INTERNAL CONTROL SYSTEM AND MANAGEMENT POLICIES IN PUBLIC ORGANIZATION. A CASE STUDY OF MINISTRY OF EDUCATION
Internal control system is the whole system of controls financial and otherwise established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and ensure as far as possible the completeness and accuracy of the records. The study reviewed Internal control system and management policies in public organization . The research critically highlighted the importance of strong internal control system and how cash in the institution can be protected against waste and fraud. The findings of the study revealed that there is strong internal control system that brings about efficient cash management in the institution. It was further discovered that adequate measure are taken to ensure cash is safeguard in the institution.Although management significantly rely on internal audit and bursary department for strong internal control for efficient cash management. For management of the institution it was recommended that the management should be more protective ion its checking, vouching and preparation of its vouchers in order to detect and prevent fraud. The act of incompetence should be eradiated among officers of internal audit and bursary department. Training and employment of qualified staff are important for an effective strong internal control system\. Officers of the department should adhere strictly to the polices of the institution in order to effectively managed cash.
Background of the Study
Internal control has been recognized in most organizations as one of the most essential ingredients, necessary for the survival of the business enterprise and government agencies. Apart from the problem of scarce resources, organizations run a high risk of fraud, errors, miss appropriation of funds and inefficient and ineffective operations. Steps are required therefore to minimize, if not eliminate completely, these risks, by establishing internal control system. For every organization, there are risks that the organizational goals and objectives are not achieved. All efforts aimed at preventing such risks or identifying and correcting such risks are viewed as internal control.
Several studies have been carried out in Nigeria to find out why many government parastatals or institutions which started off well later fall or remain stagnant in their operations. The major causes of this situation were traced down to low accountability which emanated from a lot of factors, parts of which are poor accountability and adequate provision of fund in an organization. Accountability has always been an important feature of life. In fact, it is said to be life blood of any organization. By interacting with other people, one is able to develop one’s personality. Anderson (2009) stated that one of the most elusive concepts in management is accountability. In leadership roles, accountability is the acknowledgement and assumption of responsibility for action within the scope of a role or position, encompassing the obligation to report and be answerable for resulting consequences.
According to Daily independent published on 31st October 2012. It was assumed that a flagrant stealing and mismanagement of funds by come heads of tertiary institutions across the country has brought about a standardized internal control system for effective cash management and how often are the accounts of tertiary institution audited? If these accounts are audited at the end of the year, it will serve as a proactive measure to forestall stealing and mismanagement of funds thereby bringing efficient cash management by the principal officers of tertiary institution in which college of Education, Ikere Ekiti is not left out.
Kolawole (2006) defines internal control system as the controls exercised internally, that is, within the enterprise. They are usually set up by the management of an organization so as to enable them to achieve their stated goals and objectives. The Institute of Internal Auditors (2009) defines internal control as “all means designed to promote govern and heck upon various activities for the purpose of seeing that enterprise objectives are met”.
Accountability is the key to achieving result and helping identify the opportunities in the organization. Holding employees accountable helps them to known the satisfaction of achieving a goal and performing to a standard. “Accountability is the obligation to the render an account for a responsibility conferred. It presumes the existence of at least two parties: one who allocates responsibilities and on who accepts it with the undertaking to report upon the manner in which it has been discharged”. Accountability is the liability assumed by all there who exercise authority to account for the manner in which they have fulfilled responsibilities entrusted to them”.
Michael (2009) defined accountability as “the duty to provide on account (by no means necessary financial) or reckoning those action for which one is held responsible as a consequence accountability involves a promise to perform and a normal or legal responsibility to provide an account for it. According to Cornwall (2000) started that accountability has both an external dimensions and an internal. Internal accountability refers to rendering of account to higher organization lower levels in the light of delegated authority and planned targets. The external accountability refer to the accountability of department or agency to some external body like legislature. It could mean managerial accountability, referring delivery of services by government agencies or department to the public for fee or otherwise or for the utilization of public resources to deliver the services.
Horngren (2002) therefore defined internal control as referring to both administration control and accounting control. Administration control organization showing who reports to whom) and all the methods planning and control of operations.
Accounting control comprises the methods and procedures that are mainly concerned with authorization of sections, the safeguarding of assets and accuracy of the financial records. Good accounting control helps maximize profit; they help minimize waste, unintentional errors and frauds.
Marshell (2004) stated that the success of any organization is dependent on its management, which reflects their ability to control cost to minimum level and hence make profit. Without accountability no organization could exist for long, since it might not coordinate its various activities. Internal control is very essential in an organization, as coordination of individuals, works processed or department enable those been coordinated to known what they are to do and when it is to be done. Internal control in an organization can be made accountable with the application of computer to enhance information processing in an organization. This research work will prefer a critical look into the internal control system, a m Internal Audit office of Washington State University (2011) defines internal control as a process effected by tertiary institution governing board, administration, faculty and staff designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
- i) Effectives and efficiency of operation
- ii) Reliability of financial reporting
iii) Compliance with applicable laws and regulations
Every department and staff members of the college have some responsibilities for internal control by their actions. Internal control designed by the management help to ensure that all funds and cash receipts are properly accounted for promptly deposited in bank accounts. Internal control provide that complete and accurate records are kept of transactions involving students and that college equipment is properly cared for and used only for its intended purpose. In short, a well – designed internal control system safeguard college resources and ensures accuracy and reliability in the use of such resources and in the performance of respective jobs.
Statement of the Problem
The success of any organization in particular and Nigeria institution in general, Internal controls do not provide absolute assurance on efficient cash management, they help the management achieve its objectives but do not ensure successful cash management and reliability of financial reporting and compliance, only Reasonable Assurance. The management influences the decisions and report of internal auditor, that is, the internal auditors are not independent of the institution.
the problem hence centre on what is the responsibility for the failure of proper cash management and internal control in Minsitry of Education . Also, the possibility of management by-passing or instructing subordinate to by-pass certain prescribed controls (either fraudulently or under the pressure of time or cost constraints. It can also be subject to mistakes. Internal controls are subject a number of potential failures like staff abusing authority, employee or staff collusion, faculty judgment, unintentional errors by the staff, resources constraint facing the management, inadequate skills, knowledge or ability by some staff to perform or follow certain instruction on the part of the management towards the staff. Most systematic Internal control tend to be directed at routine transactions rather than non-routine transactions thereby ensuring that cash transaction are executed in accordance with proper authorization.
Purpose of the Study
This study was carried in order to review the internal control system and management polices in public organization a case study of Ministry of Education, Ekiti State and thereby determine its implication on the management polices.
In this study, the following specific objectives were achieved
- To highlight the importance of Internal control in efficient cash management in the ministry
- To discover level of accuracy and reliability in accounting and operating data.
- To highlight how the resources of the ministry can be protected against waste, fraud, inefficiency and safeguarding cash.
- To appraise the measure taken such that the assets (cash in particular) of the ministry can be safeguarded. Through internal control
- To discover if cheques, vouchers are properly authorized before payment.
Significance of the Study
It is hoped that the research will suggest possible solution that will be of importance to the Governing Council on how to develop a strong internal control system.
The study will help the Ministry to prevent, identify and correct inefficient, ineffective or unethical activities by developing and standardized its internal control system.
The study will help the Ministry and staff to ensure there is timelessness and completeness in processing cash transaction.
The study will help the government to ensure there is proper utilization of cash and assets in the school through standardized internal control system.
The study will help the students to broaden their knowledge in internal control.
The study will also provide helpful background information to other researchers that would like to investigate further into this area.
The study will help professionals and academia to ensure there is compliance with lay down standard of internal control system.
- Does building a strong internal control system lead to efficient cash management?
- Can level of accuracy, reliability in accounting and operating data affect efficient cash management?
- Cash building strong internal control system protect the resources of the ministry against waste, fraud, inefficiency and safeguard cash?
- What measure taken to ensure that cash is safeguard.
- What are the steps involved in the custodian issuance and payment
Scope of the study
This study endeavour to review internal control system and management policies in Ministry of Education Ekiti State. The study will uncover if cheques and vouchers are properly authorized before payment. The study endeavour to point out how strong is the internal control in the efficient management of cash.
Definition of Term
Internal control– can be defined as the accounting and auditing it is a process for assuring achievement of an organization objective in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. a broad concept, internal control involves everything that controls risks organization. It is a means by which an organizations resource is directed monitored and measured. It plays an important role in detecting and preventing fraud and protecting the organizations resources both physical e.g. machinery and property.
Audit: is a formal examination of an organizations or individuals accounts or financial situation i.e. the final report of an audit or a complete and careful examination of the financial records of a business or person.
Management accountant –:it is combine accounting finance and manage with the leading edge techniques needed to drive successful businesses. In management accounting manages use provision of accounting. Information in order to better inform them before they decide matters within their organizations, which aids their management and performance of control functions.
Management accountant (IMA): Management accounting is a professional that involve partnering in management decisions making devising in planning and performance management systems and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organizations strategy.
REVIEW OF RELATED ITERATURE
Internal control system has attracted various research works. These researchers have made several efforts in appraising internal control system. This chapter intends to review the work done relative to this study with a view to high lighting the results of the studies. The review will provide a theoretical frame work for this study. The items to be discussed are stated below:
- Internal Control System
- The meaning and nature of internal control system
- The objectives of internal control
- Components of internal control
- Types of internal control
- Internal control over cash management
- Internal control procedures
- Duties of the internal audit department in affecting internal control.
- Importance of good internal control system
- Internal Control and Implication of Fraud in Organization
- Internal Control System: A Managerial Tool for Proper Accountability
- Management Control
- Theoretical framework
- Empirical framework
Meaning and Nature of Internal control