Impact Of Internal Control On Effective Administration Of Local Government Councils

Introduction

1.1 Background of the Study

The definition of auditing came as independent examination and investigation of the evidence from which a financial statement has been prepared with the view of enabling the independent examiner to report whether in this opinion and according to the best of his knowledge, the information and the explanation obtained by him is properly drawn and if not, in what respect he is not satisfied. The independent examiner who the investigation and report there upon is referred to as auditor.

The auditor being an independent examiner who should be professionally qualified, examines the books of account and vouchers to report whether he is satisfied or not, that the statement of financial position is properly drawn up so to show a true and fair view of the profit or loss of the financial period.

The role of internal control is rigorous and from the above description of an auditor’s position in this dynamic business world, it can be concluded that the main objective of internal control is to ascertain that the rules and regulation, policies and procedures established by management of an organization to guide its operations and to secure compliance by staff of established standards.

The detection of fraud and error in business organization is therefore important to note with great concern that the auditor is not absorbed from the responsibility for fraud or error committed by directors.

Local government is the third tier of government in Nigeria, state government council, local government council are now recognized by the forth schedule of the constitution which includes consideration of economic planning and the making of recommendation to a state commission for planning and administration. The council chairman now becomes the chief accounting officer administrator while the counselor makes laws for the administration. By law, the council generates revenue and obtains funds from both state and federal government, hence the need for accountability and effective administration, it’s therefore pertinent that a sound financial system be in place to affect internal control by way of internal audit to prevent fraud, embezzlement and defalcation of public funds. For these reasons, internal and external control measures become the administrative tools of this administration.

The internal control includes:

Appointment of committee for different services

Issuance of financial authorities (warrants)

Centralization of all payment in the council.

Preparation of the budget/standing orders for the financial administration.

 

The external control includes;

Parliamentary control

Control by the general public

State/federal government

External auditors control

 

1.2 Statement of the problem

Generally, the public and observers believes that internal auditing is not of any value to local government council administration since there are always yearly external audit, there are financial regulation guiding the control of funds in and out of the system. More so, there are problems of lack of independent/confidence in the part of internal auditors who are also staff of the organization. The combined impact of these hinders the effective administration of local government council and it is based on this scenario that the researcher is undertaking a study to ascertain the impact of internal control on effective administration of local government council.

1.3 Objectives of the Study

The study has the following objectives:

To determine the impact of internal control on effective administration of local Government council.

To examine the forces promoting internal control in organization.

To ascertain the problems of internal control on effective administration of local government council.

To examine the measures for reducing problems of internal control on effective administration of local government council.

 

1.4 Research Hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H0: there is no impact of internal control on effective administration of local Government council.
H1: there is impact of internal control on effective administration of local Government council.

H02: there are no forces promoting internal control in organization
H2: there are forces promoting internal control in organization

 

1.5 Significance of the Study

This study will give a clear insight on the impact of internal control of effective administration of local government councils. The study will be beneficial to students and the general public. It will also serve as a reference to other researchers that will embark on this topic.

1.6 Scope and Limitation of the Study

The scope of the study covers the impact of internal control on effective administration of local government councils. The researcher encounters some constrain which limited the scope of the study;

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7 Definition of Terms

Internal Control:

Internal control, as defined in accounting and auditing, is a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.

Effective Administration:

An effective administrator is an asset to an organization. He or she is the link between an organization’s various departments and ensures the smooth flow of information from one part to the other. Thus without an effective administration, an organization would not run professionally and smoothly.

Local Government:

Nigeria has 774 local government areas (LGAs). Each local government area is administered by a Local Government Council consisting of a chairman who is the Chief Executive of the LGA, and other elected members who are referred to as Councillors.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.

Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.

Chapter three deals on the research design and methodology adopted in the study.

Chapter four concentrate on the data collection and analysis and presentation of finding.

Chapter five gives summary, conclusion, and recommendations made of the study