by Mark Amaza
The first time the Financial Reporting Council (FRC) entered the consciousness of Nigerians, it was in early 2014 when it accused the Central Bank of Nigeria under its former Governor (now Emir of Kano), Sanusi Lamido Sanusi as lacking in corporate governance. As this accusation came in the thick of the scandal that engulfed Sanusi after he blew the whistle that as much as $20bn in oil revenue was unaccounted for over 18 months, the FRC under its Executive Secretary was seen as doing the hatchet job of former President Goodluck Jonathan. It was based on this allegation by the FRC that Sanusi was suspended from his job until his tenure elapsed six months later.
The FRC has once again become the word on everyone’s lips as it has become engulfed in another scandal: its corporate governance code for public and private organizations which has forced the General Overseer of the Redeemed Christian Church of God, one of Nigeria’s largest and most influential churches, Pastor E.A. Adeboye to step down after leading the church for 34 years.
Pastor Adeboye was not going to become the only ‘casualty’ of the governance code: many other influential pastors such as Pastors W. Kumuyi of Deeper Life Bible Church, Ayo Oritsejafor of Word of Life Bible Church and a host of others were to follow suit, having led their churches for upwards of 20 years, the limit set by the Governance Code.
Expectedly, this has caused controversy to the point that the Governance Code has been suspended and its Executive Secretary, Mr. Jim Obazee to be sacked and a replacement to be named.
But what exactly is in this Governance Code? Does the FRC have jurisdiction to come up with one?
The FRC, which was established by law in 2011 when the Senate passed the Financial Reporting Council of Nigeria Bill, replaced the defunct Nigeria Accounting Standards Board (NASB). Jim Obazee who was the head of the NASB then became the Executive Secretary of the Council. Its mandate is to ensure good corporate governance practices in the public/private sector – meaning its oversight was from government bodies and private companies to not-for-profit organizations.
It was based on its mandate that it put together a Governance Code (Public, Private and NGO) in 2013 and released the draft version in 2015. The Code for Not-For-Profit Organizations mandated them to hold annual general meetings of their members and present their annual financial statements to them. It also seeks to enforce the registration requirements of the Corporate Affairs Commission for religious organizations that they make annual returns of their financial statements after audit.
However, one of the most contentious provisions of the code is the demand by the code that not-for-profit organizations should pay tax on for-profit activities even if those activities are for the benefit of the organizations. This means that churches and NGOs will account separately for ‘non-charitable activities’ such as running of schools and hospitals as profit-making entities, and pay taxes on them.
Another very contentious area is that of tenure of the founder of these organizations: the code prescribed that a founder cannot be the head of more than one governance organ of the organization at the same time, the organs being the Board of Trustees, The Governing Board and the Management Committee. Also, where the founder has served as head of any of these organs for more than 20 years and is more than 70 years of age, he must resign except for the Board of Trustees. However, the Founder can continue to be the Spiritual Leader of the church, a unique position the Code recognizes.
The code is meant to be complied with by religious organizations and failure to comply must be justified.
Expectedly, the Code was challenged in court in July 2015, which asked the court to declare the code unconstitutional and illegal, alleging it duplicates the functions of the CAC and that some of the Terms of Reference of the Code are inconsistent with some sections of the FRC Act. However, the court did not rule in their favour, and the judgment armed the FRC to release the Governance Code effective from October last year.
However, the Minister of Trade and Industry, under whose supervision the FRC falls under, queried the Council on the grounds that the Governance Code was not in line with the FRC Act which says that the Board of the Council will be responsible for the overall control of the Council and its Directorates. With the Board yet to be constituted, how could the Code have passed a test of compliance?
There was also the issue of conflicts between some provisions of the Code and other existing laws, such as where it implied that the CBN will be responsible for implementing the code in the financial sector over the code of the CBN itself.
However, the Executive Secretary disagreed with the Minister, and rather than suspend the enforcement of the Code, went ahead to enforce it. It was this that caused his ouster.
While the Governance Code is an excellent way to force not-for-profit organizations to be accountable, many of whom are seen to be amassing wealth while not even paying taxes, there are obviously quite a number of issues within it that need addressing.
Hopefully, the Code will not be buried after this controversy but the new heads of the Council will work on these issues.