What is budget padding anyway?
Padding the budget is a practice that some people use in business when submitting a budget for approval. It artificially inflates the proposed budget in order to give the project room to expand or to cover unexpected costs. Many see budget padding as unethical, but its practitioners defend it on the grounds of practicality.
Padding the budget means making the budget proposal larger than the actual estimates for the project. This is done either by increasing a project’s expenses or decreasing its expected revenue. The goal of budget padding is to get an approval committee to grant an artificially high level of funding to the budget maker’s proposed project.
Budget makers face several incentives to pad their budgets. First, they want to account for economic factors. This is true of budget increases that anticipate inflation or, in the case of international projects, fluctuations in exchange rates. Second, they want to avoid red tape. If an unexpected expense arises, the padding gives the project flexibility to cover it — that is called slack or breathing room. Third, they want to make a favorable impression on their superiors. If they propose a larger budget and then outperform the budget, then the project team will be viewed favorably by the bosses. Finally, they fear budget cuts. Some budget padders fight against cuts that they see as unfair by anticipating them with an inflated proposal.
In theory, projects should spend according to the accurate budget estimates so that padding would have no real effect. In practice, however, budget padding has concrete consequences. Projects with extra room in their budget tend to use it. Recurring projects, especially, spend money unnecessarily in order to use up their entire budgets. That way, the approval committee does not cut their budgets in the following year.
Aside from the financial consequences, many people question the acceptability of budget padding because it is a deceptive practice. They say that it breeds a harmful corporate atmosphere.
The public row between the Speaker of the House of Representatives, Yakubu Dogara, and his erstwhile ally and former chairman of the House Appropriation Committee, Abdulmumin Jibrin, has provided a glimpse into how lawmakers routinely make billions of naira by inserting fictitious projects into the national budget each year.
Nigerians have been appalled at the scale of alleged fraud perpetrated in the National Assembly, as revealed by Mr. Jibrin.
PREMIUM TIMES’ digital lead, Emmanuel Ogala, who covered the National Assembly for years, compiles some of the spilled secrets that summarily highlight the many ways crooked lawmakers steal from the nation’s commonwealth.
Here are 11 steps to get rich quickly through the budget:
STEP 1. Get elected into the National Assembly –you can go to Senate or House of Representatives. It doesn’t really matter.
STEP 2. Be a good friend of the Speaker or Senate President, and the respective chairpersons of appropriation committees. That is the legislative committee that vets the budget.
STEP 3. Think up some flimsy projects – say, boreholes to provide water for your poor constituents. It is called constituency project.
STEP 4. Look for a government agency or ministry that can smuggle that project into the budget for you and lobby the target Minister or DG. Of course the respective committee chairman in the National Assembly must know.
STEP 5. Set up a company. Or get your spouse, brother, sister, or loyalist to register a company that can execute your chosen project.
STEP 6. Plead with the chairman of the Appropriation Committee to edit the budget and include your project under the agency or ministry that you lobbied. Because budget figures are usually large, this may seem like adding a cup of water to River Niger. If appropriation chairman refuses to play, lobby the Speaker or the Senate President.
STEP 7. Say ‘aye’ on the day the budget is put up for debate. (This step is not very critical. You can decide not to show up and it will be bundled with the entire budget and passed. Almost all of your colleagues are in it.)
STEP 8. After the Ministry of Finance has released funds, approach the head of the agency to award the contract for your project to the company in #5. Most heads may require their share upfront. You can’t trust anyone in this business!
STEP 9. The company gets cash deposit from ministry or agency. It is withdrawn and handed to you. You can share with anyone that helped the process, but you’ll sure retain the bulk of it.
STEP 10. Sink a borehole in your community with a very tiny fraction of the money and call national TVs to come cover the “commissioning of your constituency projects”.
STEP 11. Plan for next year.