Assessment of internal Control system in government establishment
(A Case Study Of Unth, Enugu)
Assessing the internal control system within government establishments is crucial for ensuring accountability, transparency, and efficiency in the management of public resources. It involves evaluating the processes, procedures, and mechanisms in place to safeguard assets, prevent fraud and errors, and achieve organizational objectives. This assessment typically includes reviewing the segregation of duties, authorization procedures, physical and logical access controls, as well as the reliability and accuracy of financial reporting. Additionally, assessing the adequacy of communication channels, monitoring activities, and the presence of a robust internal audit function are integral components. By conducting a thorough assessment of the internal control system, government establishments can identify weaknesses, mitigate risks, and enhance overall governance and performance.
The primary objective of this project work is to discern the impact of internal control system assessment in government establishment using university of Nigeria Teaching Hospital, Enugu as a case study. Many people think of internal control system as a highly technical field which can be understood only by professional Auditors. Actually nearly every establishment practices internal control in one form or another on an almost daily bases.
However, internal control system therefore could be viewed as a firms or organizational plan including all methods and measures taken to:
i) Safeguard its assets
ii) Ensure the accuracy and reliability of its accounting data
iii) Promote operational efficiency and
iv) Encourage compliance with the organizational policy.
These are the main concern of this research work efforts have been made in this research work to explain the normal governmental internal control systems, and its usage as an aid to asses government establishments. Also, the two categories of internal control are discussed. Various internal control procedures being practised in university of Nigeria Teaching Hospital are identified.
The findings were that internal control system needs urgent attention so as to ensure strict compliance to management policy.
Finally, in this research work, there is a constructive explanation of scope, objective, basis concepts and principles of internal control applicable in government establishment as an aid to solving the problem of expenditure control. The researcher therefore conclude that for internal control to be effective, emphasis should be placed on the accountability morality, integrity, Honesty, ethics and behaviours of the officers operating the system.
Title page
Certification
Dedications
Acknowledgement
Table of contents
Abstracts
CHAPTER ONE
Introduction 1
1.1 Background of study 1
1.2 Purpose of the study 5
1.3 Statements of problem 5
1.4 Research Questions/hypothesis 6
1.5 Significance of the study 7
1.6 Scoped of study 7
1.7 Definition of important terms 8
CHAPTER TWO
Review of Literature 9
2.1 Introduction 9
2.2 Assessment of internal control 10
2.3 Internal control objectives 14
2.4 Internal control techniques 19
2.5 Internal audit 23
2.6 Budgetary control 27
2.7 Independent of auditors 30
CHAPTER THREE
Methodology 32
3.1 Design of the study 32
3.2 Area of the study 32
3.3 Population 32
3.4 Sample and sampling procedure 32
3.5 Instrument for data collection 33
3.6 Validity of the instrument 33
3.7 Reliability of the instrument 33
3.8 Method of data collection 34
3.9 Method of data analysis 34
CHAPTER FOUR
Data Presentation and Analysis 35
CHAPTER FIVE
Findings and Discussion for Result 41
5.1 Discussion of the findings 41
5.2 Conclusion 42
5.3 Implications of the study 43
5.4 Recommendation 43
5.5 Suggestions for further study 44
5.6 Limitations of the study 45
References 46
Appendix 48
1.1 BACKGROUND OF THE STUDY
The chartered institute of Public and finance accountants (CIPFA) states that the internal control system comprises the whole system of controls, financial and otherwise, established by management in order to carry on the business of the organization in an orderly and efficient manner, ensure adherence to management policy safeguard the assets and ensure as far as possible the completeness and accuracy of the records.
Individual components of internal control system are known as “control i.e Internal control”.
The Canadian institute of chartered accountants, Exposure Draft of proposed auditing Recommendations describes internal control as comprising of the plan of an organization and all the co-ordinate systems established by the management of the enterprise to achieve management objectives by ensuring as far as is practical, the orderly and efficient conduct of its business including the safeguarding of assets, the reliability of accounting records and the timely preparation of reliable financial information. Internal control system, therefore canto be viewed as a firms organizational plan including all methods and measures by the firm takes to
(a) Safe guide its assets
(b) Ensure the accuracy and liability of its accounting data
(c) Promote operational efficiency and
(d) To encourage compliance with company policies
This is my abridged definition:
It is the responsibility of management to determine the internal control which is appropriate to the organization. The nature and extent of controls will vary between organizations and also from one part of an organization to the other.
The controls used will depend on the nature, size and volume of the activities and the degree of control which management are able to exercise personally, geographically distribution and may other factors.
Internal control can be divided into two main categories financial controls which are primarily concerned with legitimacy of expenditure and the security of assets and income and other controls mainly administrative which are created and maintained by management the ensure that an activity is relevant to the needs of an organization and is carried out in the most effective manner. These categories are independent and should be regarded in isolation as both have an impact on the performance of activities and their consequent cost and value to the organization.
Accounting and Financial Controls
These consists of all accounting, financial and monetary control techniques and systems built into the internal control system to promote and encourage the attainment of the objectives on internal controls. Generally, accounting and financial controls consists.
(a) Budgetary Control: This refers to formulation of plans of future activity, which by down carefully determined objectives and programmes of activity and provide yard stick by which deviations from planned achievements can be measured. It is defined as “the establishment of departmental budgets relating to the responsibilities of executives to the requirements of policy.
(b) Legitimacy of Income and Expenditure: All income and expenditure should be in accordance with the policy of the organization should be properly authorized and written in law.
