European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.9, No.30, 2017 58 Effect of Internal Control Activity on Financial Accountability and Transparency in Local Government Areas of Borno State, Nigeria Ahmad A. Abubakar, PhD 1 Nifa A. Dibal 1 Peter Amade 2 Pwagusadi Joyce 1 1. Department of Accounting, Adamawa State University, Mubi 2. Department of Economics, Adamawa State University, Mubi Abstract Local governments in Nigeria being the closest tier of government to the people, occupies a strategic position in public governance. The ordinary expectation is that it should impact meaningfully on the life of the people. However, these objective remains largely unachieved due to lack of financial accountability and transparency in the utilisation and management of public funds. Internal control activity is an important mechanism of transparent and accountable financial resources utilisation in an organisation. This study therefore examines the effect of internal control activity on financial accountability and transparency in local government areas of Borno State, Nigeria. The study was carried out using cross sectional survey design. The study drew a sample of 330 out of 1886 staff of the Treasury and Finance, Administration, and Audit Departments and the Local Government Council Members out of five of the local government areas of Borno State. The data for the study were collected through the use of the questionnaire instrument. The data collected were analysed using descriptive statistics, chi-square statistics as well as regression analysis. The result of the chi-square statistics revealed that internal control activity is ineffective in the local government areas of Borno state. The regression results revealed that internal control activity has insignificant impact on financial accountability but has positive impact on financial transparency in the local government areas of Borno State. The study therefore recommends that Borno state government through the Ministry of local government affairs in conjunction with the local governments’ management should revisit the policies and procedures of internal control activity through reforms in order to strengthen the effectiveness in financial accountability and transparency of the local government areas in the state. Keywords: Local government, internal control activity, financial accountability and Transparency Introduction The Local government is the third-tier of government created to bring the government closer to the people. The objectives for the creation of local government include to involve the people at the grassroots in the development of their area, and to ensure that resources are effectively mobilised, for meaningful development (Oviasuyi, Idada, and Isiraojie, (2010). This tier of government is administered by the local government council under the leadership of the local government chairman. The local government is constitutionally vested with numerous responsibilities and these responsibilities include among others the provision of education, healthcare, motor parks, markets, rural electrification, and construction of rural roads, culverts, and security. To discharge these responsibilities, local government has internal and external sources of finances; the revenue it generated internally and that from state and federation account (Local Government Financial Memoranda, 1997; Adeyemi, Akindele, Aluko and Agesin, 2012; Aramide and Bashir, 2015). In line with above, it is the responsibility of local government management committee to ensure accountability and transparency in the disbursement of the above revenue in providing infrastructural services to the community to foster economic development at the grassroots level. This cannot be possible without effective internal control activity as a component of internal control system in the financial dealings of the local governments. Local governments occupied a strategic position in public governance. The ordinarily expectation is that it should impact meaningfully on the socio-economic wellbeing of the people. However, this objective of the local government remains largely unachieved due to the prevalence of corruption, misstatement, misappropriation, embezzlement and other similar vices by those in charge of the management of financial resources at the local government (Odigbo, Auforo, and Edeoga, 2014).Internal control activity helps in controlling the malicious behaviours of both the public officials and the civil servants from corrupt practices. Then, to what extent is the control activity effective in strengthening financial accountability and transparency of the local government? Most of the studies reviewed discussed internal control and financial accountability without transparency. This study intends to fill this identified gap in literature by looking at the three in syntheses, regression techniques is also used for analysis which none of the studies reviewed including among others Ntongo,(2012),Hannah,(2013), Aramide and Bashir, (2015), Aristanti, (2015) has used this method to analyse the study variables ,instead of the wide use of correlation statistics.