the next decade, chartered accountants and related professionals should evolve to the point where potential utility is better defined.

The EFCC Act covers a very wide range of financial crimes and I have annexed a set of FAQs on the EFCC and the Act. Due to level of computer related fraud currently in the ascendance it is important that the CA acquires the following IT skills:

• A thorough awareness of the accounting system, as operated through the computer system.
• A detailed knowledge of the documents maintained in the computer system, in general format   or specific copy (e.g., image systems technology).
• An understanding of how systems interface, one with another, and the plus factors (e.g.,   Values and benefits) and minus factors (e.g., risks, threats and vulnerabilities). An example   would be an E-mail system that can be used to enter the computer system and then get into   PBX, enabling unauthorized telephone calls to be made and billed into telephone lines used.
• The use of systems for wire/money transfer transactions (e.g., SWIFT, CHIPS, etc)
• The interface of firm (or government dept) systems with general use systems (e.g., those    involving people, firms, or governmental departments outside) and the purpose for such    connection. This would include systems such as the INTERNET.
• The determination of whether data encryption is used, and if so, for what purpose and the    level of control over that information.
• The knowledge of computer graphics.
• Use of computers to develop appropriate analysis and to prepare graphs and charts that      depict and summarize the information developed.

Determination of historical problems with computers and related technology within a particular environment. Have fraud situations been reported to law enforcement authorities or regulatory authorities? This kind of letter is required by the EFCC laws, the Money Laundering Act etc.
Today’s Professional – Chartered Accountants in the public or private sector must develop a broad range of skills, extending well beyond the limits of the Accountant of old.

We must be able to comprehend the “total picture” of any matter on which we are working. We must be able to determine initial scope and approaches. We must be prepared to change them when data developed so dictate. We must be able to use other professionals or skills, to supplement our effort. We must use computers and technology to maximize the productivity of our effort. We must know how to document our findings and communicate facts and conclusions both verbally and in writing.

“Men must be honest with themselves before they can be honest with others. A man who is not honest with himself presents a hopeless case”- William J.H. Boetcker. Professionals in Accounting and other fields must show a high level of integrity. The EFCC is presently deluged by cases involving members of our Institute. The level of dishonest conduct is appalling. We must change.

The Professional either in the public or private sector must be the beacon of light for the rest of the society – a man or woman that can be trusted to show independence, objectivity and integrity in all transaction. Most of us occupy positions of trust and high responsibility in society. We must show example. Integrity must flow from top and be seen to embrace all strata in society. It is not much good exhorting your subordinates to be decent, honest people if everyone knows that you have your own fingers in the till. Hypocrisy does not stop fraud.

Nigeriafirst.org –institutional profiles BMPIU, Joseph T Wales – Fraud Examiners, Bill T Thornbull –Forensic Accounting.