(c) Security of Assets: Assets of the organization should be kept in properly custody and not wrongly applied either by error or intent.
(d) Accounting control: All transactions should be correctly recorded processed and control account should be maintained. It is in the bid to discuss those internal control systems that this work is carried out.
1.2 PURPOSE OF STUDY
Here the researcher intends to
i) Identify the various internal control procedures being practiced in university of Nigerian teaching hospital
ii) Critically evaluate the accuracy, adequacy and application of various internal control techniques
iii) Identify the principal problems associated with workers dissatisfaction and recognise the effect of such problems for control methods.
iv) Seek possible oriented solutions and suggest useful recommendation based on the researcher findings.
1.3 STATEMENT OF PROBLEM
The common problems encountered in Hospital Management includes
(i) Late and inadequate receipt of subventions from the
government
(ii) Placement of Management of the hospital in the hands of doctors instead of experienced administrations
(iii) Lack of steady policy
(iv) Inconsistency in the salary scale of Hospital staff
(v) Frequent internal control breakdowns
(vi) Poor accountability of officers
(vii) Lack of adequate motivation which has created the room fo row morals.
However, this study is therefore aimed at ascertaining the effectiveness techniques available in government owned recommend possible solutions using university of Nigeria Teaching Hospital as a case study.
1.4 RESEARCH QUESTIONS/HYPOTHESIS
In pursuance of the above objective of the study, the following four research questions are pased.
1. Is assessment of internal control system very vital for the smooth running of government establishment?
2. Is internal control system indispensable in government establishment?
3. Is there better planning and execution of internal control system in government hospital than private hospital?
4. Has internal control system accomplishes its practical role management and staff of University of Nigeria Teaching Hospital, Enugu.
1.5 SIGNIFICANCE OF STUDY
This research will be of invaluable importance to the online management and staff of the University of Nigeria Teaching Hospital. The management will be exposed t the specific objectives of internal control and also help them to close the gaps and weakness inherent in their adopted internal control system
1.6 SCOPE OF STUDY
This research is intended to appraise the existing internal control systems in government hospitals, using the university of Nigeria Teaching Hospital, Enugu as an example.
1.7 DEFINITION OF TERMS
The following terminologies are defined to reflect their meanings in the research.
Assessment: This means the evaluation of marits or act of accessing, a valuable for the purpose of taxation with respect to control system
GOVERNMENT ESTABLISHMENT: Refers to a permanent (Civil or military force or staff ruling or managing control system.
INTERNAL CONTROL SYSTEMS: This implies the inward body as functional unity or principle which regulate or check the specific objective and weakness. Inherent in the adopted running of government establishment.
BUDGETARY CONTROL: It is the establishment of departmental budget relating to the responsibilities of executives to the requirements of policy.
Assessment of internal Control system in government establishment:
Assessing the internal control system in a government establishment is crucial to ensure the effective and efficient use of public resources, prevent fraud and corruption, and promote transparency and accountability. Here’s a step-by-step guide on how to assess the internal control system in a government organization:
- Establish Objectives and Scope:
- Define the objectives of the internal control assessment.
- Determine the scope of the assessment, including the specific departments, functions, or processes to be evaluated.
- Understand the Legal and Regulatory Framework:
- Familiarize yourself with the relevant laws, regulations, and policies governing the government establishment’s operations and financial management.
- Gather Documentation:
- Collect relevant documents such as financial statements, policies, procedures manuals, organizational charts, and previous audit reports.
- Identify Key Processes:
- Identify the critical processes and activities within the government establishment that need to be assessed. This may include budgeting, procurement, revenue collection, and expenditure management.
- Assess Risk:
- Identify potential risks and vulnerabilities in the organization’s operations, including fraud risks, compliance risks, and operational risks.
- Evaluate Control Activities:
- Examine the existing control activities and procedures in place. These may include authorization processes, segregation of duties, and access controls.
- Assess Information Systems:
- Evaluate the information systems used to support financial and operational processes. Ensure data integrity, security, and the accuracy of financial reporting.
- Review Compliance with Policies and Regulations:
- Determine whether the organization complies with applicable laws, regulations, and internal policies.
- Conduct Interviews and Surveys:
- Interview key personnel to understand their roles, responsibilities, and perceptions of the internal control system.
- Conduct surveys or questionnaires to gather input from staff at various levels.
- Perform Tests and Audits:
- Conduct tests of transactions and perform audits to verify the effectiveness of controls in place.
- Document Findings:
- Document your assessment findings, including any weaknesses or deficiencies in the internal control system.
- Risk Prioritization:
- Prioritize identified risks based on their significance and potential impact on the organization.
- Recommend Improvements:
- Based on your assessment, make recommendations for strengthening the internal control system. These recommendations should be actionable and specific.
- Develop an Action Plan:
- Work with the organization’s management to develop an action plan for implementing the recommended improvements.
- Monitor Progress:
- Continuously monitor the implementation of the action plan and assess its effectiveness in addressing identified weaknesses.
- Report Findings:
- Prepare a comprehensive report summarizing the assessment, findings, and recommendations. Share this report with relevant stakeholders, including management, oversight bodies, and auditors.
- Follow-Up:
- Periodically revisit and reassess the internal control system to ensure that improvements are sustained and new risks are addressed.
It’s important to note that the assessment of internal controls in government establishments often involves collaboration between internal auditors, external auditors, management, and oversight bodies to ensure transparency and accountability. Additionally, the process should align with the specific requirements and standards applicable to government entities in your jurisdiction